07 Apr Rest of World : China is betting on battery swaps to tackle EV chargers shortage

Media Source : Rest of World

Rarely seen globally, there are already thousands of battery swap stations across China.

By CAIWEI CHEN

3 APRIL 2024

• China is combating EV infrastructural issues like long wait times for charging and sparse chargers in rural areas with battery swapping.
• EV maker Nio is leading the battery swap trend, but more Chinese EV companies and battery makers are joining in and standardizing battery specs.
• Experts point to profitability questions and investment hurdles as reasons this trend might not spread outside of China just yet.

Alan Wu’s recent six-hour journey from Bengbu, in eastern China, to Shanghai in his electric vehicle was surprisingly seamless. That’s because Wu didn’t have to stop and wait for his battery to charge — he stopped at a battery swapping station.

Instead of parking next to a row of charging stations, he drove into a modern, garage-like structure and pressed a button on his dashboard. After he backed his vehicle onto an elevated platform, a mechanical arm extended to remove the original battery from the bottom of the car and install a new battery, as staff looked on for quality assurance. The automated process was complete in just five minutes.

“I am happy that I don’t have to wait for hours on the roadside like a lot of other EV owners,” Wu told Rest of World. Wu’s Nio ES6 is one of a few models from the brand that specifically support battery swapping; it’s not something that can be done with just any EV. “It was even faster than topping up at a [traditional] gas station.”

Battery swapping is rarely seen globally because it requires both specialized EVs that support the feature and a network of swapping stations. But it has found a strong foothold in China. By the end of 2023, the total number of battery swapping stations in China reached 3,567, of which 2,333 were operated by Nio. The International Energy Agency hailed China a “leader in global battery swapping infrastructure.”

The technology was originally pioneered in 2008 by Better Place, a San Francisco–based company operating in Israel that aimed to lower EV prices worldwide; the system didn’t take off in Israel because of financial difficulties caused by the high investment required to develop battery swapping infrastructure.

Chinese EV makers are banking on a different outcome. Home to almost half the globe’s electric vehicles, China has 85% of the world’s fast chargers and 65% of slow chargers, leading the globe in EV infrastructure. Yet, battery life and access to charging stations remain the biggest barriers for Chinese consumers considering the switch from internal combustion engine (ICE) vehicles to EVs, according to a survey by J.D. Power.

Chinese EV owners queue for well over an hour for a charging station during holidays and then wait another average 50 minutes for the vehicle to charge, according to a 2023 report by the China Electric Vehicle Charging Infrastructure Promotion Alliance (EVCIPA). On busy days, long queues form on highways, and 70% of surveyed Chinese EV owners reported dissatisfaction with waiting times. In rural regions, charging stations are scarce or simply out of service.

 3,567 The total number of battery swapping stations in China by the end of 2023.

 Nio

The earliest users of battery swap stations in China, namely Nio owners, tell Rest of World that the service has already dramatically improved their experiences, especially when traveling longer distances. Now, they simply drive up to battery swap stations and trade their drained batteries for fully charged ones.

This solution could address a major pain point for both consumers and commercial fleets and inspire international counterparts, said Bill Russo, founder and CEO of EV consulting firm Automobility. “The world is walking to the future, whereas China is racing,” Russo told Rest of World.

Wu is one of the hundreds of thousands of owners of an EV made by Nio, a local competitor of Tesla in China, which is hoping to stand out from competitors by providing superior customer service. Another customer, James Zhang, a Nio EV owner in Shanghai, told Rest of World that the ease of battery swapping was one of the main reasons he chose the brand over other competitors.

When buying a Nio vehicle, customers can choose to own a battery or simply subscribe to a battery rental service (BaaS) at 12,720 yuan ($1,760) per year. If the customer chooses to not own a battery, the purchase price could drop by as much as 70,000 yuan ($9,687). Each battery swap costs 80–100 yuan ($11–$13.8).

A failing or damaged battery is also one of the top reasons EV owners choose to trade in their cars. “Besides shorter charging time, battery swapping would de-risk battery obsolescence, allowing users to swap for upgraded batteries as technology advances,” said Russo.

K. Zé Liu, a research analyst at World Resources Institute, pointed out that with the battery swap model, EV owners don’t need to pay for new batteries, which are the most expensive component of a new energy vehicle. “This reduces the cost of cars and is very attractive for commercial fleet companies. They can buy cars in bulk at a lower cost and then lease batteries, which significantly reduces their operating costs,” Liu told Rest of World.

Following Nio’s lead, prominent players in the EV sector are joining the battery swapping trend. On January 28, battery manufacturer Contemporary Amperex Technology (CATL) and ride-hailing behemoth Didi announced their collaboration to launch a new battery swapping venture. The partnership aims to develop battery swap stations for commercial fleets in ride-hailing businesses.

However, the future of battery swapping hinges on industry-wide standards to ensure cross-brand battery compatibility. In 2021, China’s EV main regulatory body, the Ministry of Industry and Information Technology, published a safety standard for battery swap stations. In June 2023, Xin Guobin, the vice minister of the ministry, announced that China is going to push toward a universal standard of battery size, connection points, and protocols to facilitate the growth of battery swapping.

Nio has already formed a battery swapping partnership with brands including Geely, Changan, Jianghuai Automobile (JAC), and Chery. The companies announced that they will work together to standardize battery packs across brands, determine battery asset management standards, and roll out other measures to expand the EV battery swap ecosystem.

“The growing interest from various EV manufacturers is promising, signaling a potential for industry-wide scalability. The adoption of a universal battery standard is essential for cross-brand compatibility,” Alexander Li, a battery engineer and co-founder of the U.S. China Climate Forum, told Rest of World.

However, some investors and analysts question the profitability of battery swapping. The cost of building each second-generation power swap station for Nio is a minimum of 1.5 million yuan ($207,581), higher than most small-to-medium-scale charging stations. A fast charging station can cost as little as 100,000 yuan ($13,838), while a slow public charging point costs as little as 10,000 yuan ($1,383).

Nio is yet to be profitable and reported a $2.9 billion loss in 2023, adding to the company’s existing deficit of over $2 billion. Outside of China, Nio has built only 30 battery swap stations across Europe, in Denmark, Germany, Norway, the Netherlands, and Spain. With only a handful of stations in each country, it is unlikely that the service will attract users, analysts say.

“I don’t see Nio’s battery swap stations taking off in Europe anytime soon because it’s one of those things that only works at scale,” Liu, the analyst at World Resources Institute, told Rest of World. “It’s a chicken- and-egg problem — there are not enough cars that support battery swapping, not to mention Scandinavian countries like Norway already have the best charging infrastructure globally. Without policy support from the EU, Nio’s push in Europe is going to be very difficult, and battery swap is likely to remain very niche.”

In 2021 and 2022, Nio sold 200 and 1,350 cars in Europe respectively. In the first half of 2023, Nio reported that it sold 832 cars in Europe. While the number is increasing every year, Nio’s market share remains low, only about 0.1%.

But China remains the place where this vision of a green, swap-friendly future is closest to being realized. “In China, there’s a lot of [governmental] support on financing, but the U.S. government initiative has mostly favored trucks, none in the smaller vehicle space,” Baruch Herzfeld, founder of New York City– based e-bike battery swapping company Popwheels, told Rest of World. “I believe the future of mobility in America is a smaller vehicle, a personal vehicle with a swappable battery, but it will not happen in the U.S. without substantial investment. There simply isn’t a network of manufacturers, suppliers, and financers for it now.”

“Setting up battery stations is an extremely costly undertaking,” Jason Hong, U.S. general manager of battery company Ruipulan Jun Energy (REPT) Battero, told Rest of World, “but an industry-wide standardization, if achieved, could reduce overall cost to keep these stations running in the long run in China.”

SOURCE: https://restofworld.org/2024/ev-battery-swapping-china/