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The Rebirth Of EV Battery-Swapping Services And Why Their Time Is Now

Christopher Tang, Distinguished Professor at the UCLA Anderson School of Management, and S. Alex Yang, Professor of Management Science and Operations, London Business School

History is littered with clever ideas that failed to make their mark the first time around. After all, the first electric cars emerged in the 1800s, but would need to wait another century to finally have their moment.

After earlier attempts to launch electric vehicle (EV) battery-swapping services failed, a similar second coming is what the latest generation of providers are now counting on. China’s EV manufacturer NIO, battery giant CATL, and San Francisco-based Ample are offering battery-swapping services in Europe, China and the United States, hoping it won’t take another 100 years to reap the rewards.

First-generation battery-swapping services

Amid concerns that the charging requirements of electric cars could curtail their uptake, EV battery-swapping services that allowed users simply to swap their depleted batteries with charged ones emerged.

Established in California in 2007, Better Place initiated its EV battery-swapping service in Israel, with expansion plans for other countries. For a monthly subscription fee, drivers could access Better Place’s network of automated stations, enabling them to swap batteries within minutes. Despite these efforts, Better Place declared bankruptcy in 2013 after burning through $850 million in cash and attracting only a small number of subscribers for its battery-swapping service.

The EV giant, Tesla, has also tried to build battery-swapping stations, aiming to change its Model S’s battery pack in 90 seconds in 2013. However, after receiving a lacklustre reception from Tesla’s customers, the battery-swapping plan was shelved in 2015.

Renewed interest emerges

Drawing on the lessons gleaned from Better Place and Tesla’s unsuccessful attempts a decade ago, a new generation of EV battery-swapping services has emerged in recent years as the EV market size approaches a critical threshold, with the US selling a record-high 1.2 million EVs in 2023 and China boasting an estimated 20 million EVs on the road as of January 2024.

Despite this positive trend, charging an EV remains an inconvenient experience, particularly for urban residents without easy access to home chargers. This challenge has sparked renewed interest in EV battery-swapping services.

Apart from convenience, battery-swapping also lowers customers’ initial cost of adopting an EV by allowing them to purchase only the vehicle body and lease the battery pack. Compared to buying an EV with battery pack, this option could reduce customers’ initial adoption cost by thousands of dollars.

Battery-swapping services also present several environmental advantages. Batteries in a swapping system can be charged at a slower pace, which can extend the lifespan of EV batteries and consequently reduce electronic waste. By charging batteries during off-peak hours, battery-swapping stations can reduce energy demand during peak periods or even function as ‘virtual power plants’, sending energy back to the local grid during these periods.

New players

Since 2018, NIO, a Chinese EV manufacturer, has positioned itself as a leading advocate for battery-swapping. Unlike Better Place, NIO’s position as a vehicle manufacturer allows it to maintain direct control over both batteries and vehicles, ensuring compatibility with its battery-swapping stations.

NIO’s battery-swapping services operate under a Battery-as-a-Service (BaaS) model. As of November 2023, NIO had established 2,217 battery-swapping stations across six markets, completing nearly 33 million battery swaps for its users.

In an effort to expand its operations, NIO entered into a strategic partnership with Shell in November 2023 to construct and manage battery charging and swapping facilities. To maximize the utilization of NIO’s battery-swapping stations and generate additional revenue, NIO also signed agreements in November 2023 with China’s Geely Group, owner of Volvo, Zeekr, Polestar and Lotus. These agreements aim to coordinate battery standards, battery-swapping technology, and the development and operations of the swapping service network. In January this year, NIO entered into similar agreements with China’s JAC Group and Chery Automobile.

CATL, the leading Chinese EV battery producer, has also noticed the potential of the BaaS model and its unique advantage in developing and producing EV batteries better suited for this business model. In 2022, it entered this market with EVOGO, an ambitious platform solution based on its modular-designed battery.

In 2024, CATL doubled down its effort in the battery-swapping model by establishing a joint venture with the leading Chinese ride-hailing platform Didi. This collaboration can leverage on Didi’s large network of commercial drivers, providing a sizable market for EV manufacturers who choose to adopt CATL’s battery-swapping solution.

Across the Pacific Ocean, San Francisco-based Ample aims to revitalize battery-swapping. In a pilot test conducted in 2021, Ample launched five automated battery-swapping stations in San Francisco. These stations, designed specifically for Uber drivers, allowed for the exchange of depleted batteries with fully charged ones within five minutes. The stations were designed to support the Nissan Leaf and certain models of the Kia Niro.

In a bid to cater to urban residents, each of Ample’s battery-swapping stations occupies a small footprint equivalent to two parking spaces. The stations are prefabricated and can be assembled swiftly, enabling Ample to collaborate with existing gas stations and parking lots to retrofit swapping stations.

To enhance adaptability, Ample has also adopted a modular architecture for its EV battery-swapping. These modules, reminiscent of ‘Lego-like’ components, can be assembled to accommodate the unique battery shapes and sizes of different EV models without being restricted by a one-size-fits-all battery pack.

Others have taken note. In December 2023, Stellantis, the world’s fourth-largest automaker, forged a partnership with Ample to develop EVs utilizing Ample’s innovative technology. Stellantis has plans to pilot this partnership program this year in Spain, deploying a fleet of 100 Fiat 500e vehicles within its Free2move car-sharing service.

Future directions

As EV battery-swapping gains traction as a business model, our recent research highlights that its future development depends on careful strategic planning and coordination.

We find that while both EV manufacturers and battery suppliers have their place in the battery-swapping market, their capability of acting as the leading operator depends on the cost of EV batteries and building swapping stations, as well as market competition.

Governments may need to actively manage their efforts in this arena. In the short run, governments may facilitate negotiations between EV manufacturers and battery producers on the matter of who will lead investment efforts. In the long-term, governments may coordinate different players in the market to establish technology standards.

Building EV swapping stations, as well as procuring the required EV batteries, involves significant investment. To achieve scalability, innovative financing solutions, such as securitization of EV batteries and flexible revenue sharing models with investors, are needed.

For now, the stage is set for EV manufacturers, battery suppliers, technology start-ups, financiers and governments to collaborate. Their joint efforts can foster an ecosystem that accelerates EV adoption, with battery-swapping services playing a pivotal role.

Christopher Tang is a Distinguished Professor at the UCLA Anderson School of Management. A foremost scholar of global supply chain management, his current research focused on social innovation in developing countries, identifying how companies operate in the environment to do good while doing well at the same time.

S. Alex Yang is a Professor of Management Science and Operations at London Business School. He is an expert in supply chain management, finance and technology. His recent work focuses on innovations and governance in the space of digital technologies, such as AI and blockchain.