The electric vehicle (EV) landscape is undergoing a transformation, with the latest developments indicating a significant shift towards battery swapping technologies. On February 18, a pivotal partnership was solidified between CATL (Contemporary Amperex Technology Co., Limited) and Didi Chuxing, a ride-hailing giant in China, resulting in the establishment of a new joint venture named "Times Little Orange" based in Xiamen. This venture boasts a registered capital of approximately 330 million yuan (around 49 million USD), with CATL holding a commanding 69.7% stake while Didi retains a 30.3% ownership.

This collaboration between two industry powerhouses is not merely an extension of their business operations; rather, it signifies a revolutionary reconfiguration of the energy replenishment system for electric vehicles, particularly within the realm of public transportation. Battery swapping, often likened to traditional refueling but for electric vehicles, is gaining renewed attention and credibility among industry insiders and consumers alike.

When discussing battery swapping, it's impossible to overlook NIO, which has been a forerunner in this sector since it ventured into battery swapping solutions in 2018. The company has successfully established over 3,000 battery swapping stations across various regions of China and launched the "Electric County Initiative" last August, aiming to implement battery swapping stations in every county nationwide. This ambitious project illustrates NIO's commitment to revolutionizing the refueling dynamics for EVs.

Despite NIO's early investment and the substantial network it has developed, skepticism has lingered in the industry regarding the overall profitability of battery swapping. The traditional perspective holds that rising battery efficiency and homeowner charging options may render battery swapping obsolete. However, the landscape is evolving, and several traditional automobile manufacturers, including Changan, Geely, and Chery, have started to take tangible steps to integrate battery swapping in their operations as of late 2023. This momentum suggests a revitalization of battery swapping technology.

One of the key arenas where battery swapping is generating excitement is in the realm of ride-hailing and public transportation services. With the explosive growth of ride-hailing applications such as Didi, which boasts over 500 million users, the demand for efficient EV charging solutions is more pressing than ever. Ride-hailing drivers typically require charging multiple times a day, averaging three to five recharges, creating a critical need for solutions that can combat the inefficiencies associated with traditional charging methods, which often require more than 30 minutes per charge. Battery swapping, in stark contrast, can reduce this time to a mere 1-2 minutes, thus significantly enhancing operational efficiency for drivers.

One major barrier to widespread adoption of battery swapping has been the lack of standardized battery systems across different manufacturers. However, CATL, a leader in battery technology, is stepping up to address this challenge. The company has focused its efforts on improving battery efficiency from the ground up and has introduced standardized modules, such as their innovative “Chocolate Battery Swapping Block,” designed specifically for shared battery swapping systems.

Currently, CATL’s battery swapping service brand, “Chocolate Swapping,” operates in various cities including Xiamen, Fuzhou, Hefei, and Guizhou, providing a “chocolate-style” bundled battery swapping solution. Notably, the service has just launched its first station in Chengdu, with plans to establish a foundational network that will allow for a rapid turnaround—15 minutes to find a station by mid-year and a target of 10 minutes come year-end.

The modular "Chocolate Battery Swapping Block" supports impressive ranges of 400-600 kilometers and excels in standardization and high compatibility across different vehicle brands. Through collaboration with major automotive giants such as Changan, GAC, and FAW, CATL is rolling out ten models equipped for their battery swapping technology, gradually moving towards industry-wide standardization.

These strategic alliances not only solidify CATL's relationships with automotive manufacturers but also establish a formidable advantage for the company in the burgeoning public battery swapping sector. By shifting to a battery swapping model, CATL effectively deepens its ties with its automotive clients, enhancing its control over the battery supply chain. If manufacturers adopt CATL’s standardized battery solutions, it paves the way for their long-term reliance on CATL for maintenance, upgrades, and recycling processes, creating a significant "technology lock-in" effect.

In addition, the collaborations involving Didi and CATL’s battery-swappable vehicles are further enriched by partnerships with financial institutions, offering battery leasing services at monthly rates ranging from 369 to 599 yuan. This innovative financial model lowers the barrier for customers looking to purchase electric vehicles, particularly for ride-hailing drivers. Moreover, the joint venture with Didi enhances their capacity to create a seamless “vehicle-station-user” ecosystem in the ride-hailing sphere.

Didi's involvement stands to significantly accelerate the development of battery swapping networks, creating economies of scale, especially crucial for the cost-effective operation of swapping stations. CATL envisions a comprehensive strategy of combining self-built and partnered stations, with ambitious plans to construct 30,000 battery swapping stations in collaboration with ecosystem partners. The goal is to build 1,000 by 2025 and 3,000 by 2027, covering 70 cities across China.

Notably, Didi's existing charging network, featuring over 230 cities and exceeding a total charging volume of 21.8 billion charge units, provides a robust foundation for rapid deployment of battery swapping stations. By leveraging this established network, the joint venture can maximize operational efficiencies while minimizing costs; current estimates suggest each individual swapping station costs around 3 million yuan, and achieving a break-even point requires servicing approximately 200 vehicles each day. Capitalizing on Didi's established user base will significantly boost the usage rates of the new stations.

Through standardized battery swapping technology, comprehensive network expansion, and collaborative efforts within the ecosystem, CATL is poised to seize an impressive 30% share of the battery swapping market between 2025 and 2030. With Didi as a partner, the collaboration is expected to shift its focus towards expanding into various public transportation sectors in the future. Despite challenges related to inconsistent standards and substantial asset investments, CATL’s open ecosystem strategy is set to secure a long-term competitive edge in a rapidly evolving industry. As the battery swapping model further emerges, it could prove pivotal in the electric vehicle revolution, redefining the dynamics of energy supply and transportation services.