Strategizing battery swap service: Self-operation or authorization?

Electric vehicle (EV) charging is still time-consuming compared with traditional vehicle refueling, making many consumers hesitant to make the switch. As a solution, battery swapping allows EVs to get energized within minutes. As economies like China embrace the emerging battery swap market, relevant automakers face strategic choices between self-operation and authorization. This study establishes game-theoretic models of a duopoly EV market comprising two automakers and a battery swap market involving an additional third-party operator. Each automaker may run its own battery swap service entirely or license at least part of it to the third-party operator. The results suggest that authorization is typically optimal for a competitive automaker, as its collaboration with the third-party operator enhances both EV market demand and battery swap serviceability, leading to increased social welfare in 99% of simulated cases. Practical implications are discussed for promoting EV industry chain development with the new link of battery swapping.