The Rise of Battery Swapping: How Major Players are Transforming the Electric Vehicle Landscape in China

Leading automotive manufacturers are increasingly investing in battery swapping technology. CATL, a major player in the field, is redefining its identity beyond being merely a battery manufacturer. At the recent “Super Technology Day” held before the Shanghai Auto Show, CATL’s Chairman Zeng Yuqun expressed the desire for the company to be viewed as a pioneer in new energy solutions rather than just a battery maker. Over the past year, CATL has progressed from a stage where battery specifications drove demand to one where demand itself leads innovation.

On May 20, CATL was listed on the Hong Kong Stock Exchange. In his speech, Zeng referred to CATL as a zero-carbon technology company and highlighted the importance of battery swapping. CATL is ambitiously building the world’s largest and most advanced battery swapping network, targeting both passenger and commercial vehicles.

On May 23, a delivery event for the first batch of 1,000 Changan Auchan 520 taxis took place in Chongqing. This vehicle, developed in collaboration with CATL, is the world’s first battery-swappable model. A total of 15,000 units have been ordered, marking a significant step towards the adoption of standardized battery swapping in the transportation sector.

Earlier, on May 18, CATL hosted a conference in Dai County, Shanxi, to unveil its new generation of heavy-duty truck battery swapping technology. During the event, CATL introduced the 75# standard battery and the accompanying battery swapping station, which is part of a plan to cover 80% of trunk transportation routes with a network of 300 battery swapping stations along 11 major routes this year.

Battery swapping provides an alternative to charging for electric vehicles and represents CATL’s second growth avenue, enhancing its influence as a key component supplier for automakers. However, CATL is not alone in this endeavor; many large manufacturers are also exploring battery swapping solutions.

In the passenger vehicle segment, the State Grid Corporation was one of the first to research battery swapping models for social vehicles. BAIC led the way in promoting battery swapping in taxis, while NIO emerged as a pioneer for private vehicles. Other manufacturers, such as Geely, have also entered the fray, and in recent years, companies like GAC Aion and SAIC have increasingly participated to provide a more comprehensive energy replenishment system for consumers and alleviate range anxiety.

The commercial vehicle sector adopted battery swapping even earlier. Back in 2009, during the “Ten Cities, Thousand Vehicles” pilot program, electric buses in Beijing utilized battery swapping technology. Since 2019, heavy vehicle manufacturers like XCMG, China National Heavy Duty Truck Group, FAW, Shanxi Automobile, and Dongfeng have invested in battery swapping for heavy trucks. Energy companies, including Sinopec and State Power Investment Corporation, have also established battery swapping stations at existing sites, creating a comprehensive energy ecosystem.

However, challenges remain, such as the lack of unified standards for battery swapping, site selection, and operational costs, which hinder widespread adoption. As of 2024, a window of opportunity has emerged due to policy support, standardization of technology, and market development, leading to a surge of interest in the battery swapping sector.

CATL is collaborating with various partners to resolve previous bottlenecks in battery swapping development, providing a strong endorsement for the industry’s future. The year 2025 is set to become a pivotal year for battery swapping, potentially transforming it from a secondary business for large manufacturers into a mainstream operation.

The primary obstacle to scaling battery swapping in both passenger and commercial vehicles is the lack of standardization. If battery standards differ, each automaker’s battery systems will vary, limiting battery swapping stations to only serve specific vehicle models, ultimately reducing efficiency. Early adopters of battery swapping had different standards, which restricted their stations to a limited range of vehicles.

CATL, having served the most popular passenger and commercial vehicles globally, possesses a significant advantage in establishing standardized battery swapping modules. On January 18, 2022, CATL launched the first-generation 26.5 kWh chocolate battery for passenger vehicles. By December 2024, the refined chocolate battery will introduce 20# and 25# standard modules, with partnerships with five automakers, including Changan and GAC, to release ten battery-swappable models, set to debut quarterly starting at the end of 2024.

Following the passenger vehicle segment, CATL announced the world’s first 75# standard battery for medium and heavy trucks on May 18. Collaborating with truck manufacturers like FAW and Shanxi Automobile, CATL will introduce over 30 battery-swappable chassis models, with contracts signed for 1,428 battery-swappable heavy trucks, with an additional 6,900 units expected for delivery.

Once standardization issues are resolved, the adoption of battery swapping will increase significantly. Another pain point for scaling battery swapping is the layout of charging stations. The location and construction of these stations directly affect convenience and operational costs. If companies build their own swapping stations, it leads to redundancy, wasting resources and limiting access for vehicle owners, consequently hindering the promotion of battery swapping.

From an industry perspective, CATL stands out for its technological and financial capabilities to fill the gaps in station layout and enhance the energy replenishment system. In the passenger vehicle sector, CATL aims to establish 1,000 chocolate swapping stations by 2025, with a mid-term goal of building 10,000 stations in partnership with collaborators, and a long-term goal of creating a national network of 30,000 stations.

In the commercial vehicle sector, CATL plans to set up 300 heavy truck battery swapping stations this year across 13 core regions like Beijing-Tianjin-Hebei, the Yangtze River Delta, and the Greater Bay Area. By 2030, CATL aims to construct a nationwide battery swapping network spanning 150,000 kilometers, covering 80% of trunk transport capacity. Unlike passenger vehicles, the complexities of heavy trucks, with over 65% operating on trunk freight routes and also in closed environments like ports and steel mills, require collaboration with partners such as the Ministry of Transport and energy groups to address site selection and construction challenges.

Just as standardized containers revolutionized shipping logistics and improved efficiency, CATL’s standardized swapping modules and stations are reinforcing confidence in the industry’s future.

Battery swapping is costly. According to a report from LeadLeo, each passenger vehicle swapping station incurs annual costs of approximately 1.38 million yuan (nearly 200,000 USD), covering land use fees, capital investment, and battery maintenance. The average station must be used about 100 times a day to become profitable. For heavy trucks, the cost of establishing a single station exceeds 5 million yuan, requiring a utilization rate of over 35% to avoid losses. Given these challenges, why are automakers, battery manufacturers, energy giants, and third-party platforms rapidly entering the battery swapping sector?

Firstly, battery swapping offers a rapid energy replenishment advantage that charging cannot match. The efficiency of energy replenishment is a significant barrier to the popularization of electric vehicles. Battery swapping can be completed in as little as 2 to 5 minutes, comparable to or even better than refueling. As of September 2024, heavy trucks can save 80% of replenishment time compared to traditional charging methods, with a 15% increase in operational efficiency.

Previously, concerns over uneven standards and high construction costs limited the adoption of battery swapping. However, with the entry of numerous major players, a boom in battery swapping may be imminent, alleviating concerns for vehicle owners about operating with low battery levels. For the consumer market, Zeng predicts that by 2030, battery swapping, home charging, and public charging stations will each hold a third of the market.

Secondly, there is a market demand, especially for heavy trucks. The battery swapping model is widely recognized as ideal for these vehicles. For operational passenger and commercial vehicles, separating the battery from the vehicle reduces costs by 20% to 30%. CATL claims that battery swapping for heavy trucks could allow drivers who previously operated diesel vehicles to earn an extra 60,000 yuan annually while driving 100,000 kilometers, with a cost per kilometer saving of 0.62 yuan compared to diesel vehicles. Even when compared to LNG trucks, savings of 0.2 yuan per kilometer could result in annual savings of 20,000 yuan.

Thirdly, policy support plays a crucial role. In 2020, battery swapping stations were formally included in the Government Work Report; in 2021, safety standards for battery swapping were released, and pilot projects began in 11 cities; in June 2023, the government clarified tax policies for the “battery separation” model. This year, the Ministry of Industry and Information Technology announced plans to develop guidelines to promote battery swapping and support the electrification of public vehicles.

Heavy trucks account for 4% of the total vehicle ownership but contribute over 50% of carbon emissions. Therefore, transitioning heavy trucks to new energy sources has become a core challenge for achieving carbon peak and carbon neutrality objectives. The Ministry of Transport’s action plan emphasizes both “cost reduction in logistics” and “green transformation.” Encouraging measures include priority road access and subsidies for purchasing and operating new energy heavy trucks. For instance, there is a subsidy of over 140,000 yuan for scrapping old diesel vehicles, and cities like Shanghai and Chongqing offer up to 3 million yuan in subsidies for establishing battery swapping stations.

Thanks to policy-driven transformations and various incentives, the process of electrifying the commercial vehicle market has accelerated, particularly with a significant increase in the penetration rate of new energy heavy trucks. In 2024, domestic sales of new energy heavy trucks are projected to reach approximately 82,000 units, with a penetration rate of 13.6%, reflecting a year-on-year growth of 136%. Notably, December saw a monthly penetration rate exceeding 20%, reaching 21.89%. In the first quarter of this year, the trend continued with a rapid increase to 19.7% penetration and a year-on-year sales growth of 176%. Zeng predicts that over the next three years, the penetration rate of new energy heavy trucks will reach 50%.

According to CITIC Securities, the market size of the battery swapping industry is expected to exceed 200 billion yuan this year. Guohai Securities anticipates that the market for battery-swapped heavy trucks will be around 46.8 billion yuan in 2025, potentially reaching 92.2 billion yuan by 2030. With the battery swapping market still in its nascent stage, promising prospects have led leading companies to secure their positions early.

Battery swapping is not merely a method of energy replenishment; it is part of a broader ecological system that has wide-ranging impacts on society and the economy. The ecosystem of battery swapping encompasses technology, infrastructure, business, and energy, creating a comprehensive loop that includes batteries, swapping stations, automakers, financial services, energy supply, and policy institutions. Once established, this ecosystem can fundamentally reshape the industry.

CATL aims to overcome barriers by introducing standardized battery modules, making the battery separation model a more attractive option for significantly lowering vehicle purchase costs while offering flexible leasing services via a “battery bank.” A key component of this initiative involves partnerships with financial and insurance institutions to provide tailored insurance and low-interest financing options. For the new energy heavy truck sector, this strategy has reduced annual insurance premiums from 40,000 yuan to 25,000 yuan, with financing rates as low as 3.5%, effectively addressing the challenges of insurance and financing in the heavy truck industry.

The strategic development of infrastructure networks will support the explosive growth of battery swapping. CATL’s planned “Eight Horizontals and Ten Verticals” battery swapping network aims to cover 80% of trunk transportation capacity nationwide by 2030. This infrastructure density, combined with rapid 5-minute battery swaps, will alleviate the “mileage anxiety” that plagues trunk logistics.

As the battery swapping network expands, it will bring significant changes to the energy system’s deep coordination. In Dai County, Shanxi, CATL’s battery swapping technology integrates wind power generation and energy storage with swapping stations, achieving comprehensive green energy coverage for truck manufacturing and operations. This “transportation-energy” integration model transforms the entire battery swapping network into distributed energy nodes. Each swapping station will function as a micro energy storage system, capable of responding to grid peak shaving and frequency regulation demands, becoming part of a virtual power plant that balances grid stress and supports the energy grid.

If battery swapping stations effectively utilize charging systems during off-peak hours, they can mitigate the impact of concentrated charging on the grid. For cities, the development of battery swapping stations may gradually reshape energy infrastructure and urban planning. When standardized batteries, densely distributed swapping networks, innovative financial tools, and green energy systems combine, battery swapping evolves beyond a simple energy replenishment method, redefining an extensive trillion-yuan industrial ecosystem that spans transportation, energy, and finance.

The unique value of this ecosystem lies in its ability to address the technical challenges of electrifying heavy trucks while fostering collaborative innovation across the entire industry chain. This shift will transition new energy heavy trucks from being “policy-driven” to “market-driven,” ultimately achieving a win-win scenario for economic and environmental benefits.