Tata Motors questions the practicality of the Battery-as-a-Service (BaaS) model, citing cost, logistical, and consumer concerns, even as rival MG Motor sees a sharp jump in sales after introducing the scheme.
26 Jan 2025 | 9262 Views | By Kiran Murali & Ketan Thakkar
Tata Motors has expressed skepticism about the viability of the Battery-as-a-Service (BaaS) model for electric vehicles, citing financial, logistical, and consumer value concerns.
While some manufacturers are exploring the model, Shailesh Chandra, managing director of Tata Passenger Electric Mobility, shared his reservations about its practicality, both from the company’s ...
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Tata Motors has expressed skepticism about the viability of the Battery-as-a-Service (BaaS) model for electric vehicles, citing financial, logistical, and consumer value concerns.
While some manufacturers are exploring the model, Shailesh Chandra, managing director of Tata Passenger Electric Mobility, shared his reservations about its practicality, both from the company’s and the consumer’s perspectives.
Battery-as-a-Service has been a big hit in India for MG Motor, which is the first player to offer this service. The Chinese automaker has seen its EV sales go through the roof after it introduced this scheme three months ago.
Compared to monthly sales of units around 1,500-1,600 earlier, MG Motor has sold 5,343 units of electric vehicles in the month of December, largely because of BaaS. In the same month, Tata Motors sold 5,562 units of electric vehicles. Meanwhile, MG Windsor has emerged as the top selling EV in India.
Chandra clarified that the BaaS model, which involves separating the battery from the car and offering it as a service, adds unnecessary complexity and cost.
“It’s not just about physically separating the battery; it’s a financial model,” he said. “When the battery is sold with the car, it attracts 5% GST. But as a service, it incurs 18% GST, making it more expensive for consumers.”
This tax disparity creates a significant cost disadvantage, especially when combined with the dual financial structures consumers must navigate. “From a convenience perspective, it adds complexity. You have to manage two different financial components, and when you sell the car, you have to close both. I don’t see this as a tick for either convenience or cost,” Chandra explained.
He also questioned the actual value of the BaaS model to consumers, suggesting it is more of a marketing strategy than a practical solution. “It’s trying to shift the customer’s mental schema by separating running and acquisition costs, but does it add value? Based on my understanding, the percentage of cars sold with this model is very small,” he noted.
Meanwhile, by offering battery subscription plans, MG Motor has aimed to reduce the upfront cost of ownership and appeal to first-time EV buyers who are hesitant about higher acquisition costs.
This approach has also helped the brand position itself as an innovator in the EV space, providing flexibility to customers with varying usage needs.
While Tata Motors evaluated the BaaS model two years ago, Chandra confirmed that it is not being considered now. “We actively thought about it in the past, but as of now, we are not exploring it. That said, I’m not ruling it out entirely—it has marketing value—but for now, we don’t see it as a priority,” he said.
Tata Motors believes that by bundling the battery with the vehicle, it is offering a straightforward, cost-effective solution that resonates with Indian consumers. It believes that, by avoiding the BaaS model, it is reinforcing its commitment to providing value-driven electric mobility solutions that prioritize practicality over experimentation.
Meanwhile, India’s largest car maker, Maruti Suzuki, which recently showcased its first electric vehicle, e-Vitara, believes BaaS could be one way to address consumer concerns about the residual value of electric vehicles.
“BaaS is one of the options to eliminate the customers' pain point because EVs' residual value mainly relies on battery deterioration. That you can avoid through BaaS,” Maruti Suzuki Managing Director & Chief Executive Officer Hisashi Takeuchi said.