What is Battery-as-a-Service?
In the Battery-as-a-Service (BaaS) model, electric vehicle (EV) owners purchase the EV without the battery, reducing the upfront cost of the EV.
The battery is then provided in the form of a subscription or lease agreement. Typically, this might take the form of a monthly subscription, whereby alongside the ability for ‘traditional charging’, the depleted battery can be swapped at specialist automated stations for a fully charged battery in a matter of minutes. The empty battery is placed into a charging port, where it is fully charged and can then be swapped into another vehicle.
BaaS is not a new concept. Better Place, a venture-capital backed Israeli start-up company – founded in 2007 and based in California – has previously
developed and sold battery swapping services for EV cars to address the concerns of consumers around a lack of charging infrastructure, known as range anxiety, and to defer the cost premium of EVs caused by the high cost of the batteries. The uptake for its battery swapping solution was limited and it found only one EV manufacturer partner (Renault) as other manufacturers were concerned about being tied into using a standardised battery pack. There was only one EV model, the Renault Fluence Z.E. that was able to use the battery swap system. Better Place built infrastructure in many locations, including in Israel, Denmark, Japan, and California, at a cost of $2mn for each battery swapping station before filing for bankruptcy in November 2013. Notwithstanding Better Place’s failure to launch, the concept proved to be ahead of its time and may well have been hampered by limited market demand for EVs in the early 2000s. The large investment needed to develop the charging and swapping infrastructure also meant that users had to drive long distances to swap their batteries, which limited customer satisfaction. Recognising the potential of the idea, Tesla trialled battery swapping with Model S owners in California in 2013 when the EV market was still nascent but seemingly ceased the service after two years. The lack of consumer interest relative to the increasing popularity of the company’s growing supercharging network was suggested as one of the driving factors for discontinuing the service.
Despite the previous challenges faced by the BaaS model, there is promise for the technology in the near future. Given the proportion of EVs in the market is now much greater than a decade ago, and backing from governments for EVs has increased, BaaS may have the potential to fill gaps not met by other EV charging models and may offer a useful alternative to on-street charging. As discussed later in this paper, Chinese EV manufacturer NIO has successfully rolled out BaaS infrastructure in China and is now looking to roll it out in Europe.
Why do we need BaaS?
The UK context
With the government banning the sale of new petrol and diesel cars in the UK by 2030, as part of its target to reach net zero by 2050, the EV market is expected to grow from0.5mn in 2021 to 14mn by 2030. The proportion of drivers who said they plan to purchase a fully EV as their next vehicle has grown from2% in 2017 to 14% in 2021and byMay 2022 14% of new cars registered were EVs. By 2050, EVs are expected to need 65-100TWh of electricity each year, anincrease of 20-30% on current levels.
There are many obstacles to overcome in order to see the widespread adoption of EVs. Principal among these are issues surrounding cost and range anxiety, as well as concerns about a lack of charging infrastructure. Range anxiety is likely to be resolved in the short term, with some new model EVs able to cover 300 miles plus. However, the shortage of chargepoints continues to be an issue. In March 2022, the Department for Business, Energy & Industrial Strategy (BEIS) published itsEV Infrastructure Strategy, which recognised that the current chargepoint roll out is too slow, public charging costs are opaque and unreliable, and that more local planning is needed to ensure the current rollout is even across the country. TheSociety of Motor Manufacturers and Traders (SMMT) has indicatedthat the continuation of the transition will depend on the preservation of incentives that overcome the affordability barrier and the ability of the public and private sectors to increase public on-street charging to allay EV driver concerns.
Regarding the issue of costs, anOC&C Strategy Consultants surveyfound that 69% of UK consumers actively considering an EV did not want to spend more than £500 extra on the difference between an internal combustion engine (ICE) vehicle and an EV. Felicity Latcham, Associate Partner at OC&C, said the actual price differential seen between most equivalent ICE and EV models tends to be substantially upwards of £500, meaning that in many cases consumers are deterred by the cost of EVs.
Costs have been further exacerbated by increases in battery pack prices. While prices for these materials have beenset to decline year-on-year, current rising commodity prices and raw material supply risks due to geo-political tensions have meant that there is increased pressure on the battery production industry. This has resulted in uncertainty about future costs for producing battery packs with prices likely to remain higher than expected in the coming years.
In the case of infrastructure, increased EV demand necessitates the roll out of over300,000 new chargepoints across the UK, together with the requirement for a new and upgraded electricity supply network. The government’sEV Infrastructure Strategy highlightedthat a minimum of 300,000 public chargepoints will be required in the UK by 2030, a very large increase on the current 29,600 chargepoints in place. A survey by OC&C Strategy Consultants in 2019 found that 64% of consumers were concerned about finding enough places to charge their car when they were out. This dropped to 50% in 2021 as infrastructure started to catch up, but more needs to be done to alleviate concerns.
A role for BaaS
BaaS could be a solution to concerns around the lack of EV charging infrastructure, EV range and the high battery cost. The battery pack is the single most expensive part of an EV and accounts for around 30% of the cost to consumers. By leasing or subscribing for a swappable battery, the upfront cost of an EV is significantly reduced. Professor Rohit Bhagat, Centre Director and Chair of Electrochemical Energy Storage at the Centre for E-Mobility and Clean Growth Research (CEMR) at Coventry University, noted that the “better use that is taken from the battery pack, the cheaper the cost of ownership will be”. In addition, the BaaS model centralises and speeds up charging processes, as well as overcoming issues related to limited potential for home plug-in chargepoints in areas such as inner cities.
An example of this is the BaaS offering provided by Chinese EV manufacturer NIO, where adepleted battery can be swapped out in less than five minutesfor a fully charged battery providing up to 380 miles of range. This contrasts to standard EV charging, where aTesla Superchargertakes 15 minutes to provide 200 miles of range. NIO customers can also subscribe to a range of battery pack capacities to suit their travel needs.
BaaS around the globe
China
At present, the largest market for BaaS is in China. The Chinese Government has supported the battery swapping technology industry and the 2020 policy of national new energy vehicle (NEV) subsidies has recognised the vehicle-battery separation based on battery swapping technology. The Chinese Government regards power swap stations as part of the overall answer to EV infrastructure. In July 2020, China’s Vice Minister of Industry and Information Technology Xin Guobin announced that the government will ‘vigorously’ pursue the construction of EV charging infrastructure and battery swapping and encouraged companies to develop and test vehicles with replaceable batteries.
NIO
Chinese EV manufacturer, NIO, officially launched its BaaS offering in August 2020. It believes that its BaaS offering represents a ‘systematic solution’ to EV battery degradation, battery upgradability, and lower resale value.
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EV users can purchase a NIO EV without the battery and subscribe toNIO’s BaaS subscription service, which provides battery packs of varying capacity, according to needs, with customers paying on a monthly basis. The service includes the NIO Power Swap and flexible battery upgrade services. Customers that purchase NIO cars with BaaS pay the equivalent of around £8.3k less on all models, with subscription to a 70kWh battery pack costing around £116/month for up to six swaps. As at January 2022 the company had installed800 battery swap stations in Chinaand provided over 5.3mn battery swaps. It noted that in November 2021,42% of NIO users lived within 3kmof a swap station with each swap station serving around 258 cars. The company has also installed 645 destination charging stations across China, which offers users an alternative charging method.
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According to the company, NIO owners can swap their depleted battery at battery swap stations in three to five minutes with the fully charged battery providing them with a 380-mile range. The batteries take around one hour to recharge in the swapping station and each station can complete 312 battery swaps per day. In comparison, theTesla Superchargerallows users to top up their car to 200 miles in 15 minutes. The price per mile of range is alsomarginally cheaper for the NIO BaaS model(8.3p/mile) compared to the equivalent price for a Tesla Supercharger (8.6p/mile).
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With NIO’s BaaS customers able to subscribe to battery packs of various capacity according to their needs, it makes the service viable for a wide range of EV users, both those who primarily do short inner-city journeys and those who do longer journeys. The ability to switch the subscription to a different battery type provides flexibility to the users.
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NIO BaaS users also have access to NIO charging stations, of which it has over 3,000 power chargers and over 3,300 destination chargers, and NIO also has roaming agreements giving customersaccess to over 430,000 third party chargers, so they are not restricted to swapping their battery each time it runs low. Its 7kW and 20kW home chargers provide further charging capabilities with charging times of 14 hours and five hours respectively for a 100kWh battery.
Battery asset company, Weineng Wuhan Battery Asset Co. Ltd was created by NIO alongside Contemporary Amperex Technology Co. Limited (CATL), Hubei Science Technology Investment Group Co. Ltd. and a subsidiary of Guotai Junan International Holdings Limited. The battery asset company purchases the battery packs and commissions NIO to provide the battery subscription and operation services to users.
Where NIO’s service offering differs to its predecessors is that it is making BaaS and battery swapping standard across the entirety of its model range. Tesla made the service available for only one of its models, and similarly, Better Place worked with only one model by one manufacturer.
Other providers
NIO is leading the way for BaaS in China; however, other companies are also entering the space:
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In May 2020,CF Energy, an energy service provider in China, announced that EDF CF – a joint venture between CF Energy and EDF (China) Holdings Ltd – had signed an exclusive co-operating agreement with BAIC Qingxiang Technology Co., Ltd (BAIC QX) (A subsidiary of BAIC Motor Corporation., Ltd which is one of the largest EV producers in China) and Blue Valley Smart (Beijing) Energy Technology Co., Ltd to provide EV battery swap services in the Hainan Province. BAIC QX released 200 swap-battery EVs for Network Taxis in Sanya City and committed to a further 200 more in the months following the announcement.
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Chinese car manufacturer Geely has said it aims to install5,000 battery swapping stations for EVs in China by 2025through its associated service, E-Energee. Its first battery swapping station was installed in September 2020 and it has since expanded to 10 Chinese provinces. The service is primarily for EV fleets.
While battery swapping works well in China, other countries have different policies, infrastructure and environments, which means the success of BaaS will not necessarily be easily replicated elsewhere.
United States
In the United States, start-up company Ample launched in March 2021, raising $230mn to embark upon modular battery swapping, initially for commercial vehicles with the potential to move to passenger cars and SUVs. Its ambition is to get car manufacturers to make versions of their EVs that have an adapter plate instead of a full battery pack into which Ample will plug battery modules. The modules can then be swapped at automated battery swap stations regardless of vehicle size or model. These vehicles will be sold to fleets that want to go electric. It highlights the selling points for this approach as reduced charging time, a swap station rather than several high-capacity chargers, and less on-site infrastructure.
India
In India,SUN Mobility, a joint venture between Maini Group and SUN Group, announced in August 2021 that it aims to tackle the unique challenges faced by India’s urban transportation through its Mobility-as-a-Service (MaaS) model for multiple vehicle platforms, including two and three-wheelers and buses with an unlimited swap plan for the duration of the contract. SUN Mobility has 65 swap points across 14 cities in India and aims to have over 500 swap points by the end of 2022.
The Mahindra Group signed a partnership with Jio-BP – a joint venture between BP of UK and Reliance Industries – in December 2021 to explore the creation of EV products and services including business models like MaaS and BaaS. It says the partnership aims to accelerate EV adoption in India with high performance and swappable batteries that will help dispel range anxiety.
South Korea
Hyundai signed a memorandum of understanding (MoU) with South Korea’s Ministry of Trade, Industry and Energy, together with Hyundai Glovis, LG Energy Solution and KST Mobility, for the rental of electric taxi batteries and the sustainable reuse of EV batteries in energy storage systems (ESS). KST Mobility, a taxi operator, will sell the ownership of batteries in newly purchased EVs to Hyundai Glovis, the battery lessor. KST Mobility will then pay a monthly fee for battery usage which means it will have a lower initial investment on EV purchases. After extensive usage, the batteries will be reused in ESS for fast-charging EV taxis. ESS will be charged at off-peak times when electricity rates are lowest and EV taxis will be charged during the daytime when electricity is comparatively expensive. Hyundai will oversee all the business operations and w ill be responsible for providing battery warranty and replacement batteries for vehicles that return batteries after use.
Europe
Norway has achieved the highest European EV penetration so far, with the number of EVs increasing substantially over the last decade from 1,200 battery EVs in 2008 to approximately 290,000 in 2019, accounting for around 9% of total cars. Incentives have been in place for many years to make the cost of EVs cheaper than conventional petrol and diesel vehicles.
NIO launched its ES8 model in Norway in September 2021, marking the start of its service offering there, including its BaaS model. The first charging and swapping station in Norway was built and ready at the end of October 2021. NIO plans to build 20 power swap stations in the country by the end of 2022, covering its five largest cities and their main roads. Each swap station has 14 battery slots and 13 battery packs, with an empty slot to pick up a discharged battery.
NIO also plans to introduce its products and ‘holistic service system’ toGermany, the Netherlands, Sweden, and Denmark in 2022. It aims for 1,000 swap stations to be built outside China by the end of 2025 and to establish a presence in over 25 countries and regions worldwide by 2025.
Aside from NIO’s entrance into Norway and expected entrance to other European countries, from 2022 drivers of theXEV YOYO city carin Italy and Germany will have access to a battery swapping service, Battery Xchange, at selected Eni service stations following anagreement between XEV and Eni.
UK
BaaS is not a charging model that currently exists in the UK. However, this model could help to resolve issues around the cost of batteries, patchy public charging infrastructure and limited vehicle range, which have been highlighted by the government in publications such asDecarbonising UK Transport reportand theUK Electric Vehicle Infrastructure Strategy. The official government position continues to be that the commercial case for battery swapping isyet to be provenand the technology has not been a particular focus in strategies and reports related to EV markets.
Engagement with BaaS models
Customer engagement
With an ever-increasing number of EVs on the road and the phasing out of ICE vehicles, market conditions are now more conducive for the success of the BaaS model.
At present, NIO provides its BaaS offering to all users, individual consumers and fleet customers. Other companies that have entered the BaaS market, such as Geely, BAIC and Ample, have focused on offering the service solely to fleet customers. Taxi fleets are currently the primary route to market for most companies entering the BaaS space.
A key factor in customer engagement with BaaS is the shift in mindset towards subscription models. This is a phenomenon that has been observed in all sectors, not just the mobility space. The consumer shift in subscription mindset has been seen in everything from software-as-a-service, telecoms (e.g., SIM-only deals), ride-hailing (e.g., Uber, Lyft, and Bolt), car sharing (e.g., Zipcar and Hiyacar), and the consumption of media (e.g., Netflix and Amazon Prime). The key to the success of these models is the flexibility they afford the customer, withoutmuch upfront commitment or cost and the revenue certainty provided to the company offering the service.
However, Jonathan Carrier, co-founder of ZipCharge, highlighted that for a consumer to make the shift to an EV requires "a huge amount of behaviour change" and people resist because of lack of belief in it, lack of trust, or they find it too confusing. With BaaS, there is an added level of uncertainty for consumers around what happens when the vehicle is sold and where the ownership lies which means there is a "huge level of cognitive dissonance" between the reality of what is on offer and what the consumer understands. Carrier added that the early EV adopter community were willing to take a risk and to try something new, but this is not the same for the mass market, where consumers want the experience of owning and driving an EV to be simple.
Business-to-business engagement
With regard to the business-to-business (B2B) aspect of the BaaS model, there is also a shift in mindset around collaboration among various participants within the automotive ecosystem. Historically, partnerships on projects and technology sharing within the automotive industry have been limited, but now there is more recognition around the benefits of corporate collaboration to achieve success and longevity. As will be discussed later, NIO, for instance, partnered with Shell in 2021 for its roll out plan, which has helped towards meeting its 2021 end goal of building 700 swapping stations.
