Offering EV Battery Swapping as a Service: EV Manufacturers or Battery Producers?

To overcome the range anxiety that hinders Electric Vehicle (EV) adoption, To accelerate EV adoption and overcome the shortcomings of the traditional EV charging model (e.g., long charging time and lack of access to home chargers for urban residents), Battery as a Service (BaaS) has emerged as a promising alternative. Under the BaaS model, customers can purchase the vehicle body without owning the battery packs. By paying a battery service fee, customers can swap their depleted batteries with fully charged ones at battery-swapping stations. The BaaS model requires investment and operation of battery-swapping stations, prompting us to examine a question: Should EV manufacturers or battery producers build and operate these battery-swapping stations? By constructing a game-theoretical model with one battery supplier and one vehicle manufacturer, we compare two BaaS operating models. First, in the "manufacturer-operated" BaaS model (Model-M), the vehicle manufacturer procures EV batteries from the supplier and invests and operates the battery swapping stations. Second, in the "supplier-operated" model (Model-S), the vehicle manufacturer sells battery-free EVs to customers while the supplier invests and operates the battery swapping stations. Our results reveal that Model-S can induce a higher number of battery swapping stations being built; however, Model-M always entices more customers to adopt EVs. Furthermore, Model-M leads to a higher profit for the manufacturer and the supply chain, and it is preferable by the supplier when the cost of building battery swapping stations is low or the cost of producing batteries is low. Finally, by extending the model to include two competing EV manufacturers, we highlight that the choice between Model-M and Model-S hinges on the degree of downstream competition: in a low-competition environment, it could still be socially optimal for the leading EV manufacturer to lead the BaaS effort under Model-M; However, as competition intensifies, the battery producer is in general in a better position to offer the EV BaaS. By identifying how different operational and economic factors affect the relative merits between the two BaaS operating models, our paper provides insights for industry leaders and policymakers when deciding who should lead the effort of investing and operating the BaaS model.