Background
NEV penetration rate continuously rising, energy replenishment becomes a new user pain point.
The increase in the penetration rate of NEV is inevitable in the future. NEV sales in China have been rocketing since 2022. According to the China Association of Automobile Manufacturers statistics, domestic sales of NEV reached 3.2 million units in the first seven months of this year, up 120% YoY, with the penetration rate increasing to 22.1%. NEV sales volume in China is expected to reach 5.5 million by the end of 2022.
How to replenish energy efficiently becomes a new user pain point. The surge in NEV sales relies on improved energy replenishment infrastructure. With the strong support of the national subsidy policy, NEV's range capacity gradually enhanced resulting in a steady reduction in energy replenishment costs. NEV is mainly driven by electricity. Charging and battery swapping are the two primary methods of energy replenishment. For consumers, whether it is convenient and efficient is the core concern.
Swapping VS Charging: Bridging the gap of charging, the battery swapping market ushers a new opportunity.
Battery swapping refers to replacing the power battery of NEV to achieve energy replenishment, which takes less than 5 minutes. The battery swapping station comprises a switching system, charging system and power battery. It has a significant advantage in solving users’ mileage anxiety, reducing OEM manufacturing cost, extending batteries’ lifecycle and achieving grids' peak shaving and valley filling.
Compared to battery charging, battery swapping can achieve energy replenishment in a much shorter period, which lasts less than 5 minutes, bringing consumers higher efficiency and achieving lower cost. Moreover, battery swapping stations exercise unified management of batteries, which can lower battery maintenance expenditure and prolong batteries’ life. Meanwhile, the standardized battery for swapping enables batteries to be recycled and re-utilized in scale, which is environment-friendlier than battery charging.
Market Size
Battery stations have proliferated in China in recent years, and the quantity is expected to exceed 3 million by 2025. By the end of 2021, China had built up about 1,406 battery swapping stations, up 151.5% year on year, including 748 stations for passenger vehicles and 658 for commercial vehicles. From the supply perspective, China's battery swapping stations are expected to reach 33,733 by 2025 with a CAGR of 121%.
From the perspective of demand, the demand for battery swapping stations will boom with the increase of battery swapping vehicles. The rapid growth of the sales volume of battery swapping NEV will positively increase the ownership of battery swapping NEV. According to IReasearch statistics, the total ownership of battery swapping vehicles will reach 4.15 million in China by 2025, with a CAGR of approximately 102%. Meanwhile, the number of battery swapping stations will increase to 30,953 by 2025.
The market size of battery swapping stations, comprised of equipment, power batteries and operation applications, is expected to reach CNY 28.15 billion by 2025. The equipment, including the lifting device, battery swapping mechanical arm, battery box, charging cabinet and high/low voltage cabinet, is the primary input in the construction of the station. The equipment market size will increase to CNY 10.12 billion by 2025 with a CAGR of 118%. The operation market means selling electricity to consumers, which is predicted to be 6.16 billion by 2025. At the same time, the market for swapping power batteries will amount to CNY 3.55 billion.
Driving Forces
Government policies promote the construction of battery swapping stations, give subsidies for battery swapping vehicles and lead to uniform battery standards
National policies support and lead the development of the battery swapping industry. In 2012, Energy-Saving and New Energy Vehicle Development Plan (2012-2020), implemented by the State Council in 2012, mentioned to promote the construction of battery swapping and charging station, while the national grid slowed down the investment of battery swapping stations. It was until 2021 that the government restated to increase the quantity of battery swapping stations in the Government Work Report. Also, the government subsidized consumers to stimulate the demand, made efforts to uniform the battery standards and set up security standards for battery swapping vehicles.
Business model of battery property separation is gradually maturing.
The business model of battery swapping has entered the mature stage currently. In August 2020, NIO presented a new battery swapping business model called BaaS (Battery-as-a-Service), which referred to property right separation of power battery. For customers, the purchase cost of NEV is reduced; For OEMs, the initial investment of vehicles is decreased with power battery firms partaking; For battery firms, they exercise unified management of power batteries, which enables longer life of power batteries and make benefits from the prolonged lifecycle of batteries. In the past two years, many well-known OEMs, including Changan, Geely, Dongfeng and Aion, and power battery giant CATL have stepped into the battery swapping field.
Capital influx in and brings in more battery swapping models and stations.
Lots of OEMs have carried out battery swapping layouts in recent years. Auto-maker OEM and battery swapping solution provider Alton reached strategic cooperation in 2020 and has launched a series of battery swapping models, including EU220, EU260 and EU300. Other OEMs, like SAIC, GAC and Geely, are also actively researching and developing battery swapping vehicles. In addition, the Chinese power battery giant CATL launched its battery swapping project EVOGO in January 2022, and the firm signed battery swap EVOGO cooperation with NEV maker AIWAYS in April, with automaker Dongfeng Peugeot Citroen in October.
According to Qichacha statistics, there are 144,300 enterprises related to battery swapping in China. The registration of new firms is increasing, especially in 2020 and 2021. In 2021, around 47,800 firms were registered for battery swapping, with a year-on-year growth of 135%.
Technology iterates from side-to-side swapping to automatic chassis swapping
The technology of battery swapping gradually turns intelligent and automatic. There are three primary methods for battery swapping: side-to-side battery swapping, split-box battery swapping and chassis battery swapping. Additionally, the chassis battery swapping has been fully automated, and the time cost is less than 5 minutes. Currently, 80% of the battery-swapping vehicles are designed for chassis battery swapping, which has been applied by BAIC, NIO and Alton already.
Battery swapping industry chain
The upstream of the battery-swapping industry chain contains the battery-swapping system suppliers and OEMs; The midstream is the station operators with representative enterprises like NIO; The downstream is users, including business customers and individual customers.
Battery-swapping vehicles cost less than traditional fuel cars and have higher efficiency in energy replenishment than battery-charging vehicles. Meanwhile, commercial vehicles require high efficiency and low cost. Thus, business customers are the primary consumer of the battery-swapping market. Business customers refer to commercial vehicles, such as taxis and trucks. For heavy trucks with high transportation frequency and fixed transportation routes, battery-swapping vehicles can save at least 15 minutes per car since battery-swapping lasts 5 minutes while recharging needs 20-30 minutes.
Challenge
Although battery swapping has many advantages, it is still in the primary development stage, dominated by policy guidance and corporate investment. Many problems, such as too few battery swapping stations, various batteries for different auto brands and hard-to-define responsibility in case of safety problems, are waiting to be solved. Whether the battery swapping industry can grow to the scale and support sustainable development remains the biggest challenge for the industry.