Automobile industry is undergoing tremendous shift from gasoline and diesel based vehicles to battery based. A key challenge is cost of the vehicle. But the immediate need and demand of general public is clean air in the cities and reduction in global greenhouse gas emissions. India is not completely unaffected with these changes happening in rest of the developed economies. Let us look at them in detail to understand the market for battery based vehicles. The case needs even more thorough understanding of the market as the “customer” in the business proposal lies at the bottom of social pyramid but he forms a very crucial part in mobility of residents of cities.
4.1 Key success factors for EV battery swap business
The first thing we have to understand is the key requirements of the customers. In our case, the auto rickshaw driver run battery-operated vehicle for his family’s sustenance.
The author can envision following key factors needed to serve this customer and make battery as a service a successful venture.
(a) Little difference in amount of time to “Full Tank” as against petrol vehicle (b) Least number of battery swaps
(c) Battery electrical power compatibility with electric vehicle (d) Safe and easy to operate
(e) Ability to monitor remaining battery capacity (f) Swap stations in neighborhood
(g) Mileage consistency on full battery charge (h) Light weight battery
(i) No modification in vehicle (j) Ability to pay in cash
(k) Ability to attract more passengers
(l) No impact of cold or hot weather in vehicle carrying capacity (m) Affordability of service
(n) Ability to raise loans from payments and transactions (o) No disruption in case of power failure on large scale
From operations perspective, the success of the firm has very different requirements.
They are mentioned below:
(a) Ability to negotiate competitive tariff rate from traditional power companies
(b) Ability to buy solar and wind power at affordable rate
(c) Ability to claim tax incentives, various fee waivers like electricity transmission waiver for green power distribution
(d) Provide reliable service standard
(e) Get best in class battery technology at reasonable cost
(f) Convince and redesign EV auto makers to make the vehicle battery swap friendly
(g) Design very reliable (mechanical and electrical), hack proof and cost effective battery monitoring system
(h) Execute corporate social responsibility plans
4.2 Power sector in India
Let us now look at the power situation in India [5]. From 2014 onwards, the government has made tremendous effort in making power plants run at full capacity. The coal fed thermal power plants access to coal from Indian sources have been prioritized.
New power plants based on natural gas and hydel power are under development. At the same time, there has been strong push to commercially install very large solar power farms all over the country. To reduce the consumption of electricity, the central government has freely distributed LED based bulbs to poor sections of society. There is strong push to use efficient water pumps used by farmers for irrigation as they consume free electricity for the most part. There have been campaigns in the media to keep air conditioner temperature to as high as possible to plug possible wastage of electricity. All these factors have led to sharp reduction in energy supply and demand gap. In November 2018, this gap stood at -0.6% which is a huge improvement from more than 4.5% just 4 years back. This has significantly reduced the electricity power cuts or load shedding prevalent in most parts of the country. On an average, cities used to get 20-24 hours of electricity supply while 2nd tier city and towns averaged 12-22 hours. This has been significantly pushed higher even in peak demand time in summers. A typical daily demand curve of electricity is presented below.
Figure 8: Seasonal power plant load curves for north and south regions in India
We can see that there is significant difference in consumption pattern between north and south regions. The pattern also has significant impact of seasons. This pattern has significant impact on pricing of available electricity rate, which varies throughout the day and throughout the year. As the cost of electricity will significantly affect the financial performance of the company, it is envisioned to control the charging of batteries when cost of electricity is least. If feasible, a large resident battery bank can be installed at each battery swap station, which charges itself at cheapest available electricity rate and charges the EV auto batteries when demanded. Though this setup will be expensive to imagine, it may be required in the long run to gain from very low and sometime negative cost of electricity. The key factor will be cost of cheap and efficient large capacity storage battery.
Furthermore, swapping station will be made intelligent enough to enable charging at varying rate depending upon rate of electricity on offer on the supply grid. An efficient algorithm need to be implemented to bring cost of electricity for charging while maintaining availability of fully charged batteries for end customers.
Looking at data from Central electricity authority in India, we can see power situation at state level. We can see that there is wide variation in power peak demand not met situation. Patna is the capital city of Bihar state where power situation looks very promising. The mismatch in demand and supply is less than 1%. For other cities that we will be targeting, we will need to study the exact situation locally and take a call if it is feasible to start the operation
Figure 9: North Indian states power surplus/shortfall situation in 2017-18
Figure 10: Monthly Power availibility in Bihar and Jharkhand in 2017-18
4.3 SWOT analysis
SWOT analysis is a very popular framework in strategic planning and is used to identify strength, weakness, opportunity and threats respectively. Opportunities and
threats are external factors while strength and weakness are internal factors to the firm.
Also, strength and opportunity are helpful factors while weakness and threats are harmful for the organization.
Figure 11: SWOT framework of OM
As we can see from the SWOT matrix, the weakness and threats have to be appropriately balanced with strengths to fully take advantage of first to the market and make way for sustainable and dominating market presence. A key threat is that once auto drivers rent battery, they can also continue to use it by setting up a battery charger system themselves.
This can wreak very significant negative implication on sustainability of our business
model. The auto drivers should be provided some incentive to keep using the subscription without gaming the service offered to them.
4.4 Porter’s 5-force analysis
Figure 12: Porter's 5 force framework for battery swap for light EV industry in India
From porter’s 5 force analysis, we see that barriers to entry in this business is low. It is mainly due to the fact that the government has removed a lot of regulations that apply to gasoline based vehicles like safety certifications, pollution check, licenses to sell electricity in form of charged batteries or charging stations etc. Significant barriers exisit in the form of cost, technology and mass manufacturing capability of Lithium ion batteries or other high energy battery forms within India. Some companies like Exide and Munoth industries will start production in 2019 in small scale. Automotive grade lithium ion batteries are still expected to be imported from China, Japan , Taiwan or Korea well into 2020 or so. Because of large import duties, it becomes very expensive to make sense.
Power of Supplier
Low(for Lead acid battery suppliers) Very High (For Li-ion battery suppliers)
Threat of Substitute
Medium( customers can switch back to petrol based vehicles)
( Solar powered vehicles in summers)
Barriers to Entry
Low(For one city operation)
Medium(For regional level operations) (In terms of technology)
Power of Buyer
High( They can easily serve themselves) ( Many different automobile design )
Industry competitiveness
Low
(In nascent stage for now)
This acts as a natural barrier for large scale lithium ion battery based subscription business model in india.
4.5 Comparing battery technologies
Below is a table of conventional lead acid and lithium-based batteries available in India.
All figures are approximate as all available products perform around the figures in the table. Lithium batteries cost have import and shipping component into it. Lithium batteries will have significant cost per cycle advantage over lead acid based once they start being manufactured in India and match cost and quality.
Lead Acid batteries Lithium based
Cheap Exide Advanced LiFePO LTO
Energy density (Wh/Kg) 30 40 50 130 110
Power density (W/Kg) 120 180 190 200 200
Cycles 150 300 600 2000 6000
Fast charge time (Hr) 12 4-8 4-8 1-2 1-2
Temperature range 25C - 35C 25C - 35C 25C - 45C 25C - 40C 25C - 40C Cost (INR per KWh) ₹ 5,000 ₹ 8,000 ₹ 16,000 ₹ 56,000 ₹ 1,20,000
Cost per cycle ₹ 33 ₹ 27 ₹ 27 ₹ 28 ₹ 20
Energy Efficiency 60% 75% 80% 90% 90%
Daily cost of operation ₹ 167 ₹ 133 ₹ 130 ₹ 128 ₹ 104
Table 2: Comparison of key battery technologies performance figures available in India
The most important factors to look is daily cost of the respective battery technology. We can see that LTO is the most cost efficient available technology but it is also the most expensive one. Current cheap lead acid batteries used in the EV auto industry is cheap but very inefficient in terms of electricity utilization and cost per cycles. So there exist an
opportunity to offer cost saving by a big factor provided the cost associated with import of lithium based batteries can be overcome. Temperature of operation can play a significant role in India, as it is most hot weather except for 2-3 months. A strategy to overcome this limitation is to enclose the batteries within temperature-controlled environment. It should be a must requirement for Lithium based battery but no economical for lead acid battery because of their volume and poor energy density.
To enhance the life, we will restrict upper and lower 10% of battery charge capacity out of customer usage. This will not only add life to lead acid battery but also save lot of capital investment. A
Figure 13: Lead acid battery life enhancement using partial capacity utilization Typical operation conditions with existing Lead acid battery
Upper charge limit = 100% Lower charge limit = 2% to 5%
Battery life = 6 months
Upper margin
Lower margin
Upper margin
Lower margin
OM operation conditions with existing Lead acid battery
Upper charge limit = 90% Lower charge limit = 10%
Battery life = 7-9 months (Expected)