Battery swapping: The killer app for electrifying India’s millions of tuk-tuks?

Porter Harris used to design batteries for SpaceX rockets, luxury hatchbacks at Faraday Future and commercial trucks at startup Romeo Power. Now, as CEO and founder of Power Global, he’s targeting a new market: batteries for the three-wheel vehicles moving passengers and goods through the crowded streets of India’s biggest cities.

That’s a large and growing market. The Indian government has mandated that new three-wheelers sold in the country must be all-electric by 2023, part of a push to improve air quality in some of the world’s most polluted cities. More than a million electric three-wheelers are now on the road in India, and forecasts indicate their sales, which account for a fourth to nearly half the total market as of last year, could double over the next five years, hitting a value of $1.4 billion to $1.8 billion.

Most of those electric three-wheelers — known alternatively as auto rickshaws or tuk-tuks — are using lead-acid batteries or lower-cost lithium-ion batteries imported from China. These can struggle to provide the range needed for driving hundreds of kilometers per day, Harris said. And they tend not to last more than about six to nine months under such tough duty cycles, meaning drivers have to replace them often and governments have to deal with a growing stock of old batteries that need to be recycled or disposed of.

Harris sees a niche for a more modern approach: state-of-the-art lithium-ion batteries that can be swapped out for freshly charged modules at local dealerships or service stations and monitored on drivers’ Android-enabled smartphones.

“It truly is the first connected solution for the market,” Harris said of his company’s swappable eZee battery module, launched in late August. ​“It is a very practical and very frugal market. But any consumer is willing to pay more for something that’s reliable.”

That’s what Power Global discovered through hundreds of hours of interviews with rickshaw drivers in India, according to Harris. ​“They’re extremely skeptical of a lot of things,” he said. ​“Reliability is the key issue they’re having trouble with.”

Building a business model around battery subscriptions is a way to tackle reliability and cost in one go, he said. Batteries make up the majority of electric vehicle costs, and ​“battery swapping eliminates the upfront cost of the batteries.”

And unlike electric cars and trucks that are built around batteries that can’t be switched in and out — a fact that startup Better Place learned in 2013, to its investors’ chagrin — auto rickshaws are a relatively simple target for battery swapping, Harris said. Power Global is working with manufacturers of three-wheel vehicles interested in its system and is making its own electric drivetrain retrofit kits for existing fossil-fueled and lead-acid battery-powered vehicles.

Tackling the pain points of cost, range and refueling waits

Other companies are scaling up battery swapping as well. Hero MotoCorp, the largest two-wheel vehicle manufacturer in India, has partnered with Taiwanese battery-swapping company Gogoro. Honda, Yamaha, KTM and Piaggio have formed a consortium to standardize swappable batteries for motorcycles and mopeds. Piaggio also makes a three-wheeler with a battery that can be swapped at a service station.

Gayam Motor Works sells three-wheelers with swappable lithium-ion batteries and has installed swapping and charging networks at distribution centers. And ride-share company Ola Electric has inked deals with utility companies in Delhi to develop charging and battery swapping across the capital city region.

But Power Global sees its system as more flexible and scalable than those of its competitors, said Pankaj Dubey, co-founder and CEO of Power Global’s India subsidiary. As the former head of India operations for vehicle manufacturers Yamaha and Polaris, he’s well aware of the challenges faced by commercial vehicle operators.

Power Global’s batteries can be swapped out, but they can also be charged by drivers at home using standard household outlets, and its retrofitted three-wheelers will be able to charge at EV charging stations, he said. Other competitors offer various flavors of these options, ​“but none of them have all three.”

As for pricing, the company hasn’t released details, but it estimates its retrofits to turn internal-combustion three-wheelers into electric ones will cost about one-third of the price of the new electric three-wheelers currently on the market, he said. Those new models now range in price from $3,000 to $3,500 for those with swappable batteries and $4,000 and up for those with heftier batteries that require on-board charging, compared to about $2,500 to $3,000 for fossil-fueled models, he said.

Rising fuel prices over the past year have been squeezing rickshaw drivers’ profit margins, giving them an economic rationale to switch to electric, on top of the pending regulatory mandate, Dubey noted. At the same time, public EV charging infrastructure is sparse in India, and drivers can’t afford to wait in line to fill up depleted batteries, he said. Both of these factors give the battery-swapping concept a leg up.

Power Global is already producing eZee battery modules at its Pasadena, Calif. headquarters. It plans to scale up its battery manufacturing at a newly announced site in India as it inks deals with vehicle dealers willing to host its swapping stations, and starts producing its swapping stations and vehicle-retrofit kits via third-party manufacturers, he said.

The company is also exploring deals with vehicle original equipment manufacturer (OEM) partners, Dubey said. While he wouldn’t name any of those prospective partners, ​“the interest from OEMs is increasing day by day,” he said. 

Managing the costs of a batteries-as-a-service business model

Owning its own batteries does put pressure on Power Global to design cells and modules that can stand up to heavy use without rapid degradation, Harris said. The same telematics that give drivers a readout on remaining battery life will inform the company’s cloud-based battery-management system, he noted.

That’s ​“the reason we have a full cell test lab — we’re validating, making sure the cells are going to last a minimum of four years” of daily use by drivers, he said. ​“The longer the battery lasts on our side, the better the business case is for us.”

The swapping stations the company is planning to deploy at sites across India’s most populous cities can also provide backup power for their site hosts, he said — a valuable service on India’s notoriously unreliable grid.

Batteries that have degraded past the point of being usable for vehicles can be repurposed for stationary storage, where they’re still usable for another five to seven years, Harris said. Last month Power Global announced a partnership with storage and EV-charging infrastructure company PositivEnergy to develop stationary storage systems. It has also tapped battery recycling company Redivivus to manage batteries once they’ve reached end of life.

Power Global has raised $5 million to date, most of it in the form of self-funding by its founders. The company hasn’t publicly revealed the scale of investment it’s seeking to take the next steps in its expansion plans. It will certainly need more capital to hit its target of scaling up its India battery module manufacturing to about 500,000 units per year in the next 18 to 24 months, Harris said.

Whether India’s electric vehicle growth trajectory will support the expansion plans of Power Global and its competitors is an open question. Compared to the U.S., Europe and global EV market leader China, ​“India is perhaps a decade behind in its economic development, which explains why motorcycles/​mopeds and three-wheel vehicles represent such a sizable portion of its auto market,” Pavel Molchanov, director and energy equities analyst at Raymond James, said in a Tuesday email.

India’s government has set a 2030 target to electrify 80 percent of two- and three-wheeled vehicles on its roads, along with 70 percent of commercial vehicles, 40 percent of buses and 30 percent of private cars. But those targets ​“don’t mean much in practical terms unless and until the government creates a cohesive policy to incentivize EV adoption by end users,” Molchanov added. A recently introduced incentive framework for EV manufacturers will need to be supplemented with direct rebates or tax credits for buyers to boost the market, he said.

Harris believes India’s rising fuel costs and growing clean energy ambitions are putting an accelerator on transportation electrification plans, with light vehicles an early focus. But he also sees opportunities for the battery-swapping business model in other developing countries as well.

“How can we make this technology contribute to the global good?” he asked. Selling his shares of stock from his previous companies to fund Power Global is one way to ​“drive innovation where it matters.”