Can Tesla's resolute say no power exchange model be popularized in China?

A central question is: Are automakers willing to adopt uniformly standardized batteries?

A year ago, Tesla called the power swap model "problematic and unsuitable for widespread use."

But China on this side of the globe is pushing this business model hard. As a complement to the charging pile, the government has supported several companies that are promoting the technology.

Nio, Geely, Aodong New Energy and state-owned oil producer Sinopec, the four companies say they plan to build a total of 24,000 substations across the country by 2025 — just about 1,400 now.

Swap modes can help alleviate the growing pressure on the grid as millions of drivers charge, but experts warn that power swap patterns can only be widely replicated if batteries become industry-wide standardized products.

But if China makes the swap a massive success, that shift could undermine the business models of global brands like Tesla, Volkswagen and General Motors, which are designed and powered by their own proprietary batteries and, in the case of Tesla, have their own dedicated charging networks.

China plans to fully electrify 25 percent of its car sales by 2025, and according to current forecasts, it will exceed about 6 million passenger cars. The industry's estimates for how many vehicles will have replaceable batteries vary widely.

The Ministry of Industry and Information Technology is a major supporter of battery replacement.

In addition, China's large enterprises are also paying attention to the possibility of power exchange business in overseas markets.

CATL recently said it is not only developing power exchange services for China, but also "meeting the needs of the global market."

"We are accumulating experience in the Chinese market while communicating closely with overseas partners. You will receive more specific information shortly. "CATL supplies about half of the electric vehicle batteries in the Chinese market, and more than 30% of the electric vehicle batteries in the world.

Ganesh Iyer, head of North America at NIO, said it plans to provide battery replacement services to U.S. customers by 2025. It has more than 800 substations in China and has just built its first in Europe.

"The power swap mode is never going to work"

Plans for a swap model clash with views expressed by global electric vehicle leader Tesla in March 2021, when it denied the feasibility of a large-scale power swap in China. A few years ago, it piloted power swapping in the United States, but then abandoned it.

Industry executives are divided over whether China's push will overcome The reluctance of European and American automakers to abandon their own battery designs in favor of standardized batteries.

Andy Palmer, former CEO of Aston Martin and now head of electric vehicle maker Switch Mobility, said: "You can never get a car manufacturer to agree to a swap model. ”

John Holland, commercial director for Europe and the Middle East at Electric Vehicle Charging Company Momentum Dynamics, said the convergence of batteries has created a dilemma for automakers.

"So how do you differentiate your product?" Tesla, General Motors and Volkswagen say they are not exploring the possibility of swapping modes for now. A GM spokesperson said the power swap "is not part of our strategy at this time." ”

A Volkswagen spokesperson said the company initially considered swapping to avoid customers waiting too long at charging stations, but advances in fast charging and low costs for non-replaceable batteries have shifted their focus to the latter.

Still, Volkswagen remains open, saying it is closely monitoring and evaluating the competitive environment, as well as all developments in the field.

In fact, Asia and Europe have proven the convenience of electric motorcycle replacement, but the challenge is how to apply the technology to larger and more complex cars, trucks and vans.

It only takes 180 seconds for a battery to be replaced at NIO's substation.

However, grid charging has a huge lead and is supported by the multibillion-dollar charging infrastructure that has been built around the world.

Automakers are also rolling out electric vehicles with improved batteries that have longer endurance and shorter charging times, which could make battery swapping obsolete.

It's a long road

In China, the Ministry of Industry and Information Technology (MIIT) released the world's first power exchange technology standard for the automotive industry last year. The standards, which came into effect in November, set out safety requirements, test methods and inspection rules for battery-replaceable electric vehicles.

The ministry aims to have more than 100,000 vehicles with replaceable batteries and more than 1,000 substations in 11 cities by 2023; replacement stations in large cities will accommodate both passenger cars and commercial vehicles, while outlying provincial cities will focus on electric heavy-duty trucks.

A key uncertainty about China's ambitions, however, is whether there will be enough automakers to adopt standardized batteries. This hurdle has hampered the adoption of power-swap modes over the past decade – however, if overcome, the technology could be pushed to a viable scale.

The power exchange option that NIO offers to customers uses the company's own batteries, limiting the service to the nio car owner group.

CATL has helped NIO develop exchangeable batteries, and it has also signed a contract with China FAW to become the first customer for its new Evogo battery swap service, which it expects to expand to other Chinese automakers.

According to a person close to the company, CATL hopes that domestic companies will accept the standardized batteries it designs so that its battery stations can serve models of multiple brands, adding that it hopes more car brands will adopt its standardized designs.

Meanwhile, among those Chinese companies that have built a network of substations, Shanghai-based Aodong New Energy Vehicle Technologies said it is working with automakers to develop standardized batteries and working with Sinopec to install substations at 30,000 Sinopec gas stations in China by 2030.

While international automakers may boycott replaceable batteries, according to many industry experts, they rely on Sales in China to amortize their expensive electrification transition costs and will have no choice but to adapt to the Chinese market.

"In addition, if the Chinese government eventually mandates the use of batteries in the power exchange mode, those overseas car companies will have to comply with local regulations." John Halveston, an assistant professor at George Washington University's School of Engineering, said.

Levi Tillemann, head of policy and international operations at Cample, a San Francisco-based battery swap startup, said: "Swapping is too convenient, too economical and too reasonable, and it's not going to happen on a massive scale in Europe and the United States." ”

Ample, one of only a few alternative battery developers outside of China, has raised $275 million from investors, including energy companies Shell, Repsol and Eneos, to boost its valuation to $1 billion.

It is working on pilot projects with Uber and car rental startup Sally and said it is working with several automakers.

Tillemann noted that the use of this service for fixed-operated fleets is the best option.