Battery exchange stations for electric cars – China sets a new standard

In 2007, the company "Better Place" was founded by former SAP manager Shai Agassi. Agassi's idea was to set up a system of battery swapping stations nationwide to solve the range problem for electric cars. In less than ten minutes, the empty battery of an electric car can be exchanged for a fully charged one at a swap station. Electric cars would no longer be handicapped by time-consuming charging processes. The electric car would work like a diesel or gasoline car. A catchy idea.

Despite a lot of publicity, the system turned out to be not very marketable. In 2014, "Better Place" went bankrupt. At that time, battery-electric cars and the swap station model were in little demand. 8,522 fully electric passenger cars were sold in Germany in the insolvency year of "Better Place". The market share was a meagre 0.3%. The balance for the passenger car fleet looked even worse. According to data from the Federal Motor Transport Authority (KBA), only 12,156 pure electric cars were among the 44 million passenger cars on Germany's roads at the time. A system of battery exchange stations had to "starve", i.e. a "chicken-and-egg problem" thwarted success. In the meantime, the electric car is booming. Dieselgate, the climate crisis, the hard CO₂EU requirements and generous bonuses of up to 9,000 euros for the purchase of electric cars have made electromobility socially acceptable. In the first seven months, 174,180 new battery-electric passenger cars were registered in Germany, just under 11% of all new passenger cars. In total, 417,609 fully electric cars were on Germany's roads in April 2021. So the egg should be laid to solve the "chicken-and-egg problem". Volume for the infrastructure providers of battery exchange stations would be available.

Why the battery swapping system is not marketable

Tesla, but also the VW Group with its broad brand portfolio, Mercedes, BMW and all other Western carmakers are nevertheless not interested in the battery swapping business. Tesla very quickly set up its fast chargers (Elon Musk calls them Superchargers, of course) across Europe and operates 7,000 of them in China. Electricity companies, municipal utilities, oil companies and the car manufacturers themselves are setting up fast chargers. As recently as July 2021, the Federal Ministry of Transport passed a tender with high subsidies for the installation of fast chargers. Of course, only as a tender, but from 2023 onwards, according to the plans of Transport Minister Scheuer, the state-subsidized fast chargers are to shoot up like mushrooms. So did the battery exchange station sleep through the laying of the egg? Once one infrastructure is in place, it is very difficult to convince investors of a competing one.

In addition, the charging times of electric cars are becoming shorter. High charging voltages, up to 800 volts at Porsche, enable fast charging processes in less than 20 minutes. Furthermore, battery technology is making progress. If the solid-state battery can be produced industrially, sometime between 2025 and 2030, according to the battery manufacturers, this should succeed, the charging processes can be significantly shortened again. In addition, the energy density of the battery increases, i.e. a range of 1,000 km on a single charge is no longer a problem, with significant cost reductions and lower battery weight. The air for setting up battery swapping stations is getting even thinner. The standard for the charging infrastructure has been set. A large network of battery swapping stations no longer seems conceivable.

There is another shortcoming. The battery is the new heart of the car, and the performance of the battery defines the competitive advantage of the car manufacturer. Tesla is in the process of integrating the battery into the car's vehicle structure. Using huge die-casting machines, which Elon Musk of course calls Giga Press, the front and rear chassis of the vehicle are each cast in a single part. The gigapresses are also used at the Tesla plant in Berlin Grünheide. The vehicle design is designed in such a way that the battery packs are firmly connected to the vehicle structure. This means that the electric car can be built much lighter and more cost-effectively. This technology, also known as cell-to-chassis, "welds" the vehicle to its battery pack, if you will. This makes it even more difficult to imagine a market breakthrough for battery swapping systems.

Furthermore, the battery does not exist. On the one hand, different cell formats are installed. Larger cell formats, such as the so-called Blade Battery from the Chinese carmaker BYD or Tesla's 4680 cell, allow cost advantages with less weight and battery volume. In addition, cells, even in the same format, are often clearly differentiated. For example, Tesla uses cells with lithium iron phosphate cathodes for the entry-level variant of the Model 3. In higher-quality models, cobalt-nickel cathodes or cobalt-nickel-manganese compounds are used. As battery cell development advances with major leaps in innovation, cells from 2020 will no longer be identical to cells from 2025. It is becoming clear that it is not only the increasingly well-developed charging infrastructure that makes it difficult for an infant industry with a battery exchange system to enter the market. A swap station infrastructure needs a high level of standardization around a "uniform battery". Keeping a wide variety of different battery types in stock destroys the economy of a battery swap station system. Last but not least, there is no Western car manufacturing company today that designs its electric cars in such a way that a battery pack can be changed in a short time. As an interim conclusion, it can be said that under "normal" market laws, battery swapping systems have no chance of a breakthrough.

China as a kingmaker and driver of innovation

China is by far the largest car market in the world and that will not change in the next 100 years. In 2020, 20 million passenger cars were sold in China, 15 million in the United States, and 12 million in Europe, defined as EU28 plus EFTA. While the United States and Europe markets are saturated with 845 and 540 cars per 1,000 inhabitants, respectively, China accounts for 110 cars per 1,000 inhabitants. The hunger for cars is still great in China. By 2030, a car market of more than 30 million new passenger cars and a Chinese world market share of 32% can be expected. The market for all-electric passenger cars in China is developing very dynamically (see Figure 1). According to the Chinese government's 14th Five-Year Plan of 2020, 20% of new cars in China are to be sold as NEV (New Energy Vehicles = plug-in and fully electric) by 2025. In our estimation, the vast majority will be fully electric. So if anyone can push through a change in technology, it is China. China is a kingmaker due to its huge domestic market. China defines the standard.

However, China is not only focusing on the size of the domestic market, but also wants to become a global technology leader. This is a clear goal defined by the Chinese Communist Party. The conditions for achieving this goal are extremely good, and not only in the automotive sector. The largest battery manufacturers are based in China, and innovations in the battery sector are increasingly coming from there and less from the previous technology leader Korea. In addition to electromobility, the second, even bigger revolution in the industry is the software-defined car, i.e. everything that can be designed around self-driving cars. China already has data sovereignty with world market leaders such as Huawei in 5G Internet and is rolling out autonomous driving on a broad scale. This allows battery swapping stations to be set up in such a way that they are in continuous contact with the electric cars and efficient battery stocks are kept at the swap stations. In addition, power grids – especially in China's huge metropolises – are better optimized, because swap stations can charge batteries anticyclically and add electricity to the grids during demand peaks. Of course, a China standard that is later adopted by the world has great advantages for the country's companies. Western carmakers would be forced to either live in two worlds or adapt their vehicle architectures to the China standard. Both are costly projects. A battery swapping system would certainly have charm for China.

China defines the infrastructure standard

The first battery swapping stations in China date back to 2016. The Beijing Automotive Group (BAIC Group), one of the country's major car companies with headquarters and close ties to the Beijing city government, is currently presenting battery swapping stations in the capital. First and foremost, the stations should allow taxi companies to operate electric taxis without long charging times and help electric taxis to achieve a breakthrough more quickly in metropolises. Since 2021, BAIC has been testing robot taxis in Beijing in cooperation with the Chinese internet giant BAIDU. The combination of electric taxis and robot-taxis has innovation potential and could lead to the breakthrough of completely new mobility systems in large cities. A huge volume of business worldwide would open up for the first mover China. Swap stations combined with robot taxis goes much further than the well-known concepts of ride-hailing service providers, such as UBER. With the network of swap stations, robocars can be on duty 24 hours a day without long charging times, thus contributing to better air quality, less space required for cars and high capacity utilisation for mobility providers. With a network of battery swapping stations, China is laying the foundations for an infrastructure project that will secure competitive advantages for Chinese carmakers and mobility service providers.

The next impetus for the swap system came from the young Chinese carmaker NIO. NIO defines the swap station as a core element of its product strategy. The start-up's first car, the NIO ES8, was presented in 2017 with a battery swapping station. In July 2021, NIO said it was the second-largest exchange station operator behind the Chinese company Aulton with 301 exchange stations. By 2025, NIO plans to have 4,000 swap stations worldwide, 1,000 of them outside China. The first NIO station outside China will go into operation in Oslo at the end of 2021. Five more are to follow in major cities in Norway in 2022. All NIO vehicles are designed to perform a quick battery change. The Chinese state-owned oil company Sinopec is working on an even bigger coup together with the Chinese battery exchange station operator Aulton. For example, Aulton battery exchange stations are to be operated at 30,000 Sinopec petrol stations. According to company information, fully automatic battery changes are possible in one minute.

The balance of the exchange stations in the Middle Kingdom is impressive. In June 2021, 716 exchange stations were in operation. Back in April 2020, government agencies announced that electric cars above a price limit of 300,000 yuan (about US$42,000) would no longer be covered by the state bonus program, unless they were vehicles with replaceable batteries. According to the Ministry of Finance, this is intended to promote innovative business models. In May 2020, China's government included battery swap stations in the "New Infrastructure Plan". Almost all Chinese carmakers are in the process of aligning their electric cars with the battery swapping system. One of the many steps was an agreement between the exchange station operator Aulton and 14 car manufacturers, including the large groups FAW, BAIC, Geely, SAIC, Changan Automobile and Dongfeng Motor.

How to deal with the phenomenon of "size sets the standard"?

China is rapidly setting a new infrastructure standard for electric mobility. Neither in Europe nor in the United States are similar projects observable. Similar to lithium-ion batteries, China has the opportunity to build clear competitive advantages for the country and its companies with the swap station model. As with lithium-ion batteries, it will take a long time for the EU Commission or the German government to notice that we are running behind. The story of Silicon Valley with Amazon, Facebook, Google, Tesla repeats itself, only this time under the Chinese flag. There are two ways to deal with the phenomenon of "size sets the standard". First, by creating its own greatness and a countervailing power, as US President Joe Biden is calling for in the alliance against China: a confrontational model and the division into two worlds. Looking at the EU28-1's successes in implementing innovations to date, disillusionment is more likely to occur. The second option is the cooperation model. It won't be easy, but the auto industry has shown that it's possible. 40% of German carmakers' sales come from China. Cooperation in the economic field shows success. What remains is the question of values, how to deal with the Hong Kong or Uyghur question. Perhaps we should adopt the assessment of former Chancellor Helmut Schmidt: "There are values that we should absolutely hold on to, but I absolutely do not believe that we have to teach these values to other people."