Rapid Expansion of China's Battery Swap Services... Profitability Yet to Be Proven [Digging Energy]

[Specialist Report]
CATL Joins Nio, Botan, and Aulton in the Market
Chinese Government Actively Supports Industry Since 2021
Only 1 in 5 Nio Stations Reaches Break-Even Point
Battery Swap Stations Expected to Expand to 10,000 This Year

Nio's Battery Swap Station.

China is the most active country in the world when it comes to electric vehicle battery swap services. In China, companies such as Nio, Botan Technology, Aulton, and GCL Energy provide battery swap services. Among these, Nio, an electric vehicle manufacturer, is the largest player, operating 3,370 battery swap stations nationwide as of June.

According to a 2023 report titled "Status and Prospects of the Private Battery Swap Industry" by Professor Li Xin of Tsinghua University, Chinese power authorities began research on electric vehicle charging and swapping services in 2006. In 2010, Zotye Auto launched a pilot battery swap taxi service in Hangzhou.

However, the battery swap sector was excluded from the New Energy Vehicle Development Plan announced in 2012. At that time, the electric vehicle market share was low, and the profitability was insufficient compared to the high investment costs, leading to the conclusion that the timing was not yet right. The technological capabilities were also not sufficiently developed.

Later, in the late 2010s, with the emergence of various private companies offering battery swap services, the Chinese government began to show renewed interest. In 2020, "battery swapping" was explicitly mentioned for the first time in the government work report. In 2021, a pilot battery swap service for new energy vehicles was launched in 11 cities nationwide. In Hainan Province, 15% of the construction costs for battery swap stations were subsidized.

Thanks to government support, China's battery swap industry entered a new phase. In 2022, 5,365,000 pure electric vehicles were sold, of which 520,000 were battery swap models, accounting for about 10% of the total. As of February 2023, the number of operational battery swap stations in China had expanded to 2,022.

New companies have also entered the battery swap service market. Battery and electric vehicle companies such as CATL, Geely Auto, and BYD have launched their own branded swap station businesses. Among them, CATL, the world's largest battery company, stands out the most.

In January 2022, CATL officially entered the sector by launching its battery swap service brand "EVOGO." In December last year, it announced "Choco Swap," a standardized battery subscription service capable of swapping batteries in under 100 seconds. CATL also signed a strategic agreement with Sinopec, China's state-owned oil company, to build 10,000 battery swap stations.

Mergers and alliances among Chinese companies are also active. In March of this year, Nio and CATL signed a strategic partnership to jointly build a passenger car battery swap network. Some foreign media reported in April that CATL was seeking to acquire Nio's battery swap service.

Despite the rapid expansion of battery swap services in China, profitability has not been proven. Building a battery swap station in China can cost up to 5 million yuan (about 950 million won). For Nio, it is reported that at least 60 battery pack swaps per month are needed to reach the break-even point. According to CNBC, as of 2024, less than one-fifth of stations have achieved this level.

Nevertheless, China is paying attention to the role of battery swap stations as urban energy storage hubs. Professor Li Xin forecasts, "The number of battery swap stations in China is expected to reach 10,000 by 2025," adding, "Beyond the basic function of charging vehicles, they can serve as key nodes in the future smart transportation infrastructure as energy storage infrastructure."