Opportunities to capture value in the BaaS model

Benefits for the end-customer

The increasing use of battery storage technology over the last two years, particularly in China, has highlighted the many benefits of the BaaS business model for consumers.

Principal among these are the reduction in range anxiety and the reduction in the upfront costs of an EV. Batteries are the single most expensive component of a new EV, accounting for up to 30% of the EV’s total on-the-road cost. By removing this from the vehicle, the upfront purchase cost is significantly reduced. The cost of the battery is, in essence, then spread out in more manageable payments across the battery subscription period. Battery swapping can provide customers with a quicker alternative to conventional EV charging as well as a longer range. A NIO user can swap to a fully charged battery with a 380-mile range in three to five minute.

BaaS models service a particular need in inner cities where access to on-street and off-street parking are likely to be more limited; this is especially the case in areas with a high density of flats or apartments. Similarly, consumers in rented homes are unlikely to be permitted to install a home chargepoint by their landlord andso BaaS offers a solution to these individuals. This is a particular advantage in the UK and mainland Europe, where the home rental market is significant.

BaaS providers offer the subscriber the opportunity to vary their subscription package – and therefore the amount they pay – to meet their needs in any given month. For example, by having a lower capacity battery for a month in which they anticipate only commuting short distances to and from work, whilst upgrading to a longer-range battery when they might have a significant journey planned.

Frequent rapid charging of batteries can increase the rate of degradation of the EV battery and therefore potentially result in higher battery costs due to shorter battery life. Battery swapping may prolong battery life and lower the overall battery cost, despite the need for multiple batteries at charging stations. The International Energy Agency (IEA) noted that although the use of swappable batteries increases the number of total batteries needed to support a fleet, it can significantly reduce operational emissions and enable a longer lifespan of vehicles Similarly, battery swapping has been found to have a higher energy efficiency than plug-in battery charging, hydrogen, or catenaries - overhead wire system used to supply electricity to locomotives such as a tram or light railway - due to the lower energy losses and longer battery life from slow battery charging. Together with the electrification of transport, predicted lower cost and environmental impacts, the IEA found it to be an attractive way forward compared to other forms of battery charging.

To achieve the benefits of battery swapping and for full and fast deployment, a much wider and international effort is required. This needs to include involvement from automotive manufacturers and battery producers, robotic and electrical device industries, electrical grid operators, national authorities, fuel service station owners and, importantly, engagement from consumers.

Alongside the benefits to consumers that are key to the attraction of the BaaS model, there are additional opportunities to extract value from EV batteries. These opportunities range from the reuse and recycling potential to their inclusion in network flexibility programmes.

A NIO user can swap to a fully charged battery with a 380-mile range in three to five minutes.”

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2024.

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