Is Battery-as-a-Service the Key to Making EVs More Affordable in India?

03 Nov, 2025

Interest in electric vehicles (EVs) is growing rapidly in India. Various incentives from the central and state governments, increasing charging stations, and a penchant for eco-friendly travel are attracting people to buy EVs. However, a major hurdle still lies ahead for the high initial cost. Typically, the price of an EV is still much higher than an equivalent petrol or diesel car.

In this situation, the concept of Battery-as-a-Service (BaaS) has emerged as a new solution. Here, the customer buys the car but rents the battery. This reduces the initial cost of the car, and the risk of battery maintenance falls on the manufacturer. MG Motor has popularized this concept in the market with its Windsor model. Read this article to know if this model really accelerates EV adoption among private car users.

What is Battery-as-a-Service?

When buying an EV, a large portion of the original price of the car has to be paid for the battery. But in the Battery-as-a-Service (BaaS) model, the cost of the battery is excluded from the price of the car. The customer only buys the car and uses the battery on a monthly or per-kilometer rental basis.

So, the initial cost of the car is reduced. For example, in the case of the MG Windsor, the car can be purchased for about 4 lakh rupees less if the battery is rented. The charging cost is borne by the owner, but there is a separate rental agreement for the battery.

The main attraction of this model is that the customer no longer has to worry about the condition of the battery or the cost of future replacement. The manufacturer or financial partner takes responsibility for the battery. So, this makes the cost predictable and brings peace of mind to the user.

Read more – Electric Vehicles Battery Types Used in India

Why Is the High Initial Cost of EVs a Major Obstacle in India?

The biggest challenge to EV popularity in India is its price. While a mid-segment petrol car is available for 8-10 lakh rupees, an equivalent EV costs 12-14 lakh rupees or more. The main reason for this is the cost of the battery. It is about one-third of the cost of the entire car.

In this case, the BaaS model clearly makes a difference. For example, the MG Windsor costs around 9.99 lakhs without the battery, while the one with the battery costs around 14 lakhs. This difference is attracting many middle-class families, as the lower price means easy access to credit and less initial investment.

In rural areas or tier-2 and tier-3 cities, where people have limited budgets, this model is more effective. The lower sticker price brings peace of mind to people and presents EVs as a realistic option.

How Does Battery-as-a-Service Work?

BaaS fundamentally changes the financial structure of buying a car. Usually, the customer buys the car and the battery together. But in BaaS, the car is bought without the battery, and a separate contract is made for the battery. This reduces the initial cost, and the rental or subscription fee is paid per kilometer or monthly.

The most important thing is the user’s driving pattern. For average users, those who drive about 10,000 km a year, the cost equals itself in about 8-10 years. If they had bought the battery, the cost would have been the same if they had rented it. In addition, they get a lifetime battery warranty, which is a big advantage.

This model is more profitable for low-mileage users. Suppose someone drives only 6,000 km a year. In his case, the total rental in 10 years would be about 2-2.5 lakh, whereas if he had bought the battery directly, he would have spent about 4 lakhs. So, this will benefit us economically.

However, BaaS is not always profitable for high-mileage users. If someone drives 15,000 km or more in a year, the rental cost over 10 years can be Rs 5-6 lakh. It is more than the actual cost of the battery. So, for long-distance or regular highway drivers, buying the battery outright may be a better option.

What are the Challenges of GST Inconsistency?

Have a look at the challenges of GST inconsistency-

Only 5% GST is applicable on the purchase of electric vehicles or EVs.
But 18% GST is applicable on battery rental, subscription, or leasing.
Customers must pay additional taxes on monthly or kilometer-based rentals, which increases the cost in the long run.
Many industry bodies have requested the government to reduce the GST rate on BaaS services to 5%, the same as EVs.

If the policy changes, it will be more affordable for users, and the BaaS model may quickly become popular in the market.

Benefits of Battery-as-a-Service

Given below are the significant benefits of battery-as-a-service-

Lifetime battery warranty: The customer does not have to worry about battery degradation or defects. If there is a problem, the manufacturer replaces it.

Upgrades are easy: If advanced technology batteries come in the future, the customer can easily get a new battery without the hassle of the old battery.

Resale value is good: Some manufacturers offer a guaranteed buyback offer for the car after a certain period. It gives the customer additional benefits at the time of sale.

Encourages first-time EV buyers: Those who were previously afraid of the cost of buying an EV can now get a car at a lower price.

Costs like fuel: The battery no longer has to be considered a major asset, but rather it can be considered a part of the regular expenses. This makes budget planning easier.

Limitations and Hidden Problems

High mileage users are expensive: For those who drive 15,000 km or more in a year, the cost of renting can exceed the cost of buying the battery.

Minimum subscription conditions: Sometimes, there is a minimum monthly mileage requirement. Even if you do not use it, you have to pay a certain amount.

Resale complexity: If you want to sell the car, the new buyer must take a battery lease agreement or buy the battery separately. This complicates the sales process.

Dependence on finance partner: Battery rental terms and charging methods are mainly based on the terms of the finance company. This limits the customer’s control.

Not available on all brands yet: Currently, only a few manufacturers, such as MG Motor, are offering this facility. If big brands are not involved, it will not be within everyone’s reach.

What can India learn from the World about BaaS?

A company called NIO has successfully launched BaaS in China. There, customers can buy cars cheaply and change the battery quickly if necessary. This model has not only increased sales but also increased confidence in EV usage.

In some countries in Europe and Asia, subscription models have been seen to make people more comfortable with adopting new technologies. Users know that if the battery goes bad, it is the manufacturer’s responsibility. This reduces stress.

India needs to come up with the right policy support, tax breaks, and adequate charging infrastructure; the BaaS model can quickly become popular. It is also important to introduce flexible plans for customers. Environmental clearance is crucial in current scenario.

Can BaaS Really Boost EV Adoption in India?

Suitable customer profile: It is most profitable for budget-conscious, medium-mileage drivers and urban commuters.

Policy support needed: Reducing GST to 5%, government incentives for rental models, and creating easy leasing policies will further expand the market.

Expansion potential: If manufacturers like Tata, Hyundai, Mahindra, etc. adopt this model, it will increase options for customers.

Not a universal solution: BaaS can increase costs for those who regularly travel long distances. So, it is not equally suitable for everyone.

Mindset change: BaaS is making EVs more affordable for people. They no longer have to worry about the high cost of batteries when buying a car, making EVs affordable for consumers.

Conclusion

The biggest barrier to EV adoption in India is the initial cost. BaaS has reduced that barrier to a large extent. It allows consumers to buy a car cheaply, transfers the battery risk to the manufacturer, and provides peace of mind. But it also has its limitations, especially for high-mileage drivers, the cost becomes higher, and the GST creates policy mismatch issues.

If the government provides tax cuts and incentives and more manufacturers adopt this model, BaaS could become an important step in India’s EV transformation. It may not be the only solution, but it could reduce the initial barrier to EV purchase and lead many households to green mobility.

If you need expert advice on EV-related policies, EPR Compliance, licenses, or green business opportunities, contact Enterclimate. Our team of experts is ready to guide you in the right direction.

Frequently Asked Questions On Battery-as-a-Service

What is Battery-as-a-Service (BaaS) in electric vehicles?

BaaS is a model where the customer buys the car without the battery and rents the battery separately. This reduces the initial cost of the car, and the risk of the battery is on the manufacturer or service provider. The user pays a monthly or kilometer-based rental. So, the battery can be treated as a cost like fuel.

How does BaaS reduce the cost of EVs?

Around 30–40% of the total cost of an EV is for the battery. If the battery is excluded, the cost of the car comes down. For example, in the case of the MG Windsor, the battery is reduced by around Rs 4 lakh. This makes it easy for middle-class families to buy EVs, where earlier the high price was a big barrier for them.

Who benefits the most from BaaS in India?

BaaS is most profitable for those who drive 5,000 to 8,000 km per year. They can use the battery at a lower rental cost than the purchase cost. They also get lifetime battery coverage. However, for high-mileage drivers, the rental cost may be higher than the direct purchase price of the battery.

Are BaaS available on all EV models in India?

No, currently only a very limited number of manufacturers, like MG Motors, are offering this facility. If big brands like Tata, Hyundai, or Mahindra launch this model in the future, the options for customers will increase. So, if the government reduces the GST rate and provides incentives, this model can quickly become popular.

How Does GST affect BaaS?

Only 5% GST is applicable on buying an EV. But 18% GST is payable on battery rental or subscription. This increases the monthly or kilometer-based cost of the user. Industry associations have urged the government to reduce this rate. If reduced, it will be more affordable for customers.

What happens if the rented battery goes bad?

One of the biggest advantages of BaaS is the lifetime warranty of the battery. If the battery deteriorates or fails, the manufacturer or finance partner will replace it. Here, the customer does not bear any additional costs or worry about the battery’s risk.

Does BaaS affect the resale value of an EV?

Yes, it does create some complications. The new buyer may have to continue with the old contract or buy the battery separately. This makes the resale process a bit time-consuming. However, manufacturers like MG have introduced buyback programs, which are increasing confidence in the resale value. Future policy developments may ease this issue.

Can BaaS make EVs cheaper than petrol cars?

EVs already have lower running costs than petrol or diesel cars. Now, BaaS models are also reducing the initial cost of buying a car. Average users can almost equalize the cost of renting and the battery in the long run. So, EVs often become cheaper than petrol cars in terms of total cost.

Is BaaS effective for long-distance drivers?

BaaS is not always cost-effective for long-distance or high-mileage drivers. If you drive a lot of kilometers per year, the rental cost will exceed the cost of purchasing the battery. So, for regular highway commuters or long-distance travelers, buying the battery outright may be a better option, unless more flexible subscription plans come along in the future.

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