The Switch from Car-as-a-Service to Battery-as-a-ServiceBy Chris Tobey, Global Sales Director at NETSOL Technologies Inc. on 29-06-2021
Disruption and innovation run side by side in the automotive industry. When consumers started adopting the subscription-based model, not very long ago, it changed the dynamics of owning a car. Following in the footsteps of other industries like the media, hotels, and food, consumers in the automotive industry expected an on-demand service, available at the click of a button. Thus, the Car-as-a-Service model started looking mainstream for the future where consumers could pay-per-use and pay-per-mile/hour/vehicle.
The idea of car-sharing begun to receive attention because it could potentially reduce emissions and has an apparent growing interest from consumers. Nonetheless, given the dangers that climate change poses, the automotive sector needs to transition into an environmentally friendly future. One way of doing this is by exploring the electric vehicle (EV) market, which does not necessarily mean giving up on the car-sharing model. According to the NRDC (Natural Resources Defense Council), people are switching to EVs in the attempt to reduce their carbon emissions. Furthermore, in order to aggressively reduce carbon emissions and offer a sustainable and affordable solution, people are willing to implement the car-sharing model in the EV market.
The dynamic electric vehicle market
The transition from gasoline-powered vehicles to EVs has not been smooth, and there has been a lot of hesitation. The reason is simple - Most people who are expected to purchase an EV already own a car or do not want to purchase EVs because they are not fully aware of the benefits and the costs. However, with the bans on gasoline-powered cars being imposed by the government, the switch to EVs seems to be an urgent need of consumers. The ban, thus, can prove to be a blessing in disguise.
People are interested in finding sustainable alternatives to gasoline-powered vehicles. The switch to EVs presents many options for the consumer, however, there have been many hindrances. This is because consumers are not well aware of the product. When EV sales became dominant, consumers were only aware of the limited charging stations and the hassle they had to go through to charge. This limitation brought many concerns for the consumer and people started switching back to gasoline powered vehicles. Research shows that 1 out of 5 owners of an EV switched back to gasoline powered cars because of the charging inconvenience.
Covid-19 and the demand for EV
In spite of all the challenges, the demand for EVs established a high sales record globally in 2019 which made EVs become very prominent in major automotive markets. The Covid-19 pandemic disrupted the economic progress of the world. The drop in car sales was knowingly greater than the drop observed in the financial crisis of 2007-09. Despite the commotion, the outlook for electric vehicles continued to be very positive. The adoption for EVs has already been very fast paced all over the world because of many reasons. These are connected cars, have smart charging technologies, reduce emissions, save money and are super fun and practical. However, these are not the only innovations that are ruling the electric car industry. Many new innovations have completely changed the EV market and demand has exponentially risen.
The lockdown of 2020 impacted sales of EVs. However, the EV market saw resilience for many reasons. First, there was a lot of policy support from the government. In 2020, Europe was on the target list for reducing emissions standards. Incentives for EV purchases were doubled, battery costs declined, model and performance choices by OEMs were offered, implementation of new technology and excited buyers of electric cars gave a very promising future for EV sales. The result was that the first four months of the year 2020 reached around 90% more EV sales than the same time last year. Sales for electric cars surged to over 3 million and reached a market share of over 4% which made 2020 record breaking for EVs. There has been an increase in EV charging stations and hydrogen fueling stations installations around the globe. According to the projections for the year 2030, Asia Pacific is on top for the demand for EVs. China is the world's largest EV producer. Their government has been taking initiatives to increase the sales of EVs, to install more charging stations and have regulations set against emissions vehicles.
Innovation of Battery-as-a-Service
Since the prices of petrol and diesel have increased tremendously, there has been a great demand for fuel efficient vehicles. The only roadblock in the sales of EVs is the high manufacturing cost. The reason is because these EVs haven't been mass produced and the economic scale is yet to be monitored. There is unavailability of the infrastructure for electric vehicle market growth and a lot of investment is required to help with the progression. The demand is clearly visible, however, governments need to play a very active role in order to encourage mass production and help make the switch from conventional vehicles to electric vehicles smooth and economical. In 2013, Tesla introduced a battery swapping model and only after 2 years, abandoned the service. In 2018, Nio, a Chinese multinational automobile manufacturer, introduced its first battery swapping station in China. There were many doubts raised for Nio testing out a service that had failed for the automotive giant, Tesla. However, since the launch, Nio has successfully swapped 2 million batteries, giving power to 400 million emission-free kilometers. But what is battery swapping and why did Tesla fail? Battery swapping, also known as, Battery-as-a- Service, is the ability to swap the battery of the car for a 100% fully charged battery. It can be used for whenever those extra miles on the road are needed. Battery-as-a-Service removes the hassle of standing on the charging stations for hours to fully charge the car battery.
The reason why Tesla failed the Battery-as-a-Service model is because when it tested it out, the EV market was comparatively new. Around 25,000 Teslas were on the road and the EV industry consisted of around 0.4% of the total auto industry. When shutting down the service, Elon Musk mentioned that the driving factor for discontinuing BaaS was lack of consumer interest and the growing superchargers network. Nio spread out several benefits for swapping batteries instead of waiting at charging stations for charging of the vehicle. The biggest advantage that BaaS offers is the 3-5 minutes' time required to get a fully charged battery compared with the 75 minutes of wait time to fully charge the vehicle via superchargers. With the BaaS model, consumers can purchase a car without a battery which decreases the price of the vehicle tremendously. Several other auto companies have been shifting towards the BaaS model. Ample, a US-based EV battery swapping startup, has launched a battery swapping station. With the help of robots, the depleted batteries will be removed and fully charged batteries will be replaced in less than 10 minutes. These are small modular batteries so it is convenient and easy to quickly swap. These batteries can be used in any electric vehicle. With the advancement of technology and continuous innovation in the EV industry, it is safe to say that there are numerous new innovations lined up to be launched soon. However, whether battery swap stations will be a success in a few years or a failure, is yet to be seen. As for now, the BaaS model has attracted many new consumers and the graph for purchasing new EVs has shifted significantly.
Chris Tobey, Global Sales Director at NETSOL Technologies Inc.
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