The News: Zhejiang Geely Holding Group (Geely), China’s leading privately controlled automotive technology group and NIO Holding (NIO) signed a strategic partnership agreement on battery swapping. Both parties agreed to carry out comprehensive cooperation on battery standards, battery swapping technology, battery swapping network expansion and operation, swappable model development, and battery asset management. The full press release is available on NIO’s newsroom page.
Geely and NIO Announce Strategic BaaS Technology Partnership
Analyst Take: Shanghai-based EV maker NIO’s new partnership with Geely, the company behind Volvo, Polestar, Lotus, and several other brands, aims to expand adoption of EV battery swapping in the EV market. The ability to swap batteries can help EV drivers get back on the road quickly by replacing a depleted pack with a fully charged one significantly faster than just plugging in and waiting for the battery to charge. Unlike the 15-60 minutes it normally takes for charging, the swapping process is meant to take only about 5 minutes.
Other key advantages of the battery as a service (BaaS) model are that it can potentially extend vehicle lifecycles by replacing battery upgrades with simple battery replacement, therefore decoupling the cost of battery upgrades from vehicle maintenance costs and making EV ownership more appealing for consumers looking to hold on to their EVs for a longer timeframe.
Geely and NIO’s agreement looks like a co-investment, co-construction, shared, co-operative model. This approach matters because battery swapping is not just an infrastructure investment (like charging stations); it also represents a significant supply chain investment, as swapping stations have to be stocked and maintained and the cost structure of operating a supply chain that serves those stations could be a challenge in an increasingly competitive market.
That is why the NIO-Geely partnership is significant. First, because it injects resources and scale into NIO’s idea. Launching into a vast BaaS model carries tremendous upfront costs (and risks) for an up-and coming automaker that has not reached a critical volume of vehicles on the roads just yet, especially in markets outside of China, such as Europe and North America, where NIO’s footprint is still nascent. Second, because this is not just a battery swapping station play. It is an EV standards play, and it could potentially disrupt established EV OEMs such as Tesla. (More on that in a moment.) This partnership also comes on the heels of another recent NIO partnership with Changan Auto to expand the network, signaling an acceleration of investment and buy-in for the BaaS model and how it could disrupt the global EV market.
The Potential Scale of Geely and NIO’s BaaS Partnership Is Bigger than You Think
The partnership between Geely and NIO includes developing two battery-swapping standards, and that, to me, is the real nugget of this partnership announcement. Both companies have agreed to develop EVs compatible with each other’s battery swap systems. For context, Geely’s brands include Geely, Zeekr, Lynk, Farizon, Radar, and Livan, but also LEVC (London taxis), Lotus, Volvo, Polestar, and Smart, and sells roughly 1.5 million vehicles per year. NIO, for its part, has a respectable 320K+ vehicles on the road and is expanding into Norway, Germany, the Netherlands, Sweden, and Denmark. BaaS is apparently gaining traction with Scandinavian EV consumers, which might have played a part in Geely’s decision to enter into its partnership with NIO, given Volvo’s importance to those markets and Geely’s relationship with Mercedes-Benz.
BaaS Is Not Just a Chinese Market Play: It Is Aimed Squarely at the EU and Tesla
What might initially seem like a news item about Chinese automakers partnering to make a play in the Chinese automotive market looks more to me like a standards, infrastructure, and market disruption play aimed squarely at the European EV market. It also appears to be aimed at Tesla, whose battery technology, vehicle cost-to-lifecycle ratio, and charging infrastructure could be vulnerable to a scalable BaaS model.
Designing EVs with easily swappable batteries is not just an attractive market differentiator. It is also the solution that consumers considering switching to EVs but still on the fence about it have been waiting for: Easily swappable batteries offer a promise that their vehicles will not require expensive and time-intensive battery maintenance and upgrades down the road. It is also a promise that their EVs will likely remain on the roads longer, making the investment in an EV less risky. And the value-add of having the option to swap out a battery in minutes instead of sitting at a charging station for up to an hour is also fairly significant for consumers with busy schedules. That is a tough set of features and value propositions for Tesla to compete against.
But that is not all. Chinese battery innovator WeLion is now equipping NIO’s 150 kWh batteries with advanced new semi-solid-state cells. These semi-solid-state battery cells are fairly energy dense and packing 360 Wh per kg. Here is where things get interesting: Tesla’s 4680-cell batteries look to range between 270 and 296 Wh per kg. Thus, the NIO ET7, which ships with these new battery packs, should have a range that exceeds 600 miles on one charge, which exceeds Tesla’s reported battery/range performance. Here too, Tesla is being challenged.
Opportunities and Challenges of Market Disruption at Scale
Market differentiators aside, the road ahead is not exactly smooth for Geely and NIO just yet. Despite Geely’s healthy global footprint, and NIO’s impressive network of 2,100+ power swap stations and 3,500 power charging stations (with roughly 20K chargers) to say nothing of its exciting battery performance, getting new standards adopted by the automotive industry, convincing regulators to give the technology and business model the nod, building the infrastructure, developing supply chains, and convincing European consumers to choose BaaS over traditional EV battery designs requires a lot of heavy lifting and risky upfront investments that will likely take years to fully bear fruit.
NIO’s cost-cutting and price-reduction actions earlier this year reflect the market pressures the company is already experiencing, along with Tesla, and tackling such an ambitious expansion gambit, even with a partner of Geely’s size, is a formidable challenge. Realistically, the EU and EC might need to play a proactive role in helping scale adoption of swappable battery standards and power swap networks if the infrastructure piece of Geely and NIO’s BaaS model is to take root outside of Scandinavian markets at a pace that makes sense for broad consumer adoption of swappable battery technology. Germany and the Netherlands are a good start, but Poland, Austria, the Czech Republic, Belgium, France, Switzerland, Spain, and Italy will have to get onboard as well. The UK will also be an important piece of this adoption puzzle. The EU’s rapprochement strategy with China as of late could also help alleviate fears of significant supply chain disruptions, but bringing battery and vehicle production facilities to the European region could further de-risk Geely and NIO’s market reshaping strategy, at least for consumers. On the bright side, NIO’s batteries can be charged just like any other EV battery, so there is no downside to buying an EV with a swappable battery even in markets where power swap stations are not yet available.
What I see here is mostly an opportunity to fill needs that current EV technology and infrastructure cannot solve all that well: Batteries that can either be charged or swapped, based on the consumer’s needs, make sense to me. The long-term viability of EV purchases through easily swappable batteries also makes a lot of sense.
And if Europe wants to make good on its plans to eliminate non-EV vehicle sales in the next decade or two, it is going to need more players to enter the market. Tesla has also left itself vulnerable to competitors that can innovate faster, bring new features and elevated performance to market, deliver more consistent quality in their products, and might also not be as likely to draw the ire of European regulators (who have shown a tendency over the past decade to target US tech giants with a steady diet of regulatory battles and fines).
There is also a massive potential jobs uplift attached to the creation of a BaaS supply chain in Europe, starting with shipping, but also touching on construction, maintenance, and support of the thousands of battery swapping stations that could be built across Europe in the next decade, should Geely and NIO’s BaaS play manage to scale there. And from there, the North American market, obviously. I will continue to follow this thread closely.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Author Information
Olivier Blanchard has extensive experience managing product innovation, technology adoption, digital integration, and change management for industry leaders in the B2B, B2C, B2G sectors, and the IT channel. His passion is helping decision-makers and their organizations understand the many risks and opportunities of technology-driven disruption, and leverage innovation to build stronger, better, more competitive companies.
