Two Chinese companies — Nio and CATL — may have solved the battery charging problem of electric vehicles (EVs) by promoting a battery swap design. Nio’s innovation is that its electric car’s battery, at the end of a typical 250-mile run, is designed to seamlessly switch out to another battery with a full charge. As the driver detects a weak charge on his screen, he drives his car to a Nio-operated swap station. There, the car is clamped down on a jack and raised. A robot removes the existing battery from underneath the car and replaces it with a fully-charged battery in just five minutes — about the time it takes to fill fuel for a petrol/diesel car.
Tesla cars, in contrast, cannot have their batteries swapped and must be re-charged. A full charge at home may take eight hours, although chargers powered by a 220V outlet can do the job in about half the time. Nio, an EV manufacturer based in Chengdu, has a market capitalisation higher than General Motors. The lithium-ion batteries Nio uses are built by Contemporary Amperex Technology Co. Ltd (CATL), a Chinese giant with more than 10,000 employees. Batteries remain the most expensive component in EVs.
Innovative tech
Nio’s innovation is groundbreaking because it may have found a solution that has plagued the worldwide EV industry. According to the International Energy Agency (IEA), new EVs in 2019 accounted for 2.6 per cent of global car sales but only about one per cent of the global car stock. As I noted in June that year, the two main reasons for the slow adoption of EVs have been driver anxiety that a car may run out of juice while in operation and the 75-minute charging time at a commercial super-charging station, assuming one is conveniently located and is readily available. Two cars ahead of you mean an additional 2½ hours of waiting.
Nio offers three models of EVs. The top of the line ES8 luxury full-size SUV retails for $72,000. All models use the same battery pack. By making the batteries standardised, swap stations need to store only one kind of spare. In contrast, each Tesla model uses its own battery design, size, and shape, optimised for use and efficiency, so battery-swapping for Tesla cars comes with more headaches. Besides, Tesla cars are not designed for a robot to quickly swap a battery out.
The five-minute battery-swap solution immediately makes a Nio car an attractive buy and a potential threat to Tesla’s leading market position in China. But first, these battery-swap stations have to become as ubiquitous as fuel pumps. And only in China, with its penchant for building roads and high-speed rail tracks in rapid time using billions in government money, is the establishment of such a swap-station infrastructure even thinkable. And doable.
Government backed
The government has an ulterior motive to have Nio succeed. In Sep 2019, Nio had suffered more than $5 billion in losses and by May 2020, it was virtually bankrupt. Then, Nio received a huge infusion of government cash to resurrect operations. Never ashamed to pick winners and losers, the government has since put its weight behind battery-swap EVs by making policy changes. The government offers a $3,500 subsidy to buyers of battery-swap EVs, and because Nio is the only major player that offers this technology, the effect of the policy is to shamelessly help one company in a market with many manufacturers. Only in China is such open favouritism legal. As a practical matter, it has the potential to urge other EV manufacturers to adopt the battery swap technology.
Nio’s business model has evolved as it sees success with its battery-switch approach. It is the only EV manufacturer that offers customers the option to buy cars without batteries, another novel idea. For a subscription fee of about $150 a month, a Nio car owner who has signed up for its “battery as a service” offering gets six battery swaps a month, each good for about 250 miles of driving. Such a subscription model is ideal for the majority of Chinese consumers whose commutes for both work and leisure average about 1,500 miles a month.
William Li, founder and CEO of Nio Inc, at a product launch event in Chengdu, Sichuan province, China.
For a Nio driver, not ever having to worry about battery life or its service issues is a major advantage. If a customer runs out of the six charges with a few more days to go in the month, the customer can always charge the batteries at home or at a commercial charging station. This flexibility of the CATL-designed battery — of being able to be swapped quickly or charged - is a major selling point and will hasten Nio’s adoption, not only in China but around the world.
China, a tech superpower
Chinese companies are looking to export their EVs. A CNBC news report in October 2020 quoted UBS analysts saying, “Over the next five years, we anticipate Chinese players across the EV supply chain to aggressively enter the overseas market.”
For the last decade, the world has been wary of China’s rise as a technology superpower. Of the world’s five hundred fastest supercomputers as ranked in June 2020, China has 226 systems, followed by the US at 114. China already leads the world in nuclear energy, operating 46 next-generation plants, having designed and built its own reactors. It installs entire nuclear plant systems in poorer nations on a turnkey basis, offering end-to-end financing. In 2016, The Economist reported that China’s surplus capacity in steelmaking was larger than the entire steel production of Japan, America, and Germany combined. Not overall capacity, but surplus capacity.
China, at 47 per cent of the world’s EV market, already has nearly 3.5 million electric cars and trucks. It is well-positioned to dominate this crucial market and the underlying technology in the coming years.