New Delhi: JSW MG Motor India has reintroduced the Battery as a Service (BaaS) for its electric four-wheelers. The concept first came to India 10 years ago but failed to make an impact in the four-wheeler (4W) market.
Today, while this seems like an innovative idea to overcome some of the challenges being faced by electric car makers and buyers—especially given the success of this model in the electric two-wheeler space (E2W)—industry analysts are still unsure of how it will pan out for four-wheelers.
Under the BaaS model, buyers purchase electric vehicles without the battery. As per industry estimates, batteries account for 40-50 percent of the cost of EVs, so BaaS helps bring down the initial investment by consumers substantially.
The battery is provided to users on a subscription basis or a lease agreement. In addition to the ability to charge batteries, users may also get the option to swap their depleted battery with a charged one at select charging/swapping stations.
BaaS is not a new concept, even in India. In 2014, Mahindra Reva introduced a monthly subscription model for its electric car, the Mahindra Reva e2o, reducing the upfront price of the vehicle by about Rs 1.7 lakh—from about Rs 6.5 lakh to Rs Rs 4.99 lakh (all prices ex-showroom) for the base variant.
Under that scheme, the buyer had to pay the company an energy fee, starting from Rs 2,599 per month for 50,000 km (800 km/month) for five years.
However, at the time, there weren’t many buyers for e-vehicles in India. This was mainly because the technology was new and expensive, and the infrastructure it required, such as charging points, was not easily accessible.
Backed by the government and with more manufacturers coming out with their own electric models, the market is changing. People are growing more comfortable with the idea of EVs. As a result, analysts say BaaS could make it lucrative for car buyers to turn to EVs by reducing their initial investment.
“The market for EVs has evolved. We are seeing increasing adoption of EVs,” Adhnan Wani, Associate at Koan Advisory Group, said to ThePrint. “The battery technology has evolved too. There are now more manufacturers making EVs which helps boost consumer confidence in the technology. Now, BaaS could help in making EVs much more accessible.”
Siddharth Kabra, Founder and CEO at BaaS start-up VoltUp, said that in the past few years, BaaS has seen considerable success in the E2W and 3W (three-wheeler) segments, mainly due to the growth in battery swapping infrastructure.
And though the industry is still at a nascent stage, BaaS, driven by battery swapping, has witnessed over two times the year-on-year growth since 2021.
He added that by opting for BaaS, customers can save up to 40-50 percent on the cost of an E2W, compared to when they purchase the battery outright.
“In a fixed battery, even if there is low usage, the running cost per kilometre increases as one has already paid for the battery,” Kabra said.
“However, with BaaS, the saving is significant because one pays as per usage. When it comes to fossil fuel, the total cost of operating (TCO) of a vehicle is around Rs 4-5 per km depending on fuel prices, whereas the TCO for a BaaS E2-wheeler is around Rs 1-2 per km. This leads to nearly 60-70 percent savings in fuel expenses, making it a highly cost-effective option for consumers.”
Kabra also noted that while opting for the BaaS model, since the customers are effectively leasing the battery, they are not responsible for its maintenance or replacement. However, the maintenance of the vehicle remains the responsibility of the customer and resale value depends heavily on vehicle conditions.
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Mixed response to BaaS globally
The battery renting model is still emerging globally, with only a few car manufacturers currently offering it, Ashim Sharma, Senior Partner and Head of the Business Performance Improvement Unit, Nomura Research Institute India, explained.
He noted that, in Europe, Renault pioneered the battery subscription model in 2014 with the Renault Zoe. At that time, there was a significant uptake of this model as the TCO for EVs was considerably higher due to low resale values and high upfront costs.
However, in 2019, Renault discontinued the battery subscription model after observing a notable improvement in the resale value of EVs, making their TCO competitive with that of internal combustion engine vehicles.
In China, Sharma said, the battery swapping model is considerably more popular than battery leasing. Major manufacturers, like NIO, have established battery-swapping stations across the country, supported by government policies that recognise these stations as part of the EV infrastructure.
In South Korea, in 2021, Hyundai Motor Company partnered with KST Mobility, a taxi operator, to sell EVs under the battery-subscription model.
“With the commercialisation of battery rental service, Hyundai Motor expects that customers will be able to purchase BEVs (Battery Electric Vehicles) at lower cost because they will only pay for the vehicle excluding battery cost. This is expected to foster EV adoption and expand the EV ecosystem,” Hyundai Motor Company had said in a statement then.
“Similar to MG Windsor’s offering in India, KST Mobility pays a monthly fee for using the battery while Hyundai takes ownership of it. The used batteries will then be acquired by LG Energy Solution and will be used as energy storage units for fast-charging services,” Sharma said, further explaining the South Korean model.
In the US, however, no manufacturer has fully implemented the battery subscription model yet.
How battery subscriptions compare with other engine types
On 11 September, JSW MG Motor India first announced the BaaS system with MG Windsor EV. Under that plan, the EV costs Rs 9.99 lakh and the customer, additionally, needs to pay for battery usage from Rs 3.5 per km. The customer would also incur charging costs at around Rs 1 per km.
The company has tied up with different finance partners under this programme, where some require no minimum running per month and others require a minimum running of 1,500 km per month. At Rs 3.5 per km, this comes to about Rs 5,250 per month.
According to industry estimates, the running cost for a petrol or diesel vehicle is about Rs 4.80-Rs 5.20 per kilometre and Rs 2.8/km for CNG vehicles. For hybrid cars, according to JSW MG Motor India, the fuel cost comes to be around Rs 5/km.
The company is marketing MG Windsor as a crossover utility vehicle. BaaS “makes owning a full-size capable electric CUV at the price of a manual engine-based compact SUV possible”, it says.
“The BAAS programme reduces the upfront cost and the running cost by 40 percent compared to compact ICE SUVs. This makes owning an EV more affordable and cost-effective over time.”
Then last week, after an “encouraging response”, the company announced that it was extending the BaaS programme to two more EVs in its portfolio—the Comet EV and the ZS EV.
With this, customers can buy MG Comet EV, which costs Rs 6.99 lakh onwards, for a starting price of Rs 4.99 lakh with battery rental at Rs 2.5/km. The MG ZS EV priced at Rs 18.98 lakh, comes to Rs 13.99 lakh under the programme with a battery rental at Rs 4.5/km.
“There is a lot of positive perception regarding this model within the industry and think tanks right now—in theory, but also proven from the experience in the two and three-wheeler industry in India. It has been financially rewarding for the gig workers, at least those who are using BaaS as a micro-mobility solution to deliver goods within a 2-5 km radius,” Wani added.
For BaaS in 4Ws, Sharma added that this model may also need to factor in things like how the resale value of the vehicle evolves, especially if the owner has to pay the balance subscription amount before the transfer of ownership, and how a buyer would compare the same as against buying a new vehicle with subscription
Echoing his views, Wani added that while it is too early to talk about challenges BaaS may face in India. One issue that is emerging is for re-sale of such vehicles. BaaS, he said, will not impact the resale value of the product, but right now there is a lack of clarity on the transfer of the battery subscription in case of resale.
According to the FAQs on the BaaS model for MG Windsor on the company’s website, if a customer wants to sell the car before the tenure, they can do so by “repaying the outstanding amount and by paying the balance amount for both vehicle and battery”.
Wani added that if we take the example of the MG Windsor EV only and compare it to the similarly priced ICE and EV vehicles, it will be cheaper to own overall. However, this option will make economic sense for people as long as they drive the average monthly distance of around 1,500 km. For someone with high driving requirements, owning an EV might make more sense.
“I’d say, overall, it could be a disruptive product in the EV market as it’s able to provide high-end features at an accessible cost by excluding the cost of the battery. We will have to wait and watch,” Wani said.
(Edited by Sanya Mathur)
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