Batteries are by far the most expensive component of an electric vehicle, and swinging raw-material prices can make the task of lowering their cost more difficult. China’s NIO Inc. and Contemporary Amperex Technology Co. Ltd. aim to lighten that burden by allowing customers to lease batteries separately from cars, reducing upfront purchase costs.
The approach means customers can buy just the vehicle shell outright, while agreeing to pay rental fees for the battery. They can also replace the battery with a newer, improved one in the same car shell as technology rapidly advances.
Such a model could expand the potential pool of customers and help to spur sales at carmakers such as NIO, which announced a standalone battery business with CATL in Beijing on Thursday.
Under the new model, the starting price of NIO’s ES6 SUV without a battery will be 273,600 yuan ($39,500), and the battery’s monthly lease starts at 980 yuan, NIO said. Customers can still choose to buy the entire vehicle, battery included, for 343,600 yuan.
The so-called battery-as-a-service model could “considerably lower the purchase cost,” Credit Suisse Group AG analysts said earlier this week.
The new venture, which will handle leasing, charging, maintenance and upgrades of batteries separate from its cars, will be part owned by NIO and battery giant CATL. Other investors are Guotai Junan Financial Products Co. and the government-backed Hubei Provincial Science and Technology Investment Group.
The four owners will each invest an initial 200 million yuan into the venture, called Wuhan Weineng Battery Asset Management Co.
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Shanghai-based NIO, which this year received a municipal government cash injection and credit facilities from local banks, reported a positive gross margin for the first time in the second quarter. Its sleek ES8 and ES6 SUVs are attracting buyers as the coronavirus pandemic eases in China, helping NIO’s stock price more than triple this year.
NIO, headed by Chief Executive Officer William Li, is the only EV maker so far to roll out models with swappable batteries for individual customers. Rival BAIC Motor Corp. uses swappable battery technology too but only for fleets.
Wuhan Weineng Battery Asset Management will also handle battery wholesale and retail, battery recycling, mobile charging, R&D and energy storage.
“We are very bullish on this business model,” CATL said in a written response to questions. “In the vehicle-battery separation model, batteries will become an important asset instead of a source of power only.”
While NIO may be ahead of the pack in terms of the battery-as-a-service concept, competition remains stiff. Registrations of Tesla Inc. vehicles in China have topped 61,000 this year, versus the 17,702 vehicles NIO delivered through July. NIO doesn’t have any overseas sales.
Sales of new-energy vehicles, including electric cars, are set to reach 1.1 million units this year in China, with Tesla expected to account for around 10% of that, the China Association of Automobile Manufacturers has forecast. A new government regulation in April maintained buyer rebates for vehicles equipped with swappable batteries.
— With assistance by Charlie Zhu, and Chunying Zhang