Electric Vehicle Battery Subscription Service Allowed... Will 'Battery Exchange Stations' Appear?

Chinese EV Companies like Nio Promote Battery Swap Business
Pay Monthly Subscription and Replace Battery Within 3 Minutes

As the government has decided to allow subscription services for electric vehicle batteries, there is growing interest in whether a 'battery swapping' business could emerge in Korea. / Photo by Song Hyundo, Asia Economy intern reporter

[Asia Economy Reporter Lim Juhyung, Intern Reporter Song Hyundo] The government has decided to allow subscription services for electric vehicle lithium-ion batteries. This means that the battery, which accounts for 40% of the cost of an electric vehicle, can be purchased separately from the vehicle. In China, which introduced the 'battery subscription system' earlier than Korea, this has not only significantly lowered the selling price of electric vehicles but also led to the emergence of 'battery swapping station' businesses where vehicle batteries can be swapped frequently.

The Ministry of Land, Infrastructure and Transport recently decided through the 'Land and Transport Regulatory Reform Committee' to promote regulatory improvement plans including the allowance of battery subscription services. The core of the improvement plan is to amend the Vehicle Registration Decree to allow the registration of the fact that the battery owner and the electric vehicle owner are different in the registration records. Currently, the registration decree does not allow the ownership of the battery to be separately registered from the complete vehicle, making it difficult to launch battery subscription products.

Once the battery subscription system is implemented, the purchase price of complete vehicles can be significantly reduced. Lithium-ion batteries are a key component accounting for about 40% of the cost of electric vehicles. For example, if you purchase an electric vehicle priced at 40 million KRW this year, you can buy it for 30 million KRW after receiving an average subsidy of 10 million KRW from the central and local governments. If the battery is also acquired through a subscription, the final purchase price of the complete vehicle can drop to the 10 million KRW range.

◆China diversifies battery subscription business from 'BaaS' to swapping services

The battery subscription system originated in China. In 2020, the Chinese electric vehicle startup 'NIO' first devised the concept called 'BaaS (Battery-as-a-Service)', where instead of purchasing the battery installed in the vehicle, users pay a monthly fee to rent it. The Chinese government also supported NIO's subscription business by lifting regulations that required complete vehicles to be sold with battery packs installed internally in the same year.

Nio's Battery Swap Electric Vehicle Charging Station / Photo by Nio

NIO's BaaS received great response from consumers. First, it lowered the 'entry barrier' by reducing the expensive price of electric vehicles, and the appeal of 'renting' batteries instead of owning batteries that degrade in lifespan and performance with each charge was also attractive. As of the first quarter of this year, NIO has become a major company ranking 4th to 5th in the Chinese electric vehicle market. When customers bring their cars to NIO-operated battery swapping stations, the battery is replaced with a new one within 3 minutes.

Automated battery swapping station operated by China SAIC Motor. / Photo by 'Jeon Gibang' website capture

Currently, the battery swapping business in China is a battleground not only for electric vehicle companies but also for battery manufacturers. CATL, the world's largest battery manufacturer, launched an electric vehicle battery swapping service called 'EVOGO' earlier this year, and the Chinese state-owned oil company 'Sinopec' also plans to build electric vehicle charging stations and battery swapping facilities together.

◆Domestic companies also actively enter 'BaaS'

The Chinese government has designated 11 major cities including Beijing, Nanjing, and Wuhan as pilot areas for the battery swapping business and is actively supporting the industry by presenting unified industry standards to participating complete vehicle and battery companies.

In Korea, the allowance of the battery subscription system is relatively late compared to China, but domestic battery manufacturers are already accelerating preparations to enter the BaaS business. One example is LG Energy Solution, which has been promoting the 'e-platform' business since last year. They plan to collect data on the lifespan and residual value of batteries manufactured by LG Energy Solution and implement value certification, secondhand trading, rental reuse services based on this data. SK Innovation also provides a wide range of services from battery performance diagnosis to price estimation through its self-developed 'BaaS AI' since last year.