Unwrapping the Standard 'Chocolate': Have We Just Unlocked a New Era of Battery Swapping Ecosystem?"

For convenience, the following currency denominations will be in Chinese Yuan (CNY). Today's exchange rate is 1 USD = 7.15 CNY

With a "ding" sound from the system, Driver Wang received a large order from Liuhe District in Nanjing to Lukou International Airport, a one-way trip of nearly 100 kilometers. The backend showed that after deducting commissions, he could earn over 100 yuan from this order, which was almost equivalent to his earnings from running for most of the day on an average day.

Airport orders of this size are rare and unpredictable, with just a few appearing in a month. However, they also brought about Wang's concerns. This round trip of nearly 200 kilometers meant that if the battery was low, he would need to find a place to swap it upon arrival.

Although there are several battery swapping stations at the airport, they seem to be separated by an invisible barrier, forming isolated islands. The factors hindering the interconnection of these "islands" include not only technical differences in vehicle chassis sizes and battery pack specifications but also commercial independence considerations by automakers and battery swapping station brands, who prefer to build their own systems rather than rely on competitors' systems.

This situation has led to a limited number of vehicle models supporting battery swapping, scattered across only a few cities. Furthermore, the lack of unified standards and interconnection capabilities has severely limited the large-scale promotion and development potential of the battery swapping model.

In fact, battery swapping has unique advantages in alleviating users' range anxiety and optimizing grid load management. The Ministry of Industry and Information Technology and other departments have issued multiple documents encouraging the coordinated development of various energy replenishment methods such as battery swapping and fast charging. To achieve this vision, it requires the joint efforts of the entire industry. Establishing unified battery standards has become the key to connecting these "islands."

On December 18, CATL and nearly 100 partners jointly launched the Chocolate Battery Swapping Ecosystem, introducing three innovative initiatives: standardization, new infrastructure, and a comprehensive ecosystem, along with 2 standardized battery swapping options, 20# and 25#. This marks the industry's first standardized battery swapping service across brands, models, and industries.

Robin Zeng, Chairman and CEO of CATL, predicted at the conference that by 2030, battery swapping, home charging, and public charging piles will form a three-way split in the market.

When standardization gains widespread industry acceptance, what kind of new era of travel will a highly interconnected battery swapping network usher in?

1. How to Overcome Battery Swapping Anxiety?

The concept of battery swapping for EVs existed before their widespread adoption, first proposed by Israeli company Better Place in 2007, aiming to reduce dependence on oil and promote the development of EV.

Constrained by limited EV market demand, inadequate supporting facilities, and the inability to profit from huge investments in the short term, Better Place ultimately failed to survive beyond 2013.

More than a decade later, despite the explosive growth in demand for new energy vehicles and the continuous improvement of battery swapping infrastructure, the market still has some reservations about the battery swapping model.

These concerns mainly revolve around: vehicle owners worry about insufficient battery swapping stations, causing inconvenience; the industry lacks unified standards, and automakers dare not invest heavily in the battery swapping sector due to the possibility of frequent standard changes and concerns about whether battery swapping platforms will invest long-term in infrastructure; investors hesitate due to uncertainty in market demand.

CATL is addressing these issues.

To eliminate the doubts of multiple parties regarding battery swapping, the primary task is to establish unified industry standards, enabling ecological partners to share a common "language" for battery swapping, thereby accelerating the formation of a battery swapping ecosystem.

Robin Zeng, Chairman of CATL, pointed out at the conference that the core of battery swapping standardization lies in the standardization of battery sizes. He mentioned, "Comparing battery swapping to gasoline filling, gasoline has grades like 92 and 95, and Chocolate Battery Swapping will also use 2 standard battery sizes, which we name 20# and 25# battery packs, providing users with personalized services by allocating power based on their needs."

By unifying size standards, battery cells can be compatible with multiple chemical systems, offering a variety of power options. The 20# and 25# battery packs support a driving range of 400 to 600 kilometers, allowing vehicle owners to flexibly choose the most suitable battery pack based on their specific needs, effectively alleviating range anxiety.

Moreover, Chocolate Battery Packs are not only compatible with commonly seen LFP and NCM lithium batteries; according to plans, all future battery technologies of CATL will be applied to Chocolate Battery Swapping models. This means vehicle owners don't need to worry about battery depreciation or the risk of technological obsolescence.

Facing the challenge of battery swapping stations, which are capital-intensive and have a long return period, CATL plans to build 1,000 "Chocolate Battery Swapping Stations" by 2025 and expand its business to Hong Kong and Macao. In its medium-term plan, CATL will work with various partners to build 10,000 battery swapping stations. As the battery swapping ecosystem continues to grow, the ultimate goal is to achieve a widespread layout of 30,000 battery swapping stations through the joint efforts of the entire society.

These initiatives not only ensure the convenience and sustainability of battery swapping services but also create a win-win situation for automakers and consumers.

With the continuous improvement of battery swapping infrastructure, battery swapping vehicle models will usher in a wave of market launches. Since the beginning of this year, CATL (Contemporary Amperex Technology Co. Limited) has collaborated with automakers such as Changan, GAC, BAIC, Wuling, and FAW to jointly launch ten models, which will gradually hit the market from the end of this year, with new models being introduced every quarter.

As the first ecosystem to achieve cross-brand and cross-model battery swapping services, "Chocolate Battery Swapping" has set a milestone in the industry. Through this innovative model, car owners of different brands can enjoy convenient and efficient battery swapping experiences, revolutionizing the way new energy vehicles are used.

2. Challenge of Standardization

Currently, the battery swapping sector has attracted the attention and participation of numerous enterprises, forming a diversified development trend.

However, due to the differentiated layouts of various enterprises in technology and services, the industry has not yet formed unified standards and collaboration mechanisms. Although this diversity brings a certain degree of innovative vitality, it also leads to the dispersed use of resources to a certain extent, affecting the widespread adoption and efficiency improvement of the battery swapping model.

Lu Mei, general manager of China Automotive Technology & Research Center Co., Ltd., believes that the lack of unified technical standards has become a significant obstacle to the large-scale promotion and application of battery swapping. This situation is caused by both historical reasons and commercial competition factors.

From a historical perspective, the difficulty in unifying battery swapping standards can be seen as a continuation of issues left over from the era of fuel vehicles. In the early stages of the development of new energy vehicles, many models were "converted from fuel to electric." Due to the complex chassis structure of fuel vehicles, the space left for battery packs was limited, resulting in various shapes and sizes of battery packs and lacking a basis for standardized installation.

However, "conversion from fuel to electric" has gradually become a thing of the past. The chassis design of newly launched electric vehicles is more regular, providing sufficient space for the installation of standardized battery packs. But why do the battery pack standards of different automakers still vary, unable to avoid a fragmented state?

From a commercial competition perspective, there is a natural competitive relationship between automakers. Adopting someone else's battery swapping standard means being subject to their control, which is unacceptable in commercial competition. Therefore, relatively few automakers are willing to participate in battery swapping. Moreover, the sales volume of a single automaker is limited, making it difficult to reduce the costs of building and operating battery swapping stations through scale. Several automakers have previously attempted to build their own battery swapping stations, such as Geely, FAW Hongqi, GAC Aion, and Changan, but they could only cover a very small area, similar to demonstration projects, failing to change the industrial ecology.

In addition to automakers, there are also 3rd-party operating companies involved in the construction of battery swapping stations. These companies neither manufacture vehicles nor produce batteries, occupying a supporting role in the industry chain and mainly providing services. Therefore, they have relatively weak voice and it is difficult for them to dominate the establishment of industry standards.

Instead of repeatedly reinventing the wheel, it is better to make one good wheel. CATL happens to be the connection point for automakers, battery swapping networks, users, and other ecological partners.

From a historical and cooperative perspective, CATL has established deep connections with many mainstream automakers based on its extensive industry cooperation foundation, rather than existing as a competitor. This cooperation model ensures its wide application and acceptance in the field of power batteries, laying a solid foundation for the promotion of standardized battery swapping.

In terms of technology and adaptability, CATL has successfully developed Chocolate Battery Swapping Blocks that can be adapted to most models on the market by deeply mining vehicle chassis and battery pack industry data. This innovation not only enables multiple automakers to share the same standardized battery but also greatly promotes large-scale production, effectively reduces battery costs, and thereby enhances the market competitiveness and cost-effectiveness of the models.

3. Chocolate Battery Swapping "Brings" a New Ecosystem

Since the invention of the automobile by German engineer Karl Benz in 1886, after more than 140 years of development, the automotive industry has formed a mature ecosystem, with automakers, financial institutions, dealers, the automotive aftermarket, and other participants each taking a slice of the pie.

If new growth points cannot be found, it will be difficult for ecological participants to obtain excess returns from stock competition. Standardized battery swapping brings a brand-new vehicle usage ecosystem, which happens to meet the growth needs of ecological partners.

At the ecology conference, Robin Zeng invited ecological partners: "We hope to gather more forces through the open platform of the 'Chocolate Battery Swapping Ecosystem' to jointly promote the continued development of the battery swapping industry. Battery swapping is not only the business of CATL, not only the business of every ecological partner, but it can also become a common cause for each of us to promote sustainable social development."

Take insurance as an example. Insuring electric vehicles has once troubled many insurance companies. Düdenhöfer, the founder of the Center of Automotive Management, known as the "godfather of the automobile," found through statistics that the power battery is one of the most important core components of EVs, accounting for up to 40% of the total vehicle cost. However, the battery is hidden at the bottom of the vehicle and enclosed in a thick shell, making it difficult to judge the health status of the battery interior solely from its appearance. And dismantling for inspection is a dangerous technical task beyond the capabilities of insurance companies.

With the difficulty in accurately assessing battery performance and status, insurance companies often find it challenging to set insurance prices for batteries alone and can only determine the insurance for the entire vehicle based on its value, resulting in high insurance costs that deter many potential users.

Under the Chocolate Battery Swapping model, the history and real-time data of each battery pack and even each battery cell can be viewed and used to assess their performance status. This fine management provides a reliable reference standard for separate battery insurance. As this industry challenge is gradually resolved, battery insurance premiums have been significantly reduced from 2,000 yuan to 500 yuan, not only allowing car owners to enjoy tangible benefits but also enabling insurance companies to tap long-term revenue from customer loyalty.

At the same time, a smooth second-hand car circulation channel is a critical part of building a healthy ecosystem. Previously, the rapid depreciation of electric vehicles troubled many car owners and used car platforms. On the one hand, persistent issues such as the opacity of battery status and imperfect evaluation systems have lowered the market quotes for second-hand cars. On the other hand, the decline in raw materials and production costs has driven the depreciation of batteries, further reducing the selling prices of second-hand electric vehicles.

CATL has collaborated with Uxin Second-Hand Car and Chadoctor to jointly create a second-hand car trading system with vehicle-battery separation. Users can assess the battery value on platforms like Chadoctor or directly sell the vehicle body without the battery on second-hand car platforms like Uxin, allowing users to avoid bearing risks associated with the battery, making transactions smoother, and increasing car owners' proceeds from selling their cars.

In addition, the Chocolate Battery Swapping Ecosystem also includes e-commerce platforms, automotive aftermarket brands, autonomous driving companies, car rental platforms, and more. In the automotive aftermarket, Times EV Services and JD Car Care will jointly build "integrated stations" for the maintenance and battery swapping of new energy vehicles, providing a one-stop solution to address various issues encountered by car owners during vehicle use and promoting the industry to establish more standardized and efficient service standards and processes.

When users are unsure whether they are suitable for battery swapping vehicle models, they can rent a battery swapping vehicle from car rental platforms such as Shenzhou and eHi to personally experience it, greatly reducing the difficulty and risk of car purchasing decisions.

Another very important point is that the battery swapping model essentially involves centralized management and operation of batteries. The operator can effectively understand the lifespan and status of the batteries and promptly replace those with decaying lifespan or faults, contributing to post-lifecycle management of batteries, such as cascade utilization and recycling, which is difficult to achieve in non-battery swapping models.

Ultimately, battery swapping is a crucial link in the energy transition, with its core value lying in providing a centralized, controllable, and large-scale green power consumption model. This model not only optimizes the energy consumption structure but also effectively promotes the utilization of green power by consuming it on a large scale during each battery swapping process.

In addition, battery swapping technology drives changes in travel and energy consumption patterns and encourages all parties in the ecosystem chain to jointly participate in building a low-carbon society through the battery as a link, thereby promoting sustainable economic and ecological development.

4. Multi-dimensional Competition

This model appears to be very flawless, but there are also numerous issues and challenges worthy of our deep consideration. Firstly，The unveiling of CATL's (Contemporary Amperex Technology Co. Limited's) Chocolate Battery clearly indicates that the major automakers involved, such as GAC, BAIC, Wuling, and FAW, are not front-runners in the new energy vehicle (NEV) industry. Except for Changan, the other automakers are outside the top 10 sales list.

This essentially reveals a power struggle between battery manufacturers and automakers. Firstly, automakers like BYD, Tesla, and Geely, which have their own battery factories, compete with CATL to some extent. Before the battery swapping system becomes sufficiently large-scale, they are reluctant to actively join. Other automakers with sufficient sales volumes and significant market influence do not necessarily need to further tie their vehicle sales to the market of CATL's batteries. Furthermore, from a profit perspective, batteries currently constitute about 30-40% of the value of EVs. If automakers adopt CATL's open battery swapping system, it means they must forfeit the profit markup from batteries and the aftermarket space. Such a trade-off may be very perplexing for many automakers in the short term.

In addition to competition from automakers, CATL's battery swapping system will also compete with existing battery swapping providers, most directly with NIO's battery swapping system. NIO earlier laid out its battery swapping business and continues to expand its battery swapping alliance. Public information shows that since November 2023, NIO has reached battery swapping cooperation with Changan Automobile, Geely Holding, Chery Automobile, JAC Motor, Lotus, GAC Group, and FAW Group. It is understood that NIO's battery swapping alliance continues to expand.

In May 2024, the addition of GAC Group elevated the battery swapping system to the level of establishing a battery standard system. According to the agreement, both parties will jointly promote the establishment of a unified battery standard system, cooperate in the research and development of battery swapping passenger vehicles and compatible battery swapping service stations suitable for both parties' battery swapping systems, facilitate the launch of battery swapping models equipped with unified standardized battery packs mutually determined by both parties, and advance the implementation of station-end solutions that can provide battery swapping services for both parties' models. Simply put, NIO and GAC Group aim to share battery swapping resources, launch models using unified standard battery packs, and interconnect their battery swapping networks. There is a voice on the internet that a national battery swapping standard is coming! Currently, NIO has built over 2,785 battery swapping stations in China and 51 in Europe, with a daily average battery swapping volume reaching 80,000 times. Although CATL's Chocolate Battery swapping system seemingly has a promising start, it faces considerable challenges on the road ahead amidst existing multi-dimensional competitive pressures.

5. Battery Swapping vs. Supercharging

It should be noted that the cost of operating battery swapping stations is very high. With reference to NIO's investments: the construction cost of NIO's 1st-generation battery swapping station is approximately RMB 3 million, the 2nd-generation around RMB 2 million, and the 3rd-generation around RMB 1.5 million. Although the price of the updated 4th-generation battery swapping station has not been disclosed, considering the cost savings and revenue generation from design optimizations, engineering efficiency improvements, energy efficiency enhancements, and comprehensive energy utilization brought about by long-term operations, the total construction cost of the 4th-generation station should be slightly lower than the 3rd-generation, but still within the range of RMB 1.3-1.5 million. When combined with time, labor, and maintenance costs, each battery swapping station built by NIO consumes a huge amount of funds. Taking the 1,000 stations announced by CATL this time as an example, the investment cost is around RMB 1.5 billion.

In contrast, the construction cost of fast-charging stations is significantly lower. Currently, take the construction of a charging station with a 1,250KVA transformer and 10 120kW dual-gun DC chargers as an example, including site leasing, construction, and operation, the total investment is approximately RMB 800,000. If a 500KVA transformer is used, the cost will decrease by RMB 100,000-200,000. This means that the investment cost for building one battery swapping station can be used to build 2-3 supercharging stations, not to mention the relatively lower later-stage operation and maintenance costs, lower asset requirements, and more flexible construction sites for fast-charging stations.

Currently, the fast-charging sector is experiencing rapid technological iterations. Huawei, as one of the pioneers in fast-charging technology, has achieved unprecedented charging efficiency with its latest-generation HUAWEI DriveONE 800V high-voltage silicon carbide efficient power platform and Whale 800V high-voltage battery platform. It enables vehicles to significantly replenish driving range with a short charging time, providing an experience close to "charge and go," which undoubtedly poses a direct challenge to the immediacy advantage of the battery swapping model. Models equipped with Huawei's fast-charging technology, such as the AITO S7, demonstrate the huge potential of fast-charging technology in addressing range anxiety, with excellent performance that allows for "charging 5 minutes for 215km of range and charging 15 minutes for 430km." Huawei's all-liquid-cooled supercharging terminal achieves a maximum output power of 600kW on the 800V platform, further reducing charging time and enhancing user experience, making a "one-second-per-kilometer" charging experience possible.

With the increasing maturity and popularity of fast-charging technology, numerous automakers have joined this sector, ranging from tech newcomers like Xiaomi to traditional auto giants like Mercedes-Benz and BMW. They have actively responded to market demand and enhanced their brand competitiveness by introducing high-voltage platforms and supercharging technologies. Xiaomi's 871V high-voltage platform has pushed charging efficiency to new heights, while Mercedes-Benz and BMW jointly operating a supercharging network in China demonstrates the rapid development of fast-charging technology globally.

These initiatives not only enrich the recharging options for NEVs but also accelerate the market penetration and recognition of fast-charging technology. The entry of traditional high-end brands brings more resources and support to fast-charging technology, further driving the transformation and upgrading of the entire industry, indicating that fast-charging technology will become an indispensable component in the future NEV sector.

In the NEV sector, battery swapping and fast charging, as 2 recharge methods, are not in an absolutely opposite state. By simultaneously launching the 4th-generation battery swapping station and 640kW all-liquid-cooled supercharging piles, NIO not only showcases its capability to integrate both technologies but also conveys a clear message: battery swapping and fast charging are not irreconcilable contradictions. In fact, many companies, including NIO and CATL, are actively exploring and practicing the integration and complementarity of these two technologies.

Technologically, the compatibility between battery swapping and fast charging has been verified. Successful cases from NIO and CATL demonstrate that vehicles can be designed to support both battery swapping and fast charging, meeting recharging needs in different scenarios. This flexibility provides enterprises with more options for market strategies and brings consumers a more convenient and diversified driving experience.

However, differences in business models are the root cause of the apparent "rift" between battery swapping and fast charging. Market forecasts show that both battery swapping and fast charging will have considerable market shares and development potential in the future, but their business models and development paths differ significantly. The battery swapping model requires high upfront investments, including battery swapping station construction and battery asset management, which limits its rapid popularization to some extent. In contrast, the fast-charging model is more flexible and can cover a broader user base faster, but its high load pressure on the power grid cannot be ignored.

From the perspective of power infrastructure development, the widespread adoption of large-scale fast charging faces numerous practical challenges. Factors such as grid capacity limitations, huge power investment demands, and the construction cycle of charging infrastructure constrain the comprehensive promotion of fast-charging technology. In contrast, the battery swapping model has obvious advantages in reducing grid burden and lowering charging costs. Battery swapping stations can charge batteries during off-peak grid hours, thereby balancing grid load, reducing charging costs, and improving energy utilization efficiency.

Therefore, the competition and cooperation between battery swapping and fast charging actually reflect the diversified development of the NEV industry. With technological advancements and changes in the market environment, enterprises will choose development models more suitable for themselves based on their resource endowments and market positions. In this process, the boundaries between battery swapping and fast charging may become blurred, and their complementarity will gradually increase, jointly driving the prosperous development of the NEV industry.

Whether it's battery swapping or fast charging, the goal is to address the recharging issue of NEVs and enhance user experience. In the fierce market competition, enterprises should adopt an open mindset and innovative thinking, continuously explore and practice new recharging methods and technological routes, and provide users with more convenient, efficient, and reliable charging services.