Author: Xiong Xing
Editor: Wu Xianzhi
Jianneng ZhiDian, which has been supporting the C-end battery swapping track for many years, has finally received help and competition.
Recently, China Petroleum, Sinopec, CATL, and SAIC jointly established “Jianneng ZhiDian”, which focuses on battery swapping and battery leasing services. The four giants in their respective fields joined hands for the first time and entered the battery swapping business. 2022 may well be called the first year of battery swapping.
At the beginning of this year, CATL’s EVOGO was piloted in Xiamen and SAIC’s Mofang battery made an appearance at the MG MULAN technical communication meeting in June. As a tool for entering the battery swapping field, the two sides have similarities and differences in their technical features. This collaboration, whether to unify or to form their own styles, is of great interest. The participation of the two oil giants is highly topical. In addition to “revolutionizing” themselves, they have also taken a small step towards controlling the future energy source.
Last April, NIO signed a strategic cooperation agreement with Sinopec. One year later, Sinopec personally entered the market, but this cooperation did not involve NIO. As the pioneer of C-end battery swapping in China, NIO’s volume may not be as large as any of the four giants, but in terms of battery swapping technology and operational experience, NIO is at least in the top tier.
If the four giants establish a “market” for battery swapping, NIO is currently more like a “stock”, with both risks and opportunities. However, looking at them separately, the four giants are engaged in three industries. Whether the cooperation is based on mutual needs or common goals, it is related to the development trend of the battery swapping track.
All want to control the energy of new energy
Last year, NIO’s second-generation smart battery swapping station settled in Sinopec’s venue. The results of the cooperation were obvious, but the logic behind it was not simple.
Under NIO’s policy of free lifetime battery swapping 4-6 times per month per vehicle owner, assuming 2 times of paid battery swapping per person per month, there are a total of 24 times per year, totaling RMB 3,600. Based on NIO’s data, the cost of building a single battery swapping station domestically is approximately 772,000 US dollars or approximately 5.3 million RMB, with a payback period of about 6.5 years. Including operating costs, the specific payback period will be even longer.
Clearly, it is difficult for NIO to profit from the battery swapping model in the short term, and Sinopec is not here just to share the pie. As the trend of new energy continues to grow, the National Grid is in the spotlight, while the two oil giants are increasingly evolving into sunset industries. Whether it is battery swapping, charging, or even hydrogen, the relationship with oil will gradually become distant. The demand of the two oil giants is straightforward: to continue to control the energy source in the era of new energy.
Unlike the National Grid, the two oil giants in the past have neither produced nor transported electricity. If they want to control the energy of new energy, both power generation and energy storage are the two core sectors that cannot be bypassed.The two oil giants have been making frequent moves in photovoltaic layout in recent years. After Sinopec mentioned “considering using photovoltaic to build 7,000 gas stations” in April last year, it reached 1,000 stations in just eight months. In July of this year, the first water-surface photovoltaic project of PetroChina was connected to the grid for power generation, and the 300 MW photovoltaic power generation project in Yumen Oilfield was launched at the beginning of September.
The requirements for efficiency and intensity of the power generation layout of the two oil giants are evident, and the storage layout is no exception. One of the major factors that Sinopec partnered with NIO is its energy storage properties, and both sides have complementary needs, making it a perfect match. However, demand changes with the market, and it is obviously difficult to build the energy status of the new energy era with photovoltaic power plants and a single new force.
The chairman of Sinopec disclosed last year that they plan to build at least 5,000 intelligent charging and swapping stations before 2025. As of now, NIO has completed over 1100 swapping stations in China, but the net loss of NIO in the first half of the year reached 4.54 billion yuan when it completed thousands of swapping stations, compared to last year’s annual loss of 4.016 billion yuan.
At that time, NIO was the only company with C-side swapping, but now SAIC has announced that brands such as MG and Feiyue will gradually launch swapping models, and the lineup is unprecedented. The EVOGO of CATL will face further expansion after a year of “leveling up” in Xiamen. For the two oil giants, partnering with SAIC and CATL will greatly improve the efficiency of their energy storage layout.
At the current stage, NIO may not be the first choice for the two oil giants anymore. Although the cooperation with Sinopec continues, it is highly likely that it will become a single product in the “Jieneng supermarket” instead of the “exclusive sales” category.
If policy encouragement in recent years is just a “breeze”, the alliance of the four giants signals “rain”. It is not difficult for traditional car companies to add a swapping product line, the difficulty lies in the construction of supporting facilities. The Magic Cube battery of SAIC also has “chocolate” attributes, which is similar to the swapping technology of CATL, and the core of both is platform thinking, with the ability to cover more models from other manufacturers.
The swapping mode is likely to become the third mainstream outside of pure electric and hybrid. And for B-side swapping, which has been laid out earlier by car companies such as Geely and BAIC, the dream of C-side swapping is likely to be a matter of time, further radiating the development of swapping models by other car companies.
Some car companies can follow the path of NIO, or they can develop swapping models according to the swapping platform requirements of SAIC or CATL in the future, even without batteries. For other car companies, the absence of this cost-intensive component can significantly reduce product prices. If self-operated battery leasing is implemented, the purchasing process is still difficult to avoid, and it is obviously difficult to match the price advantage of CATL’s self-produced self-operated model.
For SAIC and CATL, the service cost of battery swapping terminals is their core competitiveness. JNNEV solves their two long-term costs of electricity generation and site leasing. PetroChina and Sinopec’s photovoltaic construction can also alleviate the power supply demand of SAIC and CATL.
Therefore, for part of the car companies that have entered the battery swapping field, it is difficult to withstand the “price war” of SAIC and CATL, and it is also difficult to resist the temptation of reducing their own car manufacturing costs. Apparently, SAIC and CATL’s dominant influence on the standardization of the battery swapping mode is not urgently needed, and facing the imminent surge of the track, compatibility or clear demarcation can both have a broad market.
With the joint efforts of the four giants, power generation, energy storage, and charging and swapping terminals form an industrial closed loop. Under complementary advantages, the scale efficiency will further reduce the cost of each link. Car companies joining will have to give and take, and consumers’ demand for battery swapping prices and convenience will also be better satisfied. The situation is developing towards a win-win situation for multiple parties, and NIO will face a role transformation.
Battery swapping modes beyond NIO
In the domestic new energy vehicle market, NIO ES8, with a top-level price of 600,000 RMB, was the highest-priced new energy vehicle at the time, and its sales volume was far from comparable to other high-priced models except for the “protected moat” of battery swapping terminals. Branding was also an important factor.
Similarly, Ideal EV, which also started with a high-end strategy, encountered controversy regarding its range-extender mode. The visible cost advantage of the battery swapping mode is more convincing; the EP Club and NIO Club gather users, which is rarely seen in the industry’s “after-sales service,” and Li Bin personally maintains it. Despite the controversy, NIO’s product price was supported, and it did not become a niche product. The important factor was the precise interaction of club-style marketing for the elite group to experience a sense of honor and belonging. Li Bin’s involvement was also a significant element. Repeated marketing strategies and user self-expansion in the circle interaction form a positive cycle, which is rare in the entire domestic automobile market.
Subsequent products maintain consistent tones, and NIO has gradually established its “image.” With the advantage of being the first, it became the first new force enterprise to break the 100,000 vehicle mark. However, it also means that more input is required to adapt to its battery swapping characteristics. It is both a leader and a “lonely warrior.” Other manufacturers’ battery swapping products are already scarce and almost “out of touch” with the consumer market. The relatively small market is bound to cause a narrow industrial chain and high supply costs.
If high-end yet mass-produced, it will have a certain bargaining power in the supply chain, like the Apple phone. Since the launch of the first model in December 2017, the cumulative sales volume of NIO in nearly five years is about 250,000 vehicles. Although it is at the same level as Ideal, the latter was still a single model before the launch of L9. There is still a considerable gap between NIO and SAIC in terms of delivery volume.
Although the details of the cooperation between SAIC and CATL are not yet clear, but under the framework of JNPD, both sides have the same needs for energy storage, and CATL and SAIC have the same needs to expand their battery leasing business to more car models. The difference is that CATL makes batteries and SAIC makes cars. The two complement each other upstream and downstream in the JNPD “bridge” to form a perfect industrial chain. In other words, representatives of battery swapping car companies may be replaced by SAIC instead of NIO.
Despite the double decline in revenue and net profit in the first half of the year, SAIC’s sales still reached 2.2343 million units. Although Fei Fan’s sales were dismal, with the establishment of JNPD, Fei Fan’s first battery swapping model R7 landed. It is evident that SAIC has high hopes for its brand as well as its supporting layout.
Roewe, MG, and Datong and other affiliated brands will gradually launch battery swapping models, making SAIC’s battery swapping product matrix top the industry without any suspense, and the heat of the battery swapping track is unprecedentedly high. SAIC and CATL have a different swapping standard from NIO under the JNPD framework, and it seems that the cost temptation and compatibility will help to attract third-party manufacturers to join in.
Although NIO has taken the “early bus” of Sinopec, it has not completely stayed out of the strategic game of the four giants, but the platform battery swapping strategy of SAIC and CATL will probably isolate NIO.
If NIO develops battery swapping models with other standards, it will obviously be a huge cost burden. At the same time, sharing battery swapping standards with other car makers cannot match its existing customer base, and continuing to maintain the uniqueness of its battery swapping mode is not only more realistic economically, but also more in line with NIO’s brand needs. In the era when mainstream car makers are all charging high, NIO has certain advantages in terms of brand.
The top-of-the-line price of SAIC R7 stops at the starting price of NIO ES6, avoiding direct competition with NIO for the time being. Fei Fan is even more so, and the relatively low-end Roewe, MG and even Datong will find it difficult to reach the price range of NIO in the short term. The battery swapping competition between NIO and SAIC is likely to develop towards a “mutual respect” trend, where no one will invade the other’s territory.
The era of battery swapping means that more car makers will fill the market gap, and the market will accelerate to become saturated. The good news is still for consumers. C-end users want convenient battery swapping, and they no longer have only one choice, which is NIO. With its brand advantage, NIO will face little competition in the high-end battery swapping market in the short term, and pressure and opportunities coexist.
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.