Battery-swapping technologies in electric cars can ease range anxiety in drivers

Range anxiety has been a significant barrier to EV adoption. Bloomberg

Electric vehicles (EVs) are the future, as we are often told, but despite so many models becoming available at increasingly affordable prices, we don't see as many on the roads as we should. Why?

Range anxiety has been a significant barrier to EV adoption. For instance, if I were to drive a Tesla Model 3 from Paris to the famous Mont Saint-Michel, I would need to carefully plan my 360km route, fully charging near Paris before heading east as there are no other Tesla Supercharger stops along the way. Despite Tesla’s popularity, its charging networks cannot match the number of petrol stations for internal combustion engine vehicles.

In the end, the key to fixing this issue will lie in battery technology, achieving faster charging and a longer driving range. As of 2023, long-range batteries can push north of 560km on a single charge, and fast charging can add more than 160km a battery within 15 minutes. Improving battery technology, however, is both expensive and slow.

The recent rise of Chinese EV company Nio challenges the conventional approach with an interesting alternative – battery swapping. Could this technology address range anxiety and lead to more people adopting these greener and more sustainable cars? Let’s look at how the company makes the technology work in China.

In 2014, automotive veteran William Li established Nio as a Chinese domestic brand to challenge Tesla in the higher-end sports car segment. Tesla debuted a battery swap station at Harris Ranch in California, US, in 2015, starting its exploration in battery swapping. But this demonstration site saw little to no demand and was eventually shuttered in 2016.

Unlike Tesla, Nio did not give up on the technology. Over the next eight years, the start-up experimented with the battery-swapping approach in China and Europe. By November 2023, it owned and operated more than 2,300 battery-swapping stations globally, including 30 in Europe.

How did the company achieve this scale in such a short period of time? For starters, it claimed it could achieve a fully automated swap in just one minute. Their particular chassis system allows the entire battery pack to be removed from the bottom of the vehicle and replaced.

This concept isn’t new. An Israeli venture called Better Place – one of the first EV battery charging and swapping service companies – developed it as early as 2007. By 2015, Tesla had already demonstrated the possibility of swapping a battery within two minutes.

What Nio did differently was to satisfy consumers’ needs by building an integrated experience beyond the battery swap. When a driver arrives at the automated facility, the car will be conveyed to a designated station for the battery replacement and the driver’s account will be charged for the service – all within three minutes and without the driver having to step out of the car.

As the battery accounts for nearly one-third of the cost of owning an EV, setting this cost apart from the main vehicle significantly lowers the initial purchase price. For some customers, this aspect is more appealing than offerings of higher-end EVs.

To establish its battery swap station network, the company examined the needs of its users and asked one essential question: What are the use cases with the greatest need for battery swap? Its conclusion was situations when long hours of driving exacerbates range anxiety, or when spending a long time charging the battery is simply not practical. As a result, Nio built stations in densely populated metropolitan locations, as well as along major highways connecting these areas.

In Chinese cities, residential buildings with 30-50 floors may only have a handful of charging stations, which makes overnight charging impractical and anxiety-inducing. The situation is worse for independent drivers offering taxi or ride-sharing services in major cities. EV batteries generally hold a charge for only four to six hours, which is insufficient to complete an eight to 10-hour shift. Taxi companies are able to rotate their fleet for charging, but independent drivers would have to stop and charge for an hour or more during the day.

Battery swapping can significantly reduce the time and potential revenue lost. In addition, the price is comparable to charging at a super-charging station or a public charger. (For the Nio EL6, a 100-kWh battery pack costs €30 per swap (Dh120) after the first four free swaps included in the subscription.)

In Taiwan, Gogoro, an electric scooter company, provides a similar battery-swapping plan in large cities. By 2021, it had built a network of 2,000 GoStations that handle 265,000 daily swaps. By 2022, Gogoro had expanded into three cities in mainland China, with 250 battery-swapping stations for e-scooters.

Although battery swaps make battery upgrades more convenient and less costly, it can increase other costs, including the need to keep all battery designs across multiple generations compatible with the chassis of the old vehicle. When new technology breaks through, the company needs to hold inventories of multiple generations of batteries.

Another challenge is charging drained batteries and accurately meeting demand. How many fully charged batteries should a charging station hold to cope with peak demand?

A further obstacle is that a common industry standard is needed to generate higher returns on capital expenditure and operating costs. Similar to petrol stations, it is ideal for battery-swapping stations to serve multiple brands and vehicles. In May this year, Nio made progress by striking a deal with its larger Chinese rival, the EV company BYD to source batteries for an EV brand priced at a lower range than Tesla.

But it’s far from easy to establish this standard as proprietary battery technology is the battlefield for EV manufacturers.

Finally, forging partnerships with petrol stations may be challenging, albeit still cheaper than building your own battery swap stations along the highway. The rise of EVs has prompted many petrol stations to install fast chargers, or Level 3 EV chargers as they're called. The logic seems natural. A 60-minute charge is even better than a 10-minute petrol refill in generating additional revenues in food, beverages and snacks. A battery swap without the driver getting out of the car may do just the opposite.

Traditional players must find an optimal point between attracting EV companies’ users and maximising their profits during their transition to renewable energies.

As an example, in 2021, Shell announced its strategic partnership with Nio to improve battery-swapping technologies, opening Shell Recharge Solutions to Nio users in Europe and working together on co-branded pilot sites for battery swapping.

Despite various hurdles, Nio’s success so far complements the dominant business model of most EV brands in the world, namely battery ownership and super charging. Battery swaps, let's bear in mind, directly address range anxiety.

In December 2023, Li, Nio’s chief executive, completed a test drive of their ultra-large-capacity battery – a 150-kWh semi-solid-state battery pack that offers a range of 1,055 kilometres. The ultra-capacity pack will likely require a longer charging time, which could be yet another use case for Nio to prove the case for battery swap.

A version of this article was first published in INSEAD Knowledge