The Rise of Battery Swapping in China’s New Energy Sector: Strategies and Ambitions of Industry Leaders

Why Chinese New Energy Leaders Are Pushing for Battery Swapping

Recently, during the listing ceremony of CATL on the Hong Kong Stock Exchange, Chairman and CEO Zeng Yuqun shared a new narrative with the capital market, but this time, the focus was not on batteries, but on battery swapping. Zeng stated clearly, “CATL is not just a battery component manufacturer; we are also a provider of systematic solutions and are committed to becoming a zero-carbon technology company.”

On May 18, CATL made a significant move by launching a new generation of battery swapping solutions for heavy-duty trucks in Datong, Shanxi. The highlight of this launch was the world’s first heavy-duty truck-specific battery swapping station, along with all-scenario chassis swapping technology. Why is CATL revisiting battery swapping at this moment? Are the industry’s challenges resolved? What ambitions lie behind this strategy?

The Rise of the Battery Swapping Ecosystem

Battery swapping is not a new concept. It was first brought to life by the overseas company Better Place, which transformed the idea into reality. In 2013, Tesla showcased a rapid battery swapping process that took just 90 seconds. However, these attempts quickly ceased, primarily due to the heavy asset requirements, high investments, and long cycles associated with the industry, which involves numerous stakeholders and a complex chain. It became evident that a single company or merely establishing swapping stations would not suffice to make this industry viable.

The early ecosystem of battery swapping had clear flaws, particularly the lack of standardization and the fragmentation of the industry. At that time, the battery swapping model was hindered by car manufacturers and battery producers each pursuing their own technological routes, leading to severe inconsistencies in battery sizes, interface protocols, and communication standards. For instance, companies like NIO and BAIC adopted independent technological paths, causing swapping stations to only serve specific brands. This “island effect” led to resource wastage and inefficient service from individual swapping stations, with investment return periods exceeding five years.

Moreover, while there was significant heavy asset investment, the profitability model was ambiguous. According to the China Automobile Association, the construction cost of a single swapping station could reach between 3 million to 5 million yuan (including battery reserves), while early market demand was insufficient, resulting in an average daily service frequency of fewer than 30, far below the breakeven point. Additionally, the potential for battery second-life utilization and vehicle-to-grid (V2G) models had not yet developed into mature business models. There was also a lack of sufficient coordination between early policies and market demands. Before 2020, the approval process for battery swapping station sites was complicated, and there were many restrictions on power expansion. Furthermore, there was a lack of insurance and financial products supporting “battery separation,” which made it difficult to achieve network effects for cross-regional logistics heavy trucks due to disparities in local subsidy policies, leading to low acceptance of battery leasing models among users.

However, more than a decade later, the market environment has fundamentally changed. The scale of the new energy vehicle industry is expanding rapidly, and user acceptance of battery swapping has increased significantly. For example, NIO’s battery swapping stations in Shanghai can now perform swapping services 9,000 times a day, making them profitable. Nevertheless, low-density area stations still rely on external partnerships and grid peak-shaving benefits to improve cash flow. Moreover, policies are now promoting industry development. The Ministry of Finance and other departments have included battery swapping stations in the scope of new infrastructure subsidies, with individual station subsidies reaching up to 30% of construction costs. The Ministry of Industry and Information Technology released the “Specifications and Dimensions of Battery Systems for Battery Swapping Electric Vehicles” in 2023, reducing the number of battery pack specifications from over 20 to just 6. Standardized production has lowered battery costs by 25%. CATL revealed in its 2022 annual report that its standardized battery production costs have dropped to 0.6 yuan/Wh, which is 0.2 yuan/Wh less than non-standard products.

Against this backdrop, CATL, the world’s largest power battery company, has begun to systematically layout battery swapping operations, which is not an uphill battle but rather a natural progression.

Battery Swapping for Passenger Vehicles

At the 2024 Chocolate Battery Swapping Ecological Conference held at the end of last year, CATL introduced standardized “Chocolate Battery Swapping Blocks,” simplifying the standard swapping block to just two types. The first is the 20-series Chocolate Battery Swapping Block, designed for A0-class models, with a lithium iron phosphate version of 42 kWh capable of supporting a range of 400 kilometers, and a ternary version of 52 kWh achieving a range of 500 kilometers. The second is the 25-series Chocolate Battery Swapping Block, aimed at A/B-class markets, with a lithium iron phosphate version of 56 kWh for a range of 500 kilometers, and a ternary version of 70 kWh reaching a range of 600 kilometers.

Standardization does not equate to homogenization; through various chemical configurations, the standard swapping blocks allow for “demand-based distribution.” For longer ranges, users can opt for ternary lithium, while those looking to save money can choose lithium iron phosphate. CATL’s solution caters to diverse market needs. After standardizing battery sizes, CATL has planned a comprehensive battery swapping network with the ultimate goal of establishing 30,000 swapping stations. Each swapping station will deploy 14-30 battery packs, cumulatively forming a storage scale of 33.6 GWh (approximately 33.6 million kWh). CATL has also partnered with nearly 100 collaborators to create a Chocolate Battery Swapping ecosystem that includes vehicle manufacturing, financial insurance, and sales services. Recently, the Changan Oshan 520, utilizing the Chocolate Battery Swapping system, celebrated the signing of 15,000 nationwide orders and the delivery of the first 1,000 taxi units in Chongqing.

CATL emphasized that this event marks the large-scale deployment of the Chocolate standard swapping vehicles in the travel market. Additionally, it’s noteworthy that the collaboration across the supply chain will create new economic value. For example, upstream material companies like Ganfeng Lithium are securing long-term orders through battery leasing models, with lithium carbonate long-term contracts rising to 60% and inventory turnover rates increasing by 40% in 2023. For CATL, financial services represent another area of interest; similar to NIO’s “Battery as a Service” model, CATL achieved a gross profit margin of 28% in its financial services in 2023, significantly surpassing the 15% margin of complete vehicle sales.

From the perspective of an energy revolution, CATL’s battery swapping layout is no longer just a matter of energy replenishment. As batteries evolve into energy currency and battery swapping stations become intelligent nodes within the grid, a new world of integrated vehicle energy collaboration, solar storage, charging, and swapping is emerging under CATL’s leadership.

The Next Battleground: Heavy-Duty Truck Battery Swapping

Following the introduction of battery swapping for passenger vehicles, CATL is now setting its sights on heavy-duty trucks as the next battleground. Unlike passenger vehicles, heavy-duty trucks are highly sensitive to efficiency and cost as they serve as production materials. Traditional electric heavy-duty trucks, equipped with hundreds of kilowatt-hours of batteries, are significantly more expensive than diesel trucks. However, the battery swapping model can lower the purchase cost by 30% to 50% through “battery separation,” making it comparable to that of fuel vehicles.

The efficiency of energy replenishment is also drastically better: battery swapping can be completed in just five minutes, far quicker than charging. Charging not only takes time but also consumes battery weight, creating a vicious cycle of “the heavier the load, the more energy consumed.” Battery swapping stations manage batteries uniformly, prolonging their lifespan and enabling second-life utilization to extract maximum value from them. The longer the distance traveled, the more savings realized. According to estimates by Minsheng Securities, a battery-swapped heavy-duty truck operating year-round with a daily mileage of 700 kilometers can lower its total lifecycle costs by around 30% compared to a conventional fuel version, saving at least 1.3 million yuan.

This explains why battery-swapped heavy-duty trucks have accelerated their deployment since 2021, particularly in closed scenarios like ports and mines. Last year, one in three sold new energy heavy-duty trucks was a battery-swapped version. However, CATL’s ambitions extend beyond this. The success in closed scenarios is just a warm-up; the real competition lies in the expansive trunk logistics network.

To achieve this leap, breaking the trend of car manufacturers each pursuing their own paths is vital. This year, CATL unveiled the world’s first heavy-duty truck-specific battery swapping version, aiming directly at this pain point. Once battery specifications are unified, heavy-duty truck battery swapping can truly transition from a pilot project to an industry standard. Standardizing battery specifications is the first step; the second will naturally be to establish a vast energy storage network. CATL aims to build 300 battery swapping stations in 13 core regions, including Beijing-Tianjin-Hebei, the Yangtze River Delta, and the Greater Bay Area by 2025. By 2030, they plan to collaborate with various societal sectors to construct a nationwide battery swapping green network comprising 16 major city clusters, with a total length of 150,000 kilometers of expressways and national/provincial roads covering 80% of trunk transportation capacity. This will significantly alleviate the concerns regarding battery-swapped heavy-duty trucks in trunk transportation.

If the heavy-duty truck battery swapping model successfully takes off, it will not only mark a single business line’s success for CATL but will also become a core strategic template for building an energy ecosystem, validating the path of “standardization – scaling cost reduction – ecological win-win.” At that point, CATL can transpose this model to the passenger vehicle sector. This energy revolution, initiated by heavy-duty trucks, is reshaping the entire value chain of the new energy vehicle industry through the forces of standardization, ecosystem integration, and financialization.