|
| Nandan Kumar Singh |
| Indian Institute of Management - Visakhapatnam |
Electric Vehicle (EV) Selling Options
Looking at the current EV industry, the automakers mainly sell EVs in two ways: i) Fixed Battery and ii) Swappable Battery.
- Fixed Battery: Fixed batteries, which are integrated into the vehicle’s structure, serve as the primary power source for most EVs, providing a set range before requiring recharging. In this model, the battery is not meant to be removed or swapped out; it is included as part of the vehicle’s purchase. These batteries are integral to the electric vehicle’s design and performance. In the four-wheeler segment, Tesla cars have fixed batteries; in the two-wheeler, Ola, Ather, and TVS offer fixed-battery bikes.
SwappableBattery: On the other hand, there are EVs with swappable batteries. This presents a distinct approach designed for rapid replacement at designated swapping stations. This system offers enhanced convenience, reducing downtime and eliminating the need for lengthy charging sessions. Swappable batteries cater to users with unpredictable or extended travel needs, contributing to a seamless EV experience with higher ride-up times. Nio, for instance, offers this option with their cars; Bounce and Revolt offer swappable battery two-wheelers.
For swappable battery EVs, Nio further offers two distinct selling options (Shi and Hu, 2024):
(a) PurchasewithBattery: Customers can buy the EV along with the battery, owning both outright.
(b) BatteryRental/Lease: Alternatively, customers can opt to rent or lease the battery. There exist two leasing options:
- SimpleLeasing: Under this arrangement, customers pay a fixed fee for battery usage over a specified period. The firm decides the lease rate based on different battery capacities, and customers choose their preferred primary battery capacities. In this case, there is no flexibility in upgrading or downgrading the battery packs.
- FlexibleLeasing: In this model, customers have more flexibility in upgrading or downgrading their vehicle battery packs to a different capacity on a daily basis. Currently, three sizes of battery packs are circulating in Nio’s battery swap stations — 70 kWh, 75 kWh, and 100 kWh (Zhang, 2022).
Figure 1: Electric Vehicle Sales Source: McKerracher (2024) |
Consumer Concerns Worldwide: Addressing Range Anxiety and Charging Infrastructure
Across diverse global markets, consumer sentiments towards EVs are underpinned by shared concerns. From bustling metropolises in the US and Singapore to the more open country of Canada and Australia/New Zealand, a considerable number of consumers are contemplating EVs for their next automotive investment. However, these potential buyers harbor reservations, with recurring themes surfacing. “Range anxiety," “lack of charging infrastructure," and “high purchase cost" stand out as predominant deterrents to EV adoption. These sentiments resonate across continents, illustrating a pervasive challenge demanding attention.
For instance, Kantar recently conducted a survey spanning four countries—the US, the UK, Germany, and Singapore—via its Profiles Audience Network. The findings reveal that while a notable portion of consumers in these markets are contemplating an EV purchase, over 60% express apprehensions. The top three concerns hindering EV adoption include "limited driving range," "lack of charging infrastructure," and "high purchase cost" (Kantar, 2023) . Similarly, in Canada, issues surrounding charging infrastructure and range anxiety weigh heavily on consumer minds (D’arbelles, 2024). Likewise, recent research by Pureprofile Limited underscores that in Australia and New Zealand, high upfront costs, a shortage of public charging infrastructure, and range anxiety constitute the primary barriers to EV adoption (Gupta, 2023).
The issue of higher upfront costs for EVs has been recognized by both governments and firms, and significant strides have been made to mitigate this obstacle. Many governments offer consumer subsidies to alleviate the financial burden, and firms have begun selling EVs without batteries, reducing costs by more than 50%. However, the paramount concern that demands urgent attention is the challenge of range anxiety and inadequate charging infrastructure. As governments and industries worldwide strive to promote sustainable mobility, overcoming range anxiety and bolstering charging infrastructure emerge as pivotal imperatives in fostering widespread EV adoption.
Figure 2: Electric Vehicle Selling Options |
Myth and Fact Around Range Anxiety
Range anxiety refers to the apprehension or fear experienced by drivers of EVs regarding the distance the vehicle can travel on a single charge, coupled with the worry of potentially being stranded without access to charging infrastructure during their journey. This term was introduced to underscore the concern that an EV may not have adequate range to reach its intended destination, thus instilling uncertainty and unease among drivers (Avci et al., 2015).
Range anxiety is the result of three factors: i) uncertainty about the driving range of the EV, ii) lack of charging infrastructure, and iii)
lack of fast charging options (Markus, 2023).
- Driving range of the EV (Myth): Driving range pertains to the distance an EV can travel on a single full charge. It varies among EV models and is influenced by factors such as the battery’s state of charge, driving habits, and weather conditions. However, there has been notable progress in EV technology, with many modern battery-powered cars now capable of exceeding 200 miles on a full charge (Greg, 2024). Therefore, consumers should no longer be overly concerned about the driving range of EVs.
- Lack of charging infrastructure (Fact): According to The Economist (2021), the current global number of public chargers, standing at 1.3 million, falls significantly short of meeting the demands of the rapidly expanding EV. The International EnergyAgency (IEA) (2021) estimates that by the end of this decade, a staggering 40 million public charging points will be required, necessitating an annual investment of $90 billion as 2030 approaches. This stark reality underscores the imperative for government support to enhance charging infrastructure worldwide, thereby accelerating the adoption of EVs on a larger scale. Governments are stepping in to support EV charging infrastructure development by providing subsidies and incentives for both charging and swapping stations. In the US, the government has announced investments worth $7.5 billion in EV charging1.
China also pledges to subsidize public chargers to meet demand from over 20 million new-energy vehicles by the end of 2025. The Ministry of Finance has spent almost 20 billion yuan to promote EVs, including subsidizing charging infrastructure.2Range Anxiety
Figure 3: Myth and Fact Around Range Anxiety
- Lack of fast chargers (Fact): There are three levels of EV charging: Level 1 (charging speed of 3 to 5 Miles Per Hour), Level 2 (charging speed of 12 to 80 Miles Per Hour), and Level 3 (3 to 20 Miles Per Minute) (Moloughney, 2021). Level 3 is broken into DC Fast Charging and (Tesla) Supercharging. The higher the level of charging, the faster the charging process, as more power is delivered to the vehicle. Tesla’s recent supercharger V4 is capable of 350KW power delivery (Lambert, 2023). Other automakers must also prioritize the development of fast-charging solutions to alleviate range anxiety among consumers. Alternatively, they can collaborate with Tesla to leverage their extensive supercharging and fast charging network for vehicle charging purposes.
Table 1: EV Charging Speeds on Different Charger Levels Source: Updated and reproduced from Moloughney (2021). |
DC fast chargers (Level 2 above) remain scarce. As depicted in Figure 4, with the exception of China, all other countries struggle to match the quantity of fast chargers to that of slow chargers. Governments are addressing this issue earnestly, with the European Union enacting new legislation that mandates fast-charging stations be installed at intervals of every 60 kilometers by the end of 20253.
Figure 4: Number of EV Slow and Fast Chargers Source: Statista (Data till 2022) |
Conclusion
It is imperative to recognize the pivotal role that charging infrastructure and fast charging play in addressing range anxiety among consumers. While battery swapping offers a promising solution by both providing more options and addressing high upfront costs and range anxiety, further reductions in range anxiety require the establishment of dense swapping stations. Supercharger and DC fast charging technology could also alleviate range anxiety among consumers with fixed battery cars, but realization of its promise requires deployment of a dense network of fast chargers. Governments are taking proactive measures, such as providing subsidies for the construction of charging and swapping stations, to enhance charging networks and mitigate range anxiety. Addressing this critical barrier is vital for accelerating the adoption of electric vehicles on a larger scale.
References
Avci, B., Girotra, K., Netessine, S., 2015. Electric vehicles with a battery switching station: Adoption and environmental impact. Management Science 61, 772–794.
D’arbelles, K., 2024. Charging, range anxiety, and price still barriers to mass ev adoption—but there are potential solutions. The Hills Times URL: https://www.kantar.com/inspiration/research-services/understanding-consumer-attitudes-towards-electric- vehicles-pf. retrieved April 20, 2024.
Greg, F., 2024. Longest-range electric cars we’ve ever tested. Car and Driver URL: https://www.caranddriver.com/features/ g32634624/ev-longest-driving-range/. retrieved April 20, 2024.
Gupta, Y., 2023. Upfront costs and charging struggles: Anz’s top barriers to ev adoption. Dynamic Business URL: https://dynamicbusiness.com/topics/news/upfront-costs-and-charging-struggles-anzs-top-barriers-to-ev-adoption.html. retrieved April 20, 2024.
International Energy Agency (IEA), 2021. Net zero by 2050 a roadmap for the global energy sector. URL: https://www.iea.org/ reports/net-zero-by-2050. retrieved January 14, 2024.
Kantar, 2023. Understanding consumer attitudes towards electric vehicles. Kantar URL: https://www.kantar.com/inspiration/ research-services/understanding-consumer-attitudes-towards-electric-vehicles-pf. retrieved April 20, 2024.
Lambert, F., 2023. Tesla finally confirms supercharger v4 has 350 kw output. Electrek URL: https://electrek.co/2023/07/26/ tesla-confirms-supercharger-v4-350-kw-output/. retrieved April 20, 2024.
Markus, M., 2023. The 3 biggest reasons for range anxiety – fact or fiction? Forbes URL: https://www.forbes.com/sites/ siemens-smart-infrastructure/2023/02/17/the-3-biggest-reasons-for-range-anxiety--fact-or-fiction/?sh=1accf04b46b1. re- trieved April 20, 2024.
McKerracher, C., 2024. Electric vehicle market looks headed for 22% growth this year. Bloomberg URL: https://www.bloomberg.com/news/newsletters/2024-01-09/electric-vehicle-market-looks-headed-for-22-growth-this-year. retrieved April 20, 2024.
Moloughney, T., 2021. What are the different levels of electric vehicle charging? Forbes URL: https://www.forbes.com/wheels/ advice/ev-charging-levels/. retrieved April 20, 2024.
Shi, L., Hu, B., 2024. Frontiers in operations: Battery as a service: Flexible electric vehicle battery leasing. Manufacturing & Service Operations Management .
The Economist, 2021. A lack of chargers could stall the electric-vehicle revolution. URL: https://www.economist.com/business/ a-lack-of-chargers-could-stall-the-electric-vehicle-revolution/21806663. retrieved June 25, 2022.
Zhang, P., 2022. Nio to allow owners to swap battery packs for different capacity in china. CNEVPOST URL: https://cnevpost. com/2022/10/27/nio-to-allow-owners-to-swap-battery-packs-for-different-capacity-in-china/. retrieved April 20, 2024.
Acknowledgements: We would like to thank Amir Moadab for taking the time to review this article. Photo credit goes to chuttersnap for the header photo.