Author: Xiao Ying
Editor: Qiu Kaijun
NIO is aggressively expanding its battery swap station network.
On March 28th, NIO’s third-generation battery swap station was unveiled, and the company plans to put it into use in early April.
Moreover, this year, on top of the original plan to build 400 new battery swap stations, NIO announced an additional 600, totaling a goal of 1,000 new stations for the year.
NIO founder Li Bin personally made this announcement, which highlights the importance of this decision.
According to EVCI PA data, as of December 2022, there were 1,973 core battery swap enterprises built nationwide. NIO accounted for 1,300 of them, reflecting the company’s prominent role in the battery swap network. With a plan to build an additional 1,000 stations this year, NIO’s network will nearly double.
Every time NIO announces a battery swap station expansion plan, people tend to calculate the costs for the company.
The two primary concerns are whether the heavy investment in battery swap stations will drag down NIO’s profitability and whether, with the rapid progress of charging technology, battery swap stations will become a sunk cost when Supercharging becomes ubiquitous.
It can be said that NIO has persisted in its battery swap network, and the doubts from the outside world persist as well. A few days ago, The Electric Vehicle Observer and other media outlets talked with Shen Fei, NIO Energy’s senior vice president, discussing NIO’s recent plans and long-term vision regarding the aggressive expansion of its battery swap network.
Inevitable cost questions; the cost for investment throughout the year may be 3-4 billion RMB
Indeed, building battery swap stations is quite an investment. According to a previous interview with NIO employees, the cost of a second-generation battery swap station is about 3 million RMB.
The concept of this 3 million RMB cost is ambiguous. We asked industry insiders to break it down for us. The costs for the battery swap station mainly fall into several categories. The initial investment consists of the equipment of the battery swap station, battery procurement, civil construction fees, power capacity expansion fees, technology implementation fees, and other costs. During operation, it mainly involves human resource expenses and land rental fees, and there will also be financial costs such as corporate tax rates and product depreciation rates.
The insider also revealed that excluding battery procurement, the investment cost for building a battery swap station now is generally around RMB 1.5 million.### About the cost of battery procurement, we can refer to the pricing of NIO’s battery rental mode. Choosing to rent a 75kWh battery pack can reduce the car purchase price by 70,000 yuan, and a 100kWh battery pack can reduce it by 128,000 yuan. Since each battery swap station will be equipped with different combinations of battery packs, we roughly estimated that the cost of a battery pack would be 100,000 yuan.
Therefore, taking NIO’s second-generation battery swap station as an example, it has 13 battery compartments, meaning that it can store 13 battery packs, and the overall cost of battery procurement is about 1.3 million yuan.
According to this calculation, the cost of building a second-generation station and the cost of battery procurement together accounts for about 2.8 million yuan, so an overall cost of 3 million yuan is relatively credible.
According to the information released by NIO, the service capacity of the third-generation battery swap station is stronger, with 21 battery compartments, which can serve up to 408 times a day, and will also be equipped with 2 LiDARs and 2 Nvidia Orin X chips.
Does this mean that the construction cost of the third-generation battery swap station will be higher? Some industry insiders said that NIO has strong cost reduction capabilities and can control the cost of the third-generation station to within 1.5 million yuan.
Therefore, the main part of the increased core cost of the third-generation station will come from battery procurement. Based on 21 compartments operating at full capacity, the cost of a third-generation NIO battery swap station will be around 3.6 million yuan.
If 1,000 battery swap stations are built by 2023, considering NIO’s cost control, battery management, and the investment proportion in the third-generation station, the annual investment may be around 3-4 billion yuan.
It is necessary to explain that this calculation is not an accurate number, but only presents NIO’s possible investment scale in the field of battery swaps this year.
Shun Fei has always avoided the issue of cost, but it can be understood that this account is not easy to calculate because for NIO, it is not a simple business of assessing profitability.
NIO has always hoped to make battery swapping an unbreachable moat, and a good user experience to drive NIO’s car sales is the core starting point for NIO to build the battery swap station.
NIO has its own logic for building stations. In the words of Li Bin, “stupidly treat users well” is the core. Shun Fei makes this “goodness” more tangible, doubling the number of stations to match sales targets. According to the plan, NIO plans to achieve sales of around 250,000 vehicles in 2023, which is exactly twice the growth rate compared to 2022.The high return on investment of battery swapping stations has been proven. Li Bin once shared a case in Xingfu Town, Binxian County, Shandong Province, where there are less than 50,000 registered residents but more than 500 NIO car owners. The main reason for promoting user growth is that there is a battery swapping station in the area.
In addition, NIO has also shared a set of data: more than 50% of NIO users are distributed in the Jiangsu, Zhejiang, and Shanghai areas, and most of the NIO battery swapping stations are also built in first and second-tier big cities, which shows that the concentration of battery swapping stations is consistent with the density of users.
Therefore, NIO’s recent goal for aggressive station building this year is to expand to more cities to further promote sales growth. The focus of the layout will be on third- and fourth-tier cities and counties with a certain user base but no battery swapping stations.
Regarding the second topic of external concern, whether NIO’s heavy investment in battery swapping stations will become sunk costs, it can be seen from the conversation with Shen Fei that NIO has long-term thinking, which has already covered the risk of technological change.
First of all, NIO’s battery swapping system will not only be compatible with multiple platforms of vehicle models under the NIO brand, but Shen Fei also explicitly stated that it will be compatible with the new brand (Alpine project) vehicle models that NIO will launch in the future. The second-generation station can be compatible with vehicle models with wheelbase of 2.8m-3.1m, and the third-generation station can be upgraded to 2.8m-3.3m, and can also take into account the 800V platform technology. This undoubtedly will improve the efficiency of battery swapping stations.
Currently, it is certain that NIO’s battery swapping station has this compatibility ability, but there is no conclusive plan for what kind of mode and strategy will be adopted for new brand vehicle models.
Secondly, although NIO is doing battery swapping, it has not given up on supercharging technology. At NIO Day 2022, NIO released a 500kW ultra-fast charging pile. Shen Fei did several model simulations. According to NIO’s own conclusion, building a station that integrates both battery swapping and charging may be the best mode.
He gave an example: under the same area and the same capacity, a third-generation station with four supercharging piles will have an efficiency of 1.6-2 times that of eight supercharging piles.Therefore, he believes that the integrated charging and swapping station may be the ultimate solution, which can realize the timed use of the electric capacity. “It’s like investing in the high-voltage system once, and using it together for both swapping and charging. When there are few cars, the battery in the swapping station can be charged, and when there are more cars, more electric capacity can be allocated to charging vehicles.”
He is even more optimistic that considering the insufficient electric power resources, when 800V technology becomes the mainstream demand, NIO may be the most capable enterprise to popularize the ultra-fast charging network, because NIO can flexibly regulate electric power through the swapping station.
Finally, it is the coordination between the swapping station and the power grid. Shen Fei believes that the swapping station can deeply participate in the frequency modulation and service of the power grid. Of course, this matter still seems a bit elusive to outsiders at present.
But he introduced that since last year, NIO has increased its cooperation with the power grid and tried out demonstration projects of interactive power grid. In 2022 in Zhejiang, all 72 swapping stations were connected to the dispatch of the power grid through a virtual power plant to coordinate grid regulation. The same attempt will be made in Europe this year.
Therefore, from Shen Fei’s perspective, the swapping mode will not become a sunk cost in any case.
Swapping accounted for more than 50%, and 130,000 users filled out the construction wish list for swapping stations
NIO’s construction of the swapping system seems to be somewhat similar to JD.com’s self-built logistics system. JD.com was once mocked as “big, stupid, black, and coarse”, but now this self-built logistics system of JD.com is the place that provides users with the best experience, because compared to other e-commerce platforms, it can better meet users’ need for shopping immediacy.
The swapping mode also has some similarities. Friends and colleagues around me who have used NIO swapping have all said that once they experience the speed of swapping, they can’t have that much patience for charging.
NIO’s statistics of user charging data also prove this trend. According to Shen Fei, as of June 2022, the proportion of NIO users who recharge and swap reached a balance point of 50%, and the proportion of swapping has continued to increase in the past six months.
Currently, the challenge in front of Shen Fei is how to build the new 1000 swapping stations with limited resources.
NIO’s first-generation swapping station was completed in May 2018 with 5 battery compartment positions, and the second-generation swapping station was put into use in April 2021 with 13 battery compartment positions and a daily service capacity of 312 times, and vehicles can be automatically parked.The third generation charging stations will officially be put into use in April this year, with an increase in capacity to 21 slots, an increase in daily service capacity to 408 times, and a one-minute reduction in the overall battery swap time, from 5 minutes and 40 seconds in the second generation stations to 4 minutes and 40 seconds. Equipped with high-performance chips and lidar, it may be integrated with autonomous driving in the future, realizing autonomous battery swapping capability.
Although the first generation stations are no longer as advanced, Shen Fei stated that they will not be immediately dismantled and rebuilt. This year, the focus will mainly be on expansion and densification, with approximately 1,000 new charging stations planned.
The main distribution logic is to add approximately 600 charging stations within cities, further increasing coverage of charging areas, while continuing to densify the charging network on highways with the addition of approximately 400 charging stations.
To better meet user needs, Shen Fei came up with a crowd-sourcing idea. Recently, he organized an activity to collect user wish lists and has received over 130,000 submissions. He stated that although it’s not possible to satisfy all user expectations, they will treat these wish lists as a goal and continuously improve the battery swapping system.
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.