This is a part of the EV Innovation Intelligence series
It was said that the stone age did not end because of the lack of stones.
It can be similarly argued that the reign of oil as the fuel for transport could end much before scarcity of oil hits the world, or even before electric vehicles become “cost-competitive” with ICE vehicles.
What we are currently witnessing in the world of e-mobility are diverse business concepts and business models that have the potential to significantly accelerate EV sales and adoption, in spite of the constraints.
Here’s one: Given that the high cost of battery is what makes an EV costlier than conventional cars, what if one takes the battery out of the equation and provides the batteries on a rental or pay per use basis? The upfront cost of EVs becomes lower than that of the equivalent conventional vehicles!
Battery as a detachable thing, or as a service
This is one of the business models that has already proven its worth in initial cases. Battery as a service could work pretty well in some business and end use sectors.
Nio, a Chinese EV manufacturing startup announced its own business model where the OEM sells the vehicle without a battery to reduce capital costs by a few thousand dollars. Enabled by vehicle-battery separation, battery subscription and the chargeable, swappable and upgradable batteries, NIO BaaS (battery as a service) presents innovation in both technology and business model. BaaS users enjoy a significant amount off from the car price (70,000 RMB), for a battery subscription starting from a reasonable price (RMB 980 per month), which represents a lower purchasing and use costs compared to ICE vehicles in the same segment.
Proterra, a California based electric bus maker announced a partnership with Mitsui of Japan to create a $200 million credit facility in support of a battery lease program. The battery leasing credit facility, reportedly the first of its kind in the North American public transit industry, is expected to lower the upfront costs of zero-emission buses and put Proterra electric buses at roughly the same price as a diesel bus. By decoupling the batteries from the sale of its buses, Proterra said it enables transit customers to purchase the electric bus and lease the batteries over the 12-year lifetime of the bus. As a result of the battery lease, the initial capital expense for the electric bus will be similar to a diesel or CNG bus, and customers can utilize the operating funds previously earmarked for fuel to pay for the battery lease.
Try before buy
As electric vehicles are a new product, many end users are hesitant to put full money on the table to purchase it. For these folks, models such as renting or leasing could help, as they abate the upfront cost challenge to a significant extent.
As an example: Through cooperations between Voltia and three European leasing companies, customers can use the electric van Nissan e-NV200 XL Voltia for less than 550 euros per month in leasing.( cheaper than a diesel van).
Opex schemes can overcome high upfront costs
Similarly, opex schemes – typically applicable for business users – in which the user does not at all buy the vehicle but instead pays only for the amount of vehicle used could really accelerate EV adoption in the small as well as large corporate sectors.
A similar pay as you use scheme could be applicable for battery use too – thereby making battery use economics quite analogous to that for oil.
Youth market needs
Many are looking at the youth market as prospective buyer segments. This market users have less savings but are more dependent on monthly income, do subscription is something they are more aligned to. These markets have affinities for smaller vehicles – electric bicycles, scooters, motorbikes and small cars, and subscription models are already being attempted for these segments.
Interesting updates on other innovations in EV business models
- Norway is so keen to get people on bicycles that it has offered Oslo residents a free handout of up to $1,200 to buy electric cargo bikes. Citizens won’t need to be on a low income to apply for the funds, or even to promise to cut down on driving to qualify. Wow!
- Nissan Energy Perks by EVgo is a new platform designed to encourage more U.S. drivers to make the switch to an electric vehicle (EV). Nissan will provide USD 250 of prepaid charging credits with EVgo to qualifying retail customers who lease or purchase a new Nissan LEAF or LEAF PLUS in participating markets on or after November 1, 2019.
- The program will provide participating retail customers with access to EVgo’s network of more than 750 public charging station locations with more than 1,200 fast chargers, as well as charging on other networks accessible through cooperative roaming agreements. As a result, new Nissan owners and lessees will have access to more than 30,000 public EV chargers, the largest of any US partnership.
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This is a part of the EV Innovation Intelligence series
Posts in the series
Tesla’s Valuation | EV’s in different countries | Purpose built EVs | Mainstream Fuel Cells | IT in Emobility | EVs versus ICEs | Advent of China in Emobility | Charging vs Swapping | Micromobility & EVs | Electric Aviation | Li-ion alternatives | Million Mile Battery | Battery Startups versus Giants | Sales & Financing Models | Ultrafast Charging a Norm | Heavy Electric Vehicles | Material Sciences in Emobility | Lithium Scarcity | Solar Power in EV Ecosystem | EV Manufacturing Paradigm | Innovations in Motors | EV Startups – a speciality | Oil Companies’ Strategies | EV Adoption Paths | Covid-19 affect on the EV Industry |