By Mira Inbar, Mira Inbar Consulting, Haas MBA ’09
When Tesla announced last year that it was going to build battery swapping stations, many journalists and industry insiders harkened back to the legacy of Better Place, the Israeli startup that built its business model around battery swapping stations. Better Place lost $812 million when it went bankrupt in 2012, and many claimed that the battery swapping concept was doomed.
Last week, Tesla announced that it had opened its first swapping station between LA and San Francisco. In a slick video that is typical of the Tesla brand, Elon Musk showed in real time that his 90 second battery swapping station, which uses a mechanical arm to remove and replace the battery pack, was far quicker than a 4 minute refuel at the gas station. According to Musk, battery swapping is just another step in “convincing the skeptics” on the viability of electric cars.
So called “range anxiety” (or “range anxiety anxiety“) is the barrier most often cited by people interested in electric cars. Battery chemistry is still too limited to provide 200-mile electric cars at a low price (not that that is what people need, but it is what people are looking for). Tesla is betting that battery swapping is another key element that, in addition to “Supercharger” stations, will catalyze widespread electric car adoption.
But, can the technology be scaled beyond Tesla’s beta station? Are they more capable to deploy and use battery swapping techniques than Better Place was?
It is important to note that the battery swapping concept itself is nothing new. It was first implemented by the Hartford Electric Light Company in the early 1900’s for electric trucks. Electric forklifts have used the technology since the mid 1940s. And swapping stations for electric buses exist all over China today.
So if the technology is simple and the concept a century old, then the barrier to scale adoption by personal automobile drivers rests in the business model. What can we learn from both Better Place and Tesla about how to appropriately scale this technique?
Battery Swapping is the “worst case scenario.”
Better Place bet that all EV drivers would prefer to swap their batteries rather than charge them. The fact that Better Place put its beta stations in major cities such as Tokyo and Yokohama demonstrates its assumption that drivers would regularly swap over charge. However, given the growth in 480 volt fast charging and the ability to charge your vehicle overnight on a 220v charge at home, battery swapping is inconvenient and costly for short distance city driving (the electric vehicle sweet spot).
Tesla’s battery swapping beta station, by contrast, is located at Harris Ranch, midway between LA and San Francisco, already a spot popular with carnivorous travelers. Drivers are given a choice: charge at a fast charging station for 20–40 minutes for free or pay a little less than the cost of a tank of gas for a battery swap. In this case, battery swapping is considered an emergency solution for drivers who don’t want to lose an additional 20 minutes of time en route to their destination (or can’t bear to spend another second at a place nicknamed “cowschwitz.”) Also note that Tesla is testing the concept here, with the results helping Tesla to decide how useful this model is for people.
Battery swapping should be considered only in the “worst case scenario” rather than in normal driving conditions. The cost of each station is about half a million dollars, so it is more appropriate to target the long distance drivers who are willing to pay for the convenience, rather than city drivers with better and cheaper options.
Keep battery inventory clean.
Batteries are not standardized. They come in different chemistries, power and energy densities, and form factors. Better Place designed its stations for multiple automakers. Because each automaker opted for a different type of battery, it was very difficult for Better Place to predict its inventory. Additionally, because each battery chemistry depreciates at a different rate, it is very difficult to maintain the same battery lifetime in a swap. This turned out to be a nightmare for managing battery warranty offers and claims.
Additionally, Better Place failed to coral a broad group of automakers to participate in its program. The battery is seen as the core IP of the vehicle and most carmakers do not want a third party messing with the heart of its vehicle or telling it how to design its cars in order to optimize swapping.
Tesla, by contrast, is focused on its own automobiles and battery technology. Therefore, the company is tightly controlling inventory and warranty claims.
Batteries are not likely to be standardized any time soon, as each drivetrain requires a different energy and power ratio. Therefore, battery swapping stations need to be tightly controlled by the automaker to manage inventory
Don’t overreach geographies.
Better Place spread too far too quickly. After initially focusing on Israel, a small and politically landlocked country with high gasoline prices, it quickly unfolded its marketing machine in Australia, Japan, Denmark, and California. At one point, it was even negotiating a taxi swapping model in San Francisco. And, curiously, the company always targeted cities, where short-distance drivers are far less likely to pay for convenience.
Tesla’s beta station, by contrast, is located on a familiar rest stop on a major highway and between two major cities with current high Tesla ownership. Locating the station on a popular long distance travel route appeals to the time sensitivity of those drivers and can be effectively replicated along the same cross-country interstate routes — like I-5, I-15, I-70, & I-90 — where the Supercharger stations have been deployed.
Tesla’s beta station is not an ingenious innovation, but if deployed correctly will be a necessary element along with better battery chemistry and more efficient charging that will push the electric vehicle to the forefront of America’s roads.