New EV battery norms deadline worrying auto players

The new battery norms have put the EV industry in a quandary. While the EV industry claims that it barely has time to update designs, source new materials, test batteries in isolation, simulate road loads and finally test the entire vehicle, the fact that the deadline coincides with the next phase of BS VI emission norms has exacerbated their problem. They claim that the situation will cause significant delays because testing and certification agencies lack the infrastructure needed to deal with such a large number of vehicles with the waiting period for type approval running into weeks. The fear is that the logjam could force vehicle production to a halt.

Concerned over the evolving situation, members of the Society of Indian Automobile Manufacturers (SIAM), the apex body representing all major vehicle manufacturers, has written to the government, stating that AIS 038 Rev. 2 up to Amendment 1 can be easily implemented. However, requirements of Amendment 2, if required, should be implemented with a realistic lead time. “Therefore, a suitable additional lead time (ranging from three months to 15 months) shall be provided to comply with Amendment 2 to AIS 038 Rev2 requirements,” SIAM said in its emails to the Ministry of Road Transport & Highways (MoRT&H). Autocar Professional has access to these emails. Furthermore, with regard to the proposed conformity of production (COP) for traction batteries, SIAM in their correspondence added that since the industry resources are deeply engaged in the AIS 038 Rev 2 compliance process, it is therefore requested that it be implemented on April 1, 2023.

The new safety standards include 16 additional technical requirements for electric power train vehicle traction batteries, such as BMS enabled RFID and stringent cell testing requirements. It is thought to be even stricter than the current European regulation UN R100.03, which is set to take effect in September 2023 for new types and September 2025 for all types.

Aftermath of EV fire incidents
This development in regulations should be seen in the context of fire incidents that took place earlier this year involving electric vehicle manufacturers such as Ola Electric, Okinawa Autotech, Pure EV and even Tata Motors which went viral on social media and were widely covered in the mainstream media. Expectedly, the fires created panic not only among the OEMs and their suppliers but also the general public as it involved personal safety. Moreover, the supply side issues, including the shortage of semiconductors, only helped to exacerbate the problem.

The repercussions of the news around EV fires were felt in May 2022, when e-two-wheeler sales were 39,477 units, a drop of 20 percent compared to the previous month. Indeed, there emerged a clear link between the drop in EV two-wheeler sales and the fire incidents, as the majority of the companies affected by the slump were linked to safety incidents.

For instance, one of the most affected was Bhavish Aggarwal's Ola Electric, one of the major names in the EV two-wheeler segment, which, at 9,230 units, saw a 27.3 percent month-on-month (MoM) decline in total vehicles sold in May. An alarmed Federation of Automotive Dealers Association (FADA), a lobby body of automobile retail showroom owners, in its monthly report for the month of May remarked, “While two-wheeler EV sales were growing rapidly though on a low base, various fire incidents across almost all EV brands have created a fear in the mind of customers. This, coupled with supply chain issues, has decreased two-wheeler EV sales drastically from last month,” it added. The government did not respond to Autocar Professional's RTI request for fire investigation details. As expected, the entire episode has put policy makers on the defensive, given that the current regime has been pushing hard for the adoption of e-mobility in order to transition away from relatively polluting fossil fuels. Furthermore, the transition to cleaner forms of fuel is likely to help the country save close to $101.4 billion in foreign reserves each year, which it currently spends on crude oil imports.

Swiftly swinging into action, the government accelerated its Automotive Industry Standard (AIS) 038 Revision 2 implementation programme, which was originally scheduled to come into effect on December 27, 2022. The new deadline was brought forward to October 1, 2022, pushing it back by nearly three months and making things even more difficult for the EV industry. Finally, it was changed to December 2022 and March 2023 for implementation in two phases. The proposed COP for traction battery systems was also ordered to go into effect on October 1, 2022.

NITI Aayog expects EVs to account for 30 percent of new private car sales in India, 70 percent of commercial car sales, 40 percent of buses and 80 percent of two and three-wheeler sales by 2030, thanks to FAME II and other initiatives. In absolute terms, this equates to 80 million electric vehicles on the road by 2030.

Chaos at testing centres, launches delayed
In the run-up to the deadline, one can see long queues of various types of electric vehicles from OEMs waiting to be evaluated, tested, and certified by the Automotive Research Association of India (ARAI) and ICAT — the two organisations in charge of OEM homologation certification.

The waiting period consequently has become longer at 30-60 days thereby threatening to dent the EV sales growth by about 20-25 percent during the next few months. Dr Reji Mathai, Director of ARAI, and M S Mainkar, Senior Deputy Director, both declined to comment on the issue.

Uday Narang, Chairman and Founder of Omega Seiki Mobility (OSM), a supplier of electric vehicles to businesses for their last-mile connectivity needs, stated that while they are prepared to meet the deadline, a lack of testing infrastructure could be a hindrance. “As the testing infrastructure is still playing catch up, production will certainly be hit if we have to restart from zero in the middle of the festive period,” Narang said. He also stated that if the vehicle waiting period exceeds the normal 7-10 days, the increase in sales at a critical time will undoubtedly have an impact on his company's valuations and expansion plans.

Sun Mobility, OSM's swapping partner, says it designed and developed its 'Smart Battery' with India and three-wheelers in mind, and that the Bengaluru-based battery maker is adhering to the upcoming Phase 1 norms. The festival-filled month of October, with many holidays and the flow of vehicles with modified batteries, according to a company official, has put enormous pressure on the two major government-run testing and certifying agencies. “The on-ground situation is such that a lot of OEMs and battery makers who are ready with their upgraded solution are yet to be assigned a slot for testing and certification despite agencies accommodating much more than their usual capacity” he indicated. “We are requesting an extension so that the solution development appropriately takes place,” the Sun Mobility spokesperson further added.

Reliance-backed Altigreen, which is planning a rapid expansion by investing nearly Rs 80 crore in a greenfield manufacturing plant in Mallur, near Karnataka is also unhappy with the way things are panning out. Dr Amitabh Saran, Founder and CEO of Altigreen remarked, “Our concern is that rushed work, by manufacturers who are not as equipped as Altigreen, leaves scope for untested use-cases (to just “pass the new test”) which could potentially lead to field failures.”

The mood at the Society of Electric Manufacturers of India (SMEV), Phase IV, UdyogVihar on the Delhi-Jaipur Expressway is grim as its members have inundated its office bearers with calls regarding this issue. Sohinder Gill, Director General of SMEV & CEO of Hero Electric acknowledged that the Dec 1 deadline is achievable for large OEMs. He said, “The smaller players need more time as the testing agencies are stretched with a heavy workload for battery AIS 156 certification.”

An OEM who does not wish to be named said that the committee constituted to draw up the new battery norms did not consult the auto industry at all. “No one from the auto industry was chosen nor consulted, possibly because the committee didn’t want OEMs’ vested interests to push for more lenient norms,” an industry executive said. Committee members are battery experts and from the defence field but do not understand the nuances of production. “You can have standards but how do you productionise it in the right timeline and cost?” asked the executive. However, realising the feasibility issues, the new standards have been modified after consultation with the auto industry.

New launches delayed
The headwinds arising out of the transition, is apparently having an impact on OEMs’ plans of introducing new launches. They are now preferring to prioritise the implementation of new norms over launches. Take for example the case of luxury car maker Mercedes Benz's much publicised India-made EQS rollout which may get impacted on account of the tight deadline. “As we are having issues with just one part of the regulation regarding the December 1 deadline, our production schedules for India-made EQS can get impacted. We are trying our best to meet
the deadline and convince the agencies to see our point. We are hopeful that a solution to this effect can be reached sooner,” a highly placed source in the company informed Autocar Professional.

Likewise, Skoda Auto, which had planned to localise its India-bound Enyaq electric due to the volatile regulatory environment, has decided to delay the launch. The original plan was to launch the Enyaq EV around May 2022 but it is now unlikely to be launched before the end of the year. Petr Solc, Brand Director for Skoda Auto said that the company was planning to launch it in the 2023-24 financial year — a hint that the Enyaq launch could spill over into 2024. The plan is to launch the Enyaq as a full import or completely-built-up unit (CBU) and then localise it. “We are discussing with the headquarters to bring it as a fully built-up unit and later bring its parts and components as part of its larger localisation plans,” said Solc.

Commenting on the development, a senior executive at Tata Motors which presently holds pole position in India-made EVs said, “The transition has been challenging due to tight deadlines. At Tata Motors we are fully aligned with the new norms to ensure that our vehicles are tested and homologated in the prescribed timelines to ensure a seamless transition.”

It's a similar situation with Bengaluru-based electric vehicle start-up Simple Energy which has also delayed the launch of its upcoming e-bike Simple One. “To adhere to the new battery safety guidelines, Simple has taken a call to defer the deliveries of Simple One so that our vehicles are certified as per new standards,” Suhas Rajkumar, co-founder of Simple Energy said.

While the big players may sail through the new norms without much struggle, start-ups which form a chunk of electric two and three-wheeler manufacturers have seen the disruption also weighing on their valuation. In simple terms, higher the valuation of a company, greater is its chances of attracting further funding and growth prospects. Biju Mathew, Founder and CEO of Hyderabad-based ‘91 EV’, a pressure group of EV professionals working in the fields of public policy, regulations and tech-centric clean mobility solutions to e-commerce companies stated that the government pushed the regulatory pedal too hard to give consumers confidence. “We are anyways seeing valuations of EV companies taking a beating. Too many regulations, especially the new MHI policy, the battery phase two deadline and a production winter due to the current crisis is likely to hurt the investor sentiment as we look southwards due to the testing agencies crisis,” he said.

Other challenges
According to Gautham Maheswaran, co-founder of Hyderabad-based battery manufacturer RACE Energy, the current policy is flawed because a few of the tests, including thermal propagation tests, require a few more parameter details on the test procedure, which will indicate if further design level changes on the battery pack are required. Another challenge, as according to Gautam, is the rule that necessitates manufacturing dates to also be printed on each cell. This is one more reason he claims, “will raise overall battery costs and exacerbate the OEMs' and battery manufacturers' existing problems.”

Ola Electric has a similar point of view. The management of Ola has written to the Ministry of Highways and Road Transportation (MoRTH) about the issue. They stated in their letter to GirdharArmane, Secy of MoRTH, which is in the possession of Autocar Professional, “Testing for every cell is difficult to implement across commercial, mass production volumes. Instead, we already have in place compliance with the testing of samples for every batch as per international practice as part of our quality assurance. We, therefore, propose testing of samples (a specified percent of daily production) for every batch daily as per the production plan for the day and currently practiced by us that can be enhanced/modified as per government regulations,” Ola Electric said.

Diego Graffi, Chairman and Managing Director of Piaggio Vehicles stated that the transition was undoubtedly difficult for the company. Graffi emphasised that the latest thermal propagation test for 30 minutes is still difficult, and certification agencies are working on developing a procedure for conducting the test. “We requested certain optimisation in requirements which have been incorporated in the latest notification,” he said before adding that the challenge now is for the second part of the standards.

Offering a legal perspective of the situation, Sujoy Bhatia, Partner & Head, Corporate at Chandhiok & Mahajan Advocates & Solicitors said, “In my view, the key concern is the one month duration to implement all of the changes. This is too short for various reasons. For example, RFID is not typically there in any battery packs today, many labs in India are not equipped to implement the specific manner in which thermal propagation tests have to be carried out and for BMS to have read/write functionality. Further, most of the equipment to carry out such testing has to be imported, procured and then commissioned.”

Is industry over-reacting to delay the implementation?
Ankit Mittal, Member Secretary of the Charge Point Operators Society of India (CPOSI), who claims to be one of the current norms' advisors to the Ministry of Road Transport and NITI Aayog, says, “We have given NitiAyog an advanced guideline recommendation, which you will see getting into the policy realm sometime soon. I don’t know why the industry is crying foul as enough time has been given to them.”

Mittal goes on to say that these are not policy or administrative changes, but rather technical ones that are required for the products to operate in a country with a diverse environment, not only in terms of weather and terrain, but also in terms of customer usage. “As a result, the announced standards should have already been in place in the industry.”

Industry experts say, while the norms are stringent, they are a step in the right direction. To be a benchmark in terms of safety ahead of global standards can pave the way in building a strong foundation that may open up a global play for Indian EV players. The stronger players will be able to meet the norms, but it is the smaller players and start-ups, who don’t have the luxury of a big R&D team and deep pockets, who will be hurt the most. Anand Bhangaonkar, EVP for R&D and quality assurance at Piaggio Vehicles says while these new regulations are challenging, they “will curb the meteoric rise of unorganised players and help to organise and standardise the sector.”

With over 200 players participating in the EV segment and with some inevitably looking to make a quick buck, some consolidation was expected. The stricter norms will only accelerate that and pave the way for serious credible players. The only request from the industry is for time. But the clock is ticking a little too fast at the moment.