NIO has recently launched its “BaaS” or “Battery as a Service” – NIO Power may be spun-off in the future, but its purpose is to offer charging and battery swapping services to owners of electric vehicles – and not just NIO ones.

NIO Charging Points, Battery Swapping Station and Mobile Valet Charging Van (Source: NIO)

I can’t help but compare this announcement with an earlier attempt by an Israeli start-up called Better Place.  Founded on venture capital in October 2007, it aimed to bring battery swapping to the EV market as means of addressing consumers’ “range anxiety,” as well as deferring the cost premium caused by batteries.

The heavy capital investment building new infrastructure in many locations, which included Australia and Hawaii, and the cost overrun, in which each battery swapping station cost $2 million to build, rapidly ate into Better Place’s market capital of $2.25 billion in 2009. 

The take rate for its battery swapping was very poor, in which it could only partner with one auto maker, Renault, as others were concerned that would be tied to a standardised battery pack.  Only one model, the Fluence ZE, was able to use the battery swap system, with a small 24 kWh pack and whose capacity would fall by 50 percent after four years.  Sales in Israel only reached 940 units.

Ultimately, Better Place went bankrupt in November 2013.  You could say it was too early for its time – consumer adoption of EVs is much higher now than it was, backed by government purchasing incentives and consumers’ desire to limit climate change, following the Paris Accord in 2016.

What makes NIO Power different is the adoption by one auto maker of its own system and to make battery swapping standard across its model range, just like Tesla Supercharger being a game changer in fast-charging EVs.  Compared to Fluence sales in Israel, NIO has sold 35,000 battery electric SUVs since January 2019.  The NIO battery swap stations are located in China, a larger country with longer highways, compared to Israel, swapping 100 kWh packs offering 360 miles (580 km, NEDC) of range.  The short 115 mile (185 km, NEDC) range of the Renault Fluence would have been tedious in swapping its battery pack three-times more frequently than with a NIO model.  With ever increasing battery pack capacities in the latest EV models, so the charging times for EVs will increase – and make battery swapping, in three minutes, more desirable.

Elsewhere, 20,000 electric taxi cabs in Beijing are operating with battery swapping stations, in place before the Winter Olympics in 2022.

NIO Power is a service covering not just battery swapping, but also fast-charging, mobile valet charging and being able to offer those keeping their battery packs to upgrade to a larger capacity battery pack.  This gives customers the choice in how they want their EVs re-charged, depending on their circumstances.  Just like the mostly apartment-dwelling Dutch consumers, many Chinese would also like to use fast-chargers or mobile valet chargers, in the absence of a charger at home.  Some adventurers would like to the convenience of a battery swap to continue their epic journeys across country.  With consumers driving EVs from other auto makers, the offerings from the NIO Power network are not confined to proprietary battery swaps and that NIO Power could ease pressure on other auto makers to establish new charging infrastructure.  The consumer desire for added convenience is also greater in the premium sector, where EV start-up NIO operates unlike Renault. 

Another benefit of BaaS is to offset the ownership (and cost) of the battery pack from the purchase or lease of an EV and replace it with a subscription-based business model.  The battery lease idea has been around before with other auto makers, but replacing the battery ownership with a charging/swap service could prove more desirable for consumers to afford a premium vehicle.

Another factor that could help NIO Power is the considerable back-end resources needed to make it operate.  This includes Cloud analytics and Artificial Intelligence needed to enable customers to locate charging and battery swapping facilities with a smartphone app, where best for NIO Power to locate them and simulate power demand from customers and taking data from the Battery Monitoring Systems of the customers’ vehicles in return for sending Over The Air software updates that limit battery degradation. 

My concerns for NIO Power, as it plans to push the service out to Europe in 2021, is the lack of battery standard with other auto makers and EV models to generate demand volume and economies of scale – in this case, partnerships with other auto makers would be necessary so that new battery swapping stations, for example, could swap packs from other models.  Another is the heavy capital investment needed to build new charging and battery swap stations in a new market region and to persuade consumers to swap their battery packs with another one at the swap station, where in China the take rate is 50 percent of NIO owners from a 143 station network and having recently reported its 800,000th battery swap.  Also, the emergence of 800 and 900 Volt electrical networks appearing on Audi, Porsche and Hyundai EVs could speed-up charging even faster, competing more effectively against battery swapping.

But on the whole, NIO Power BaaS stands a better chance than its Better Place predecessor.

Kevin Mak is a Principal Analyst in the Global Automotive Practice at Strategy Analytics, covering the Powertrain, Body, Chassis and Safety service.

The Strategy Analytics In-Vehicle User Experience service has carried out user experience surveys on electric vehicle ownership in China (User Experience of Pure EVs in China) and the mature markets of the UK and US (UX of Pure EVs: Can Incentives Overcome Pain Points?)  In a recent report, Interest in BEVs is Small but Mighty, consumers surveyed in China, Europe and the US showed considerable interest in EVs.  But such interest was mostly confined to mandated market regions, younger age groups, premium brands and technology “early adopters.”

Strategy Analytics also publishes the Hybrid Technologies Legislation/Support database twice a year and the OEM Hybrid and Electric Vehicle Strategies report every year, including the 2019 edition, OEM Hybrid and Electric Vehicle Strategies: Investments, Alliances and Restructuring, Move to Mass Electrification Begins.