Paul Lienert (Nick Carey) and Norihiko Shurouzu

DETROIT/BEIJING (Reuters) – A year ago Tesla (NASDAQ:) dismissed the alternative path of electric car battery swapping as “riddled with problems and not suitable for widescale use”. It seems Beijing disagrees.

China actually is working hard to develop swappable batteries (EVs) that can be used in place of regular vehicle charging. The government has also backed several companies who are exploring the technology.

The four companies, which include automakers Nio and Geely as well as Aulton, a battery swap developer Aulton, and Sinopec, a state-owned oil producer, have announced plans to create 24,000 more swap stations in the country over 2025. This is an increase from 1,400 currently.

Swapping batteries allows drivers to quickly replace low-quality packs with full-charged ones rather than simply plugging their vehicle into a charger. Although swapping could reduce the strain on power grids, experts warn that it will only be successful if all batteries are standardised.

However, if China succeeds in making swapping profitable on a large-scale, it could impact the business models global brands such as Tesla (DE:), Volkswagen (DE:), and General Motors(NYSE:). These global brands have EVs that are powered by proprietary batteries, and in the case of Tesla, their charging networks.

These carmakers can be affected by even the smallest changes in fortunes in their country, which could have serious consequences for their future success on the largest market in the world.

Although the Chinese swapping plan was announced separately in recent weeks or months, it is not known beyond China. It forms part of Beijing’s wider plan to convert 25% of vehicle sales into electric vehicles by 2025. That would make more than 6,000,000 cars 100% electric, according to current forecasts. There are many estimates as to the number of vehicles that will be equipped with swappable batteries.

Although the Ministry of Industry and Information, a significant supporter of batteries swapping, didn’t immediately reply to our request for additional comment on China’s plan.

Additionally, major Chinese firms are now looking to the international market.

Ningde’s CATL (Contemporary Amperex Technology Company Ltd), world’s largest battery manufacturer, said to Reuters that it is developing swapping services “to satisfy the demand of global market”.

We are gathering experience on the Chinese market, while also communicating with our overseas partners. CATL supplies more than half of China’s battery market and over 30% of the global EV batteries.

According to Ganesh Iyer, North American chief of Nio, Nio is one the top EV manufacturers in China. The company plans to provide U.S. customers with battery swapping services before 2025. There are more than 800 of these swap stations across China. The European branch is just being established.

“NEVER GOING to HAPPEN”

This is contrary to Tesla, the leader in electric vehicles and global EV innovation. In March 2021 it rejected the possibility of swapping large amounts of batteries in China. It tried to swap batteries in the United States many years back, and it was rejected.

Industry leaders are split over whether China’s push will overcome U.S.-based automakers’ resistance to standardizing their battery designs.

Andy Palmer (ex-CEO at Aston Martin, and current head of EV maker) stated that swappable batteries will not be accepted by carmakers. Change (NYSE:) Mobility.

John Holland, Momentum Dynamics’ wireless EV charger company commercial director Europe and Middle East said that the convergence of batteries creates a dilemma for automakers.

Then, how can you make your product stand out?

Tesla, GM, and Volkswagen all say that they have no plans to explore battery swapping at this time.

A spokesperson from GM stated to Reuters that swappable battery “are not part our strategy right now.”

VW spokeswoman said that the original intention of battery swapping was to reduce waiting time at charging stations. However, advances in fast charging technology and lower prices for non-swappable batteries led to VW shifting its focus to this option.

According to the German carmaker, “But, our strategists carefully monitor and evaluate this competitive environment and any developments in it,” he said.

Tesla spokespeople didn’t respond immediately to requests for comment.

In a constantly changing auto technology arena, both swapping and regular grid-charging have their critics as well as cheerleaders.

In Asia and Europe, it has been proven that e-scooters can be used to exchange batteries. However, the problem lies in adapting this technology for larger, more complicated cars, trucks, and vans. The following short story is available:

Nio also stated that the company has automated the swapping process to make it as fast as possible, reducing concerns about how long it took.

The grid-charging aspect has an advantage, but the familiar side is ahead of the pack. This is due to the global infrastructure for charging that’s been built in billions of US dollars.

Automobile manufacturers are also releasing EVs that have better batteries and offer longer ranges. This could eliminate the need to swap.

“BIGGEST GAME IN TOWN”

Last year, the MIIT of China released global standards on swapping technology for automobiles. They went into effect in November, specifying safety requirements, test methods and inspection rules for EVs with swappable batteries.

It is a ministry goal to have more that 100,000 electric vehicles by 2023 and over 1,000 swap stations in each of the 11 major cities. The larger stations will accept both commercial and passenger cars, while those in smaller cities and in provincial areas will cater for heavy-duty truckers.

China’s future plans hinge on whether sufficient carmakers will adopt standardized batteries. While this obstacle has stopped attempts at swapping battery packs in the last decade, it is still a major hurdle that could, if overcome. This is a quick history of swappable cells:

We still have a lot of work to do. Nio offers customers a swapping service, but it uses its own batteries. This limits the availability of the service to Nio vehicles equipped with proprietary Nio batteries.

CATL was instrumental in the development of swappable batteries for Nio. It has now signed up China’s FAW Motor to its Evogo battery-swapping service. They expect to continue to offer the service to other Chinese carmakers.

According to CATL, domestic companies should accept the standard battery design to allow stations to service multiple models, said a source close to CATL. The person, who was not authorized to speak on commercial grounds, added that CATL expected more brands to use its standardized designs.

Tu Le (managing director, Sino Auto Insights) said that the company is “the most important player” in EV battery sales.

“They offer large areas for swapping stations, and they can be very affordable to use,” he stated.

Aulton New Energy Automotive Technology from Shanghai, which is building swap stations networks in China, said that they are working with automakers on standardized batteries. They also plan to work with Sinopec and install stations at the 30,000 Sinopec stations across China by 2030.

Aulton did not respond to our request for comment.

MAGIC IN AMERICA

International carmakers are unlikely to accept swappable batteries. However, their sales in China will be crucial to finance the transition to electric, so they may have to make some adjustments. Industry experts agree.

Furthermore, Beijing could mandate the use of swappable battery packs and then say, “Okay, only cars that meet the standards are allowed.” . . you would have to comply to stay in business” in China, says John Helveston, assistant professor at George Washington University’s School of Engineering.

Swapping advocates are not limited to China.

According to Levi Tillemann (head of international policy at Ample, a San Francisco-based startup that offers battery swapping services), “battery swapping is too simple, too economic, and too logical”

He added, “It’s kind of magic thinking to imagine this is a unique Chinese phenomenon.”

Ample, which is among the few developers of battery swapping technology outside of China, raised $275m from investors. These include energy companies Shell (LON), Repsol(OTC:), and Eneos. The increase in its valuation has pushed it to $1 Billion.

The company is currently running pilot programs in partnership with Uber (NYSE 🙂 and Sally, a car-rental startup. It also claims it’s collaborating with other unnamed automakers.

Tillemann explained that with a limited number of highly utilized vehicles, it is possible to deploy and manage a profitably-oriented battery swap program. Fleets are an important target.