The Impact of Battery Leasing on EV Affordability After Subsidy Removal

The Impact of Battery Leasing on EV Affordability After Subsidy Removal

The people who make electric scooters are finding new ways to help people pay for them. Some companies now sell scooters without the battery included. Instead, you can pay for the scooter upfront and then lease the battery separately, paying a little bit each month. This way, you can own the scooter but lease the battery like it’s part of the scooter itself.

OEMS view leasing options

The price of Kinetic Green’s Zulu electric scooter, which has a 2.27kWh Li-ion battery and a pay-as-you-use approach, has dropped from Rs 94,990 to Rs 69,000.

“We have reduced the cost of ownership by 35 percent by bringing the cost of our electric two-wheeler at par with a 100 cc ICE vehicle,” said Kinetic Green Founder and CEO Sulajja Firodia Motwani. Kinetic Green users can pay a rental fee and gain access to the battery, thereby avoiding the immediate impact of a substantial upfront battery cost.  

Nikhil Bhatia, Co-Founder and Chief Strategy Officer of Jaipur-based HOP Electric said, “I am certain that in 2024 India will see a dynamic landscape for battery leasing in India.”

With its mobility-as-a-service offering, which provides the scooter and battery for a predetermined price, Sun Mobility, which presently generates more than 70% of its revenue, is already shifting its focus to battery leasing.

According to Anant Badjatya, CEO of Sun Mobility, the about thirty percent of turnover that comes from leasing is expected to increase to fifty percent. He also mentioned that four or five start-up manufacturers of electric scooters have contacted Sun Mobility about using their battery as a solution in their products.

The CEO of Delhi-based Trontek Electronics, which specializes in producing batteries for electric two-wheelers and e-rickshaws, Samrath Kochar, also predicted that leasing will become more popular in 2024 in an interview with Autocar Professional.

According to Kochar, one of their OEM clients has recently asked them to begin selling their batteries to an OEM leasing business that will purchase and offer batteries as a solution for its B2C electric two-wheeler clients.

Comparing leasing with swapping

Companies that change batteries might start renting them for regular people to use. In India, swapping batteries has been slow because the stations aren’t the same and customers don’t like only using specific stations.

Pankaj Sharma, who knows a lot about batteries, thinks renting batteries, known as Battery as a Service (BaaS), is better than swapping them. Swapping batteries is tough for both the customer and the company doing the swapping.

He mentioned a problem with swapping: a single vehicle might need many batteries to do the swapping thing.

“In a typical battery swapping scenario, one battery is actively in use within the vehicle, another is being charged at the swap centre, and a third is in standby within the ecosystem, this is known as the float battery.” Sharma said. “Given that the battery constitutes a significant portion of the electric vehicle cost, the preference is for a one-to-one ratio of batteries to vehicles”.

Battery swapping can be tricky because you can only change your battery at certain places, which makes it hard to use other charging spots. This means if your battery is low, you have to stop what you’re doing and find the right place to swap it, no matter where you are in the city or at work. This rule makes it less flexible and convenient to use batteries, according to Sharma.

Uday Narang, who started Omega Seiki Mobility, thinks there’s a lot of potential for a system called BaaS (Battery as a Service) for regular customers. With BaaS, you get a battery that’s fixed in your scooter and doesn’t need to be taken out. This kind of battery can be charged at public spots, letting you charge your scooter at home or work.

Having a fixed battery means it’s made specifically for your scooter to work really well, making charging smoother and more effective. According to Narang, BaaS is a high-tech and user-friendly solution that makes managing electric vehicle batteries easier and more accessible.

He also points out that while swapping batteries is good for keeping the vehicle running, a fixed battery can go through many charging cycles for someone who uses an electric scooter.

Why leasing is popular with financiers

From the money side, leasing is a good choice for folks investing in things like batteries because it means they don’t have to buy the batteries outright. Instead, they get them from a leasing company, so it doesn’t show up as a big expense for the vehicle makers. This setup also helps people buy electric cars for less money.

Experts say that leasing batteries will make electric cars last longer. If the battery gets old or doesn’t work well, the leasing company has to give a newer, better one. That helps the electric car keep going for longer.

Sameer Aggarwal, the founder and CEO of Revfin Services, which finances electric two- and three-wheelers and has a total assets under management (AUM) of over Rs 300 crore sees value in the concept. “Leasing increases battery life by allowing users to distribute the ownership cost over a longer period, aligning with the three-year or three-and-a-half-year loan tenures common in the industry,” he said. “As the industry moves towards better-quality and longer-lasting products, battery leasing will emerge as a viable and customer-friendly solution after the end of FAME II. Battery leasing addresses cost concerns, fosters innovation, and aligns with the industry’s trajectory towards more sustainable and long-term solutions.”

According to Sumeru Shah, Business Head, EV-2w at Ecofy, the company has effectively viewed battery leasing goods for three-wheelers as a growth product and has funded over 8,000 vehicles through them.

“In leased battery products, even with three-wheelers, the consumer is paying for the chassis/body and other Ev components. If the battery cost is covered through per-km usage plans, it also helps us to finance a greater number of electric three-wheelers within the existing assets under management,” Shah said.

Because it might be difficult to determine the vehicle’s depreciated asset worth due to the batteries’ quick deterioration, financiers have historically charged higher interest rates for electric two- and three-wheelers.

“With battery leasing, these financial challenges are mitigated, as the leasing model provides a structured and predictable payment plan. This makes it more feasible for financiers to assess and finance electric vehicles and reduce the cost of finance to the end customer,” Shah said.

Mufin Green Finance, a company that helps people buy electric cars, recently bought a 20% share in Urja Mobility, a firm that rents batteries for electric vehicles. They want to focus more on renting solutions.

The CEO of Mufin Green Finance, Pankaj Gupta, thinks more investors will get interested in renting electric cars without any extra financial support.

The founder of Urja Mobility, Pankaj Chopra, wants to rent out 10,000 batteries every month for electric three-wheelers and rickshaws. They also plan to buy old batteries from people who bought electric scooters four years ago and give them rented batteries, so the scooters can keep running.

Chopra also thinks this idea could work for electric cars that people use for renting. Instead of spending a lot of money on a new battery, they could just rent one from Urja Mobility.

“We are planning for a period when commercial electric vehicles can rent the battery from us rather than having to spend four or five lakhs to buy a new battery,” Chopra said. “There are several opportunities in store to scale up the business further.”