Battery as a Service: Flexible Electric Vehicle Battery Leasing

Problem definition: We study flexible electric vehicle (EV) battery leasing enabled by a swappable battery design, where customers lease their long-term batteries and can temporarily up/downgrade to different capacities for peak usage. We investigate whether and when profit-maximizing flexible battery leasing reduces total customer cost and/or total battery capacity compared with simple battery leasing, both of which are crucial for flexible battery leasing's viability.Methodology/results: Adopting a game-theoretical model, we find that profit-maximizing flexible battery leasing can simultaneously reduce total customer cost and battery capacity, thus benefiting customers and the environment in addition to the manufacturer (win-win-win). This result is replicated when flexible battery leasing becomes ubiquitous, and furthermore when batteries become a commodity.Managerial implications: These findings confirm flexible battery leasing's potential viability in terms of customer value and environmental impact, and may inform EV manufacturers in their decisions to adopt the swappable battery design and flexible battery leasing.