The move is aimed at increasing the sale of the eco-friendly vehicles by reducing the upfront cost of an EV, and to encourage the battery-swapping model. The companies, however, said the move will cause confusion as it creates an inverted duty structure with the battery, as a separate product, will attract higher tax compared to EVs which are being sold at subsidized rates.

There are also issues with the model as companies utilize specific vehicle battery management systems and swapping batteries across EVs may affect vehicle performance.

Mahesh Babu, managing director and chief executive, Mahindra Electric Mobility Ltd, said no country in the world allows registration of EVs without pre-fitted batteries. The government’s move “has not been thought through” and the industry has not been consulted on the issue, he added. “We will explain to the government that this notification has created confusion. Up to the sale of the vehicle, the OEM (original equipment manufacturer) takes the responsibility of vehicle safety. A vehicle is tested, manufactured and sold as an integrated unit and the OEM is responsible for warranty.”

Through its directive issued last week, the transport ministry had hoped it will encourage early adoption of electric mobility—primarily in the two- and three-wheeler segment, by making EVs more affordable compared to petrol or diesel options. Batteries comprise 30-40% of the cost of an EV.

In battery swapping, a drained battery is replaced with a fully-charged battery at a designated swapping station. “The biggest doubt in a battery-swap model is standardization of batteries that can be used across vehicles of different make,” said a senior executive of a vehicle manufacturer, requesting anonymity.

Anyone with proprietary design of an EV, including the battery, will disagree with standardization of the batteries as their R&D teams have worked to achieve certain high-performance and output, and this involves manufacturing, machining, design, casing and cooling system, among other critical areas, he added.

The executive said one battery management system (BMS) may work far more efficiently than the other. BMS is a software solution that monitors the temperature of lithium-ion cells and controls the efficient functioning of the battery.

“Budget EV makers still can’t get hold of the battery performance as they don’t have the skills and expertise to invest in developing efficient batteries for EVs. The new government order is aimed at enabling battery swap model for companies like Ola Electric,” he added.

A senior government official said the step “will benefit a three-wheeler driver or an e-commerce deliver partner who may not be able to buy a battery. “One of the ways could be to make batteries available on rent. We are open to suggestions or comments from the industry,” the official added.

However, a section of industry insiders were happy with the government’s initiative. Lauding the order, Chetan Maini, co-founder and vice chairman of SUN Mobility, said effective implementation of innovative business models, such as battery leasing and battery swapping, will now be possible.

“However, the separation of batteries from EVs must reflect in the goods and services (GST) tax rates for both. “While GST for EVs is at 5%, for EV batteries, it is at 18%. And, this must be reduced to 5%. Similarly, GST for chargers is at 5% and GST for charging and battery swapping services is at 18%. This needs to be reduced to 5% as well. Such changes can significantly benefit the end-customer and increase adoption,” Maini added.