Hey, in this video,
I want to talk about the prospects of
battery swapping technologies in China and
for Tesla.
I think there is a chance that the next
Tesla vehicle that will be developed in
China will be having this
technology. And of course,
I don't mean it in a way that
you can see in this video,
because this is just some CGI rendering,
but Tesla already had a battery
swapping technology in the past,
and Elon was pitching it as customer
centric solution to eliminate a pain of
charging time, battery degradation,
and swapping of defect batteries.
We should preserve the optionality.
So what if people do want to,
what people do want to switch out
their battery pack? What if they,
if they only want to stop
for a short period of time,
and when you come to the
back to the Tesla station,
it shouldn't be really called
the super charging station.
It should just be called
the Tesla station.
You have the choice of the supercharger,
which isn't always will
be free, or you have the,
the choice of a battery pack swap.
However, for Tesla. It never took off.
So yeah, we have the basically
the LA to San Francisco
pack swap capability
in place. And I believe
all more or less owners in the
sort of California area have been
invited at this point to try it out.
And what we're seeing is
just a very low take rate for
the for the battery swap station.
So we did an initial round of
invitations where we did basically like,
like 200 invitations. And,
and I think there were a total of
four or five people that wanted to do
that. And they will do it
just once. So like, okay,
it's clearly not very popular.
Instead, the technology was revived by
the Shanghai based startup, NIO in China,
which made battery swapping a
unique feature of their cars.
Now why could battery swapping half a
second revival and this time in China and
why could Tesla choose to adopt
this technology again? Well,
first we have to acknowledge the fact
that China is an inherently different
market to, for instance, the US, many
people are living in high rise compounds.
Wallboxes for
home charging are partly
no viable solutions.
And if you have to drive to superchargers
in the city to charge your EV this can
become costly time consuming and painful
experiences. Furthermore, in China,
labor cost is generally
lower for simple jobs.
This has developed a vivid service
culture whenever I'm in China,
I experiencing it everywhere
in restaurants in malls
or a train station stairs
and noticeable service upgrade
in comparison to Germany,
there is always enough service personnel
around to make you comfortable and to
offer you even the tiniest
services. Therefore,
Chinese consumer have kind of a different
service expectation in contrast to
their Western peers. And in general,
convenience plays a much higher role,
and it's also at a
different service level.
So NIO is a user enterprise and
highly customer oriented company in
order to innovate and to
become a lifestyle company
that caters to the needs of
China's newly rich middle
class and premium users a
high convenience and service
experience is at a core
of NIO's business model.
This is why NIO has adopted battery
swapping as a China centric solution to
foster EV adoption among sceptics.
This is why neon made swapping one
option besides supercharging and home
charging as a couple of more options here.
And the numbers speak for itself today,
NIO has completed 800,000 swaps
with 50% penetration rate.
So in contrast to Tesla,
NIO in China has found that battery
swapping adds value for their users.
Initially,
a great idea to bring down charging
times eradicating the pain of battery
degration and broken batteries as
shared by the views of Elon Musk too.
It seems that the swapping has a
future in the Chinese market. Now,
why would have Tesla possibly second
thoughts about adopting this technology
again? Well, first of all,
Elon Musk was smart enough
to announce that in China,
Tesla would built an entirely new car
from scratch designed for this new
and important market.
We're creating a China
design an engineering sense
of it to actually design a,
like an original car in China for
worldwide consumption. You know,
try something just like kinda radical,
you know, like CyberTruck. You know,
nobody was expecting that.
On top of that,
NIO has taken battery swapping a step
further and has built a powerful business
model around it, called
battery as a service (BaaS)
essentially what NIO is
doing is separating the
vehicle from its battery and
selling the car while allowing
to lease the battery separately.
This brings down the
initial price of the car,
allowing you to tap into new customer
segments that previously couldn't afford
EVs. Furthermore, to establish the
circuit for battery as a service,
NIO has founded a new entity with
stakeholder like battery manufacturer and
supplier CATL, which by the way,
also supplies Tesla with batteries,
as well as Chinese investment banks
and local governments as investors.
This new entity will manage battery
assets and bring them into the circle of
swapping stations, powered by NIO
power and open to auto manufacturers.
Basically a new standard for swapping
will become a national standard in
China. And this is really powerful.
It means that the government will be
part of helping to build up the required
swap stations and the standardization for
the leasing to swapping technology and
related taxes and subsidies will be rolled
out as a powerful incentive scheme to
become part of it already today NIO cars
are exempt from to any view subsidies
pricing thresholds,
because to subsidy rules make an
exemption for battery swapping.
This means all in your get to subsidies,
despite being more costly than the
threshold and Tesla needs to lower their
purchase prices to even apply
for it. Also, as we know,
famously with the ongoing
China US trade war,
China is a master upgrading their own
national heroes policies and compliance
rules are used to protect and
support national companies.
China will never directly forbid foreign
companies like happening with TikTok in
the US instead, they will leave the option
of complying with national standards,
for instance, internet censorship.
So companies like Microsoft who adopted
to those national rules are permitted to
stay companies who choose not to do so,
like Facebook and Google are basically
nonexistent in the Chinese market.
So I think German car OEMs will be
forced to adopt battery swapping too.
If the national standard becomes powerful.
The market is just too important
to them. And we already see SAIC,
the joint venture of Volkswagen,
in China to introduce models
with swapping functionality.
So unfortunately this is how a
protectionism works in China,
and it is unfair,
but either you comply with the national
rules or your products and services are
excluded from this big market. Therefore,
I believe this new business model has
the power to force other OEMs to become
part of the scheme and the
decreased upfront service price,
benefits like the redundancy
and interchangeability.
The effects on resale value of
the car and the simple customer
centricity of the solution alleviating
so many pain points off Chinese consumer
are just too powerful to not adopt it.
And I think this time Musk probably not
ignored us as he is thinking customer
centric too.
And he would also remember that Tesla
has higher goals than just to crush
competition.
In addition to that during the last
conference call Musk also said that the
things that bugs him the most is
that EVs need to become cheaper,
more affordable.
So this is possible with the Battery as
a Service (BaaS) business model and Musk
has emphasized several times that he
would rather accelerate the advent to
sustainable mobility by cooperating
and by sharing technology to increase
EV adoption, then just to make
Tesla the only winner here.
And if we take Elon
Musk here, by his words,
he should actually become a stakeholder
of the battery asset management company,
which is actually open to that and should
join NIO and CATL as shareholders in
this company. On the other hand,
we also need to consider that this is
definitely just a China-specific solution.
In other words,
battery swapping may never get accepted
or a thing in Western countries.
Western consumers just have different
standards and different needs as well.
And furthermore,
we have the big question what Tesla
will be introducing during Tesla Battery
Day. Maybe Tesla comes up
with new technology that
makes charging less of a pain
point and increases
longevity of batteries,
thereby taking some wind out of
the sails of battery swapping.
But generally the advantage of battery
swapping technology is also that this new
battery tech can be introduced into any
fleet simply by swapping it. However,
if Tesla has truly a
breakthrough in battery tech,
would they be ready to share it beyond
their own cars and give this technology
for instance,
into a BaaS service model so
that even NIO and other OEMs
can use the technology and
swap it into their cars?
I don't know the answer to it. It's too
early. And I cannot say it for sure.
In the end I think Elon Musk and Tesla
have all the cards in their hand and it
comes up towards their strategy and
what they are deciding to do. However,
Musk should be able to see the power of
this new battery as a service business
model that NIO has brought onto the stage
here and where they have the consumer
adoption and consent.
No matter how it ends.
I do think that Tesla and Neil
will be at a winner either way,
collaborating or by going their own
ways, both have their unique advantages,
which are defendable in both ways,
much in contrast to their competitors.
And this is why I am long and stay
invested in both Tesla and NIO.
