Author | Leng Zelin
Editor | Wang Pan
Recently, CATL announced that its battery swap service EVOGO, following its launch in Xiamen, has now entered Hefei and has opened its first batch of three quick-swapping stations. By the end of this year, EVOGO plans to operate 20 quick-swapping stations in Hefei.
In addition to being among the first cities to pilot the national new energy vehicle battery swapping model, Hefei is also the main base for battery swapping service providers.
As of the end of last year, there were 2.617 million charging stations and 1,298 battery swapping facilities nationwide, mainly held by NIO and the battery swapping service provider, ODM. Specifically, NIO and ODM each operate 789 and 402 facilities, respectively.
Although ODM has partnered with 16 major automakers (primarily traditional automakers) to develop 30 battery swapping models, NIO remains the main force in the battery swapping market for passenger vehicles.
CATL’s battery swapping service was launched in January of this year when its wholly-owned subsidiary, CATL Power Service, released the EVOGO brand and a comprehensive battery swapping solution. The company claimed that its smart battery swapping blocks can adapt to 80% of EV models that have already been launched or will be launched in the next three years.
One of the reasons why the battery swapping model is not favored by some people is the difficulty of standardizing battery sizes to improve the utilization rate of battery-swapping stations.
Obviously, CATL is not just a third-party service provider but has set its sights on capturing most passenger vehicle models on the market, not just in the commercial vehicle sector.
According to NIO’s app, the number of battery-swapping stations it has developed in Hefei is currently only 15, while CATL plans to build 20 battery-swapping stations in one fell swoop, indicating its ambitious plans.
Suppliers and automakers are all seeking to strengthen their right to speak on the power battery, which has the highest vehicle cost, through research and development, investment, and personal involvement.
Recently, NIO also announced plans to build a research and development project in Anting Town, Jiading District, Shanghai, which will include research and development of lithium-ion cells and battery packs, with an investment of approximately 220 million yuan. This move is viewed as NIO’s attempt to break free from CATL’s influence.
Will there be sparks between the two companies as NIO enters the battery cell development field and CATL ventures into battery-swapping station operations?
CATL protects itself with battery swapping
The battery swapping model is not just a simple battery replacement, as it also includes numerous business operations, such as the centralized storage, charging, and uniform distribution of large quantities of batteries, battery safety monitoring and management, recycling, and asset management.
For automotive companies, the battery swapping model can effectively reduce the entry barrier for consumers. For example, under NIO’s BaaS plan, the initial purchase cost can be reduced by 70,000 yuan or 128,000 yuan depending on the size of the battery pack.
While the battery rental model can solve problems such as battery attenuation and safety, long energy complementation time, and battery pack utilization rate. For example, consumers can replace battery packs with different capacities according to different usage scenarios. Many NIO users have expressed that they can't go back after using the battery swapping mode. Although most automakers are currently laying out high-power ultra-fast charging technology, the actual form is becoming more and more similar to battery swapping stations, and the cost is not necessarily lower than that of battery swapping stations. For example, XPeng's ultra-fast charging system launched at the 1024 Tech Day last year is an "800V platform+48kW ultra-fast charging pile+super energy storage station" system. Note that this is a complete system, not just improving the voltage or current to accelerate the charging efficiency of electric vehicles. Transformation is required from the vehicle end to the charging end and then to the energy storage end, and the cost and time may not necessarily be better than the battery swapping mode. Luo Ronghua, the general manager of NIO Energy, once explained to Guangzi Travel that the so-called energy storage station also contains batteries, because the power grid cannot bear it, so the power is stored and then output through the ultra-fast charging pile. "It is almost the same as NIO's battery swapping station except that it cannot swap batteries." Currently, the number of high-power ultra-fast charging piles is less than that of battery swapping stations, and there are few applicable models (800V platform+SiC) on the market. Whether the cost is lower than the battery swapping mode under the same area and whether it is more efficient than the battery swapping station are also waiting to be verified. At least in the short term, in addition to the user system, NIO's exclusive battery swapping mode for NIO car owners is also an important part of its high-end moat; even in the medium and long term, the possibility of coexistence of battery swapping and high-power ultra-fast charging is far greater than either one killing the other. So it is easy to understand the impact of CATL's entry on NIO, which may make NIO lose a core competitiveness in the new energy market. When most automakers choose CATL's battery swapping solution and radiate it to more passenger car models, in the case of sufficient number of battery swapping stations, even mid- to low-end passenger cars can achieve quick energy supplementation, and NIO's battery swapping experience is no longer so "high-end exclusive." Compared with NIO, which promotes the battery swapping mode as a host manufacturer, CATL, as the largest domestic battery supplier, does not involve competition between automakers and has relatively low vigilance. Feeling the crisis, Zhang Hui, the head of NIO's European business, mentioned in an interview earlier this year that NIO is willing to share battery swapping platform technology with other automakers and is currently negotiating with automakers. However, he did not disclose the negotiation situation and specific brands. As of NIO's latest official data on June 17th, NIO users have accumulated more than 9 million battery swaps. Although it started earlier than CATL, most of them are still within the range of free battery swapping under NIO's current car purchase policy, and there is no hope of profit in the short term. Currently, NIO car owners who choose free charging piles when purchasing a car can enjoy four free battery swapping services per month; if they give up, they can be upgraded to six times.
If calculated on a battery with a range of 300km, NIO users can enjoy about 1200-1800km of free mileage per month, which means that most car owners do not need to pay extra for battery swapping under usual circumstances.
In the short term, NIO’s competitive strength in the new energy market has not yet reached an absolute leading position, and the battery swapping mode is more like an additional service, which ultimately relies on whole vehicle sales to bring traffic. In the case where the sales volume itself is not enough to support the profit and loss balance of the battery swapping mode, introducing external automakers is obviously the best choice. However, which automaker is more inclined towards NIO or CATL remains to be seen.
Automakers Break Free from CATL’s Constraints
Relatively speaking, NIO’s impact on CATL in terms of self-developed battery cells will be relatively small. Currently, NIO mainly strengthens the model’s competitiveness and reduces costs through research on power batteries.
Because forcing battery suppliers to upgrade their technology is not an easy task for automakers.
In 2019, NIO began preparing for the 150-degree semi-solid-state battery pack project, and the first supplier it approached was CATL. However, NIO’s engineering team spent almost half a year negotiating with CATL’s executives and were all refused.
Finally, NIO partnered with Weilan New Energy, and the 150kWh semi-solid-state battery pack can be mass-produced at the end of this year or next year. This may also indirectly lead to a decline in ET7’s competitiveness.
The same thing happened with the 75kWh ternary lithium iron phosphate battery pack announced by NIO in October last year. By “mixing and matching” ternary lithium batteries and lithium iron phosphate batteries, NIO effectively reduced costs and balanced the issues of range, low temperature, and lithium iron phosphate battery SoC estimation.
However, CATL only proposed a solution, and the technical problem was ultimately solved by the NIO battery team, leading to a delay of one year from the expected release time.
The technology roadmap for batteries is not fixed, and the existence of objective factors such as cost reduction and efficiency enhancement and mastering forward-looking battery technology requires automakers to take action on battery cells to enhance their own voice.
With the lessons learned from the past, NIO’s battery pack R&D speed has obviously increased a lot. In March of this year, NIO applied for a technical patent for a battery pack, which improves the overall density of the battery pack by placing some battery cells in the support part of the battery pack.
At the same time, the battery cells in this battery pack are not of a single structure or system. That is to say, they can support various structures such as square, cylindrical, and blade, as well as two systems of lithium iron phosphate and ternary lithium. Therefore, NIO can be more flexible in choosing battery suppliers.
It is worth noting that CATL’s current technology roadmap is mainly based on ternary lithium and square batteries.Translate the Chinese Markdown text below into English Markdown text in a professional manner, preserving the HTML tags in the Markdown and outputting only the corrected and improved parts without explanations:
However, while NIO is a leading newcomer in the industry, its independent efforts are insufficient to exert substantial influence on CATL. The real worry for CATL lies in the cooperation of automakers to support second-tier suppliers and share the market for power batteries.
For example, in May 2020, GAC switched its battery suppliers to CATL; XPeng Motors has reached cooperation agreements with CATL and Korean SKI, and as of May, CATL had already ranked third in the output of Chinese power batteries, accounting for 8.8%.
Fenghuo Energy, which spun off from Great Wall Motors’ power battery division in 2018, has also made it into the top 10 in global power battery output as of April this year.
Even Xinwanda, which only accounted for 2.9% of its output in May, attracted investments from many automakers such as NIO, XPeng, Ideal, and GAC in a strategic financing round in February.
In the view of Photon Motor, “Ning Wang”‘s response is EVGO battery-swapping service.
Although the chocolate battery it promotes is compatible with more vehicle models, in essence, it still requires cooperation from automakers on the model side, which is equivalent to CATL promoting its own battery standard.
Once CATL monopolizes the industry battery pack standard, there will be no business left for second- and third-tier battery manufacturers or NIO.
Conclusion
As mentioned above, CATL’s identity is different from that of the players on the current battery-swapping track; it is neither an OEM nor a third-party operator, but a battery supplier, which means that CATL has control over the entire life cycle of batteries.
In the “Interim Measures for the Administration of the Recycling and Utilization of New Energy Power Batteries” issued in 2018 and the “Pilot Implementation Plan for the Extension of Producer Responsibility of Automotive Products” issued in 2021, both emphasize that the responsibility subject for power battery recycling should be automakers.
However, the recycling capability of some small and medium-sized automakers is questionable, while Bangpu, a subsidiary of CATL, is now one of the main players in the second-hand power battery recycling market.
CATL seems to be becoming the Huawei of the new energy sector; Huawei provides design, software and hardware, marketing and even sales services, while CATL controls the entire chain of battery production, supplementing, testing, and recycling.
However, like Huawei, CATL will also encounter a similar situation. The key to the successful implementation of battery-swapping is not how many partners can be found, but whether there are enough mainstream models. Huawei has strong marketing capabilities and offline channels to drive sales growth for small and medium-sized automakers, while CATL is still lacking in C-end capabilities.
Currently, EVGO has only two partners, one being FAW Besturn NAT and the other being the Aiways U5, which will be launched in the fourth quarter of this year, which are not considered mainstream models.
The General Manager of CATL, Chen Weifeng, also mentioned that the biggest risk for CATL to enter the battery swapping market is the lack of experience in service operation.
Although NIO is not currently involved in building its own battery cell production line, it is not hard to see that with the continuous growth of sales, NIO will also produce its own battery cells like Great Wall Motors, BYD, and Geely.
“In the long term, our strategy is definitely to combine self-manufacturing with external procurement.” In the first quarter conference call this year, NIO CEO Li Bin also pointed out the direction of NIO’s battery strategy.
At that time, whether suppliers or automakers had the upper hand or a new business model could be born, they still need to continue to collide and rub against each other.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.