Battery swapping technology made big news last week on both sides of the Pacific. Chinese automaker NIO received a round of applause from crowds at the Shanghai Auto Show as it showcased its ability to swap batteries in less than five minutes. Meanwhile, Shanghai-based startup U Power experienced a remarkable debut on Nasdaq as its stock prices sky-rocketed by an incredible 620%. The exciting advancements are an indication that the Chinese automobile industry is making rapid strides in optimizing electric vehicle technology.

The success of NIO and U Power in battery swapping technology is further reaffirmation that electric vehicle battery swapping in China will be a profitable venture in the future. China is already the world's largest electric vehicle market, which also makes it an ideal location for experimentation and innovation of renewable technologies. With the continued efforts to optimize electric vehicle technology, swapping batteries could well prove to be a valuable solution.

Battery swapping technology has traditionally been more appealing to drivers of taxis and heavy-duty trucks who can swap dead batteries with charged ones in no time. It also reduces upfront costs for consumers, since the cost of the battery, the most expensive component of an EV, is shared. However, the cost of setting up battery swapping stations is much higher than creating flexible charging infrastructure, which accounts for the wide gap between the number of charging piles and swap stations (nearly 2 million vs just above 2,000).

Despite this, the landscape is changing. Private car owners are now frequently choosing battery swapping over charging for its speed and convenience. In fact, Chinese automaker NIO said that most of its private car users are opting for battery swapping instead of charging since 2021.

Consumers are becoming more realistic in their expectations, Yang Ye, cofounder of Aulton, told CGTN on the sideline of the Shanghai Auto Show. Aulton has been in this business for over two decades, mainly greening cities' commercial fleets. "The desire for faster charging and longer range translate into higher purchase price of an EV. An alternative to charging, battery swapping helps alleviate the 'range anxiety' at reasonable prices," she said. The company now has a desire to target private car owners. 

Tong Zongqi, under secretary general of China Electric Vehicle Charging Infrastructure Promotion Alliance, expects new electric vehicle sales this year to reach 9 to 10 million, with 70% of new electric vehicle owners being private individuals, as opposed to commercial users which held an 80%-90% market share just two years ago.

All agree that now seems like the perfect time for battery-swapping companies to capitalize on the economies of scale and continue optimizing and improving electric vehicle technology.

Standardizing batteries for EV models, however, is a challenge that requires overcoming the reluctance of carmakers to relinquish their proprietary technology and design. Sharing batteries also means sharing communication protocols, further complicating the matter. This poses not only a technological issue but also a regulatory one.

And this is where Chinese government comes into play as it has decided to push for wider EV adoption by establishing more charging infrastructure. The government wants one charging point – be it charging or battery swapping – for every single one of the new EVs.

The China Electricity Council, a government body, is working towards implementing national-level standards for communication protocols used in swapping EV battery packs. The initiative includes 15 drafters from various companies, including Aulton. Again, it takes time for a compulsory national standard to emerge, said Tong.

The swappable solution for charging an EV has significant appeal to the Chinese government, as it helps reduce carbon emissions.

Aulton, a semi-battery manager, plays a critical role in this process. “Unlike EV owners who are unable to maximize their idle batteries, Aulton makes the best use of each power pack, saving energy in the process,” said Yang.

The company’s proposal for "Vehicle to Station to Grid" indicates that battery swap stations can serve a dual purpose. In addition to charging EV batteries, they can also wire excess electricity back to the state grid, turning battery swap stations into decentralized power storage systems. This process aligns with China's energy reform goals, which aim to achieve carbon-peak by 2030.

The demand for battery swap stations is set to rise, as a rapidly growing number of EV owners require services to refill their batteries while driving long distances or when charging is not readily available. On the supply side, companies like U Power have taken a unique approach to the technology by creating a skateboard that includes a swappable battery. The idea has the potential to transform the auto industry by reducing costs and entry barriers for car-making.

Ironically, battery-swapping technology, which was abandoned by U.S. electric vehicle maker Tesla, is seeing a revived interest in China. The market is attracting new players, including battery giant CATL and traditional oil company Sinopec. The two current top battery swap operators in the country, NIO and Aulton, have set ambitious goals to add 1,000 and 400 new stations, respectively, this year, up from their current 1,344 and 597. NIO has also expressed interest in licensing its battery swapping technology to its rivals in Europe.

However, the success of battery-swapping technology outside of China remains uncertain. While China's EV market expansion and domestic technology advancements make battery swaps a viable and attractive option, the lack of infrastructure and standardization in other countries could pose a challenge.

Nonetheless, battery-swapping technology presents a unique opportunity to tackle climate change, and innovative companies like Aulton and U Power are making strides to transform the industry. As the technology develops and the EV market continues to grow, battery swaps are set to evolve further and shape the future of green transportation.