Battery-Swapping Reincarnation Could Threaten Electric Car Charging Networks.
“German manufacturers say they see no market for battery swapping. I believe that is not correct. Swapping will bring great benefits in the big cities like London, Paris, Berlin in taxi operations, so it’s coming. China is defining the rules”
The $1billion bankruptcy of Better Place seemed to have ended battery swapping as the way to recharge electric cars, but serious Chinese industry players are having second thoughts and their ambitious plans for Europe and the U.S. must be spooking the nascent charging networks.
Despite billions of dollars spent on speeding up battery electric vehicle (BEV) recharging technology, the process is still hopelessly slow compared with refueling an internal combustion engine (ICE) powered vehicle. And that’s the key criteria. If electric cars can’t recharge as fast as ICE ones, the revolution will stall.
Currently, you can drive your ICE car into a gas station and take a full 400-mile plus load on board and be gone in 5 minutes. Electric cars need at least 3 times that on a good day to restore maybe 200 miles of range.
European automakers are not impressed by the idea of battery swapping and that’s a mistake, according to Professor Ferdinand Dudenhoeffer, director at the Center for Automotive Research (CAR) at the University of Duisburg-Essen, Germany.
“So far, all German car manufacturers say they see no market for battery swapping in Europe. I believe that is not correct. Swapping will bring great benefits in the big cities like London, Paris, Berlin in taxi operations, so it’s coming. China is defining the rules,” Dudenhoeffer said.
Better Place’s economics crashed its business with Renault of France, which started in Israel and Denmark in 2012 and was forced into bankruptcy a year later. It was thought the huge costs of storing batteries was unsolvable and doomed the concept. The fact that the cost of batteries of up to $30,000 or more meant it was uneconomic to keep the stocks readily available to swap. Car owners would be unhappy to see something they paid €30,000+ simply swapped for another one, which might well be faulty. And the recharging infrastructure would soon be ubiquitous enough for EV drivers to set off on long journeys with no range anxiety, but that remains a pipedream.
Plans are already underway in China by the likes of electric vehicle startup NIO Inc to build a battery swapping network. Renault has said it is thinking of trying again. The problem that brought down “Better Place” – the huge cost of financing a stock of very expensive batteries has apparently been overcome. Battery costs have been cut by standardization. Critics say this has been helped by big Chinese government subsidies to support the key leasing concept. NIO says it has completed more than 2 million battery swaps in China and is preparing to open for swapping in Europe and the U.S. It plans to open 5,000 stations globally by 2025, up from 800 now.
Chinese automakers NIO and Geely, battery swap developer Aulton and state-owned oil company Sinopec plan to establish 24,000 swapping stations across the country by 2025, compared with about 1,400 now.
By leasing batteries, a huge initial outlay is avoided for EV buyers, while the vexed problem of residual values, bedeviled by a big question mark over just how much life is left in the device, is eliminated. And when this problem is eliminated, the advantages look formidable. Swapping means you will always have the latest technology and concerns about battery degradation and warranties are eliminated. You can also swap a small battery if your journey is local and rent a large one if a transcontinental excursion is planned. Battery swapping would be ideal for EV owners who live in big, high-rise cities where they would be unlikely to have access to home charging. Charging of the battery stock can be done overnight, taking a big strain off the electricity supply chain. The stack of batteries can act as a reserve for the system in times of stress. What’s not to like?
U.S. in 2025
NIO is now launching in Germany, Netherlands, Sweden, Norway and Denmark. It aims to attack the U.S. market in 2025, despite doubts of the likes of Mercedes, BMW and Volkswagen who fear batteries would become more of a commodity, as they prepare to use their battery technology as a brand value.
CAR’s Dudenhoeffer reckons the swapping case is strong.
“In China, all Chinese car manufacturers are currently using battery swapping. Even big battery manufacturers like CATL now have swapping solutions. And they are currently being tested in the commercial vehicle sector. It could be interesting there too,” Dudenhoeffer said.
“The swapping solution has advantages. The swapped battery is significantly cheaper than the normal battery and the service life is longer because it is always charged under ideal conditions, i.e. no quick charging. And it can be made smaller. I don’t need (500 miles), but (250 miles) or (300 miles) are enough. And don’t forget, it can be charged with inexpensive electricity – for example at night – and then used as smart metering, i.e. an energy buffer that also feeds electricity into the grid in the event of bottlenecks. So there are more advantages than you might think at first glance,” Dudenhoeffer said.
Prayjot Sathe, and Ming Lih Chan, analysts from Frost & Sullivan, said the Chinese version of battery swapping is completely different from the Better Place plan, which only had a handful of models, a limited number of outlets, and a confusing range of different connector standards and battery technologies.
In a joint e-mail, they said the current battery swapping system in China is strongly backed by the government and an array of partnerships with battery swap service operators and battery asset management stakeholders while EV manufacturers which focused on battery leasing, battery maintenance, and battery management. This allowed price cuts of up to $10,500 for EVs without batteries, while battery leasing was available for less than $150 a month
They said NIO sells EVs as well as services like battery swap and aftermarket services and this represents a one-stop solution for customers.
“Therefore, it automatically eliminates the challenge of retaining a stock of expensive batteries and customers having to replace batteries. The key factors that are driving the market are strategic partnerships between (manufacturers) and battery swap service operators, advanced business models that eliminate the cost and ownership of the battery, along with government support,” the analysts said.
Better Place rubble
If battery swapping does rise like a phoenix from the rubble of Better Place it could undermine the business models of leading EV makers like Tesla (which briefly flirted with swapping), Volkswagen, and General Motors, which have their own battery designs. It remains to be seen if they would be prepared to abandon their own designs and go for standardized ones.
Former Aston Martin CEO and current leader of EV maker Switch Mobility Andy Palmer doesn’t think swapping will work.
“You’ll never get carmakers to agree to swappable batteries,” he told Reuters earlier this year.
A breakthrough in fast charging and battery range would also undermine the case for swapping.
Pedro Palandrani, research director at Global X ETF, thinks there’s probably room for both.
“We believe battery swapping can be complementary to charging, especially in the short term, but it’s not going to threaten the dominant position of technologies such as fast charging. For example, Tesla started a battery swapping service in 2014 but exited the market as they developed the Supercharger network,” Palandrani said.
“As any technology, battery swapping has its pros and cons. On the pros side, battery swapping has less impact on the grid because you can manage the charging speed at the stations. It also reduces significantly the price of purchasing and leasing on an EV because the vehicle value without a battery pack is much more stable.
“On the cons side, the battery pack specs are often not compatible with each other, making it challenging for customers and OEMs. This is forcing large OEMs to establish alliances but might not prove to be a successful approach. Battery tech is part of an OEMs competitive edge, which they might lose if they enter into standardization programs. Also, given that battery swapping is capital intensive, setting up stations and stocking extra batteries, government subsidies are crucial. Unlike China, the government funds for battery swapping in Europe and North America currently lack, with much focus on EV charging infrastructure expansions.
ChargePoint, which says it is the world’s largest network of electric vehicle charging stations in North America and Europe, was asked to comment on the battery-swapping issue, but declined the request.