The Nio-led battery swap model is about to get policy boosts as the Shanghai Securities News reported that the Ministry of Industry and Information Technology (MIIT) is encouraging companies to develop a battery swap model based on usage scenarios.

According to the report, the MIIT will also encourage local governments to formulate relevant policies to promote the development of the battery swap industry in the form of pilot programs to support and encourage companies to develop and manufacture products based on battery swap models.

In China, Nio is the most high-profile promoter of the battery swap model. Last month, the EV maker released its highly expected BaaS (Battery as a Service) battery rental service in China and generated high interest in China's auto and technology circles.

According to the Shanghai Securities News, MIIT researcher Bai Hua recently said at an internal seminar that MIIT, as the leading department of the joint ministerial meeting on energy efficiency and new energy vehicle industry development, will remain steadfast in developing new energy vehicles.

For the car body and battery separation mode, Bai Hua said, new energy vehicles are still in the early stages of industrial development, MIIT will maintain an open attitude on different technology routes including charging and battery swap.

He said that MIIT encourages enterprises to explore and develop in various ways to accumulate experience, and MIIT will also improve relevant policies to offer support.

Bai added that the auto industry needs to sort out the difficulties that still exist in the separation of body and battery, and work together to promote it.

He suggested that enterprise standards, group standards should come out first and then carry out standards research. The MIIT will also mobilize its local departments and bureaus to formulate relevant policies, create a pilot to promote industrial development, support to encourage enterprises to carry out research and development and production of the battery swap model.

In fact, there are regions with the new energy industry developing fast are actively preparing for the pilot.

Government officials from the Hainan Province recently said they are currently working on a specific pilot program to promote the battery swap mode and strive to launch as soon as possible.

By the end of June, Hainan's new energy vehicle ownership has reached 40,100 units, accounting for 2.82% of the car ownership, about 1.3 percentage points higher than the national average.

Beijing and other big cities also have the advantage of implementing the pilot program.

According to Wu Zhixin, deputy general manager of China Automotive Technology & Research Center Co. Ltd, taxi models in big cities is more unified, meeting the standardization and commercialization needs of the battery swap model.

For example, 100,000 taxis in Beijing can almost support the construction of a new model. When the model is built, it can drive private car users to choose the battery swap model, he said.

The difficulty in separating body and battery is that the battery specifications of different car companies and models are not the same, which makes it impossible to achieve universal compatibility and restricts the popularity of the battery swap mode.

However, a recommended national standard for electric vehicle battery swap safety requirements led by Nio, the Beijing Electric Vehicle Co., Ltd. (BJEV) which is a subsidiary of the BAIC Group, and China Automotive Technology and Research Center, has passed the review by the National Technical Committee of Auto Standardization.

The move will provide guidance for the development of electric vehicles with battery swap mode.

The standard takes the whole car, battery swap system, battery pack, battery swap mechanism, battery swap interface, and other key elements as the object of research.

It analyzes the potential failure modes in the battery swap process and vehicle operation, determines the general safety requirements, vehicle safety requirements, and system component safety requirements for the battery swap model vehicle, and proposes corresponding test methods.

However, it is worth noting that this standard is a "recommended national standard", whether other car companies and operators will follow this standard is not certain.

In addition, the profit model of the battery swap station is still unclear.  Huang Yonghe, a senior expert of the China Automotive Strategy and Policy Research Center said there is no clear way for battery swap stations to profit and it's unclear where the next profit point would be and how to share the profits.

Huang Yonghe believes that it's important to encourage or guide different subjects to strengthen cooperation to solve the problem of different models of application scenarios.

Ping An Securities analysts believe that although there are still many problems to be solved in battery swap mode at this stage, suitable scenarios for such applications are ready. Under the push of the policy, the body and battery separation model has entered a growth channel that can be developed and expanded.

In order to expand this emerging field, a number of companies have announced that they are embracing to create an ecosystem.

Recently, a total of 20 organizations including the China Association of Automobile Manufacturers, Nio, Dongfeng, BAIC, FAW, SAIC, Contemporary Amperex Technology (CATL), and the China Association of Automobile Manufacturers (CAAM) announced the formation of an eco-system with the signing of the Joint Declaration on Building an Eco-circle for the Separation of Body and Battery for New Energy Vehicles.

The ecosystem will organize the research and revision of battery swap platforms, battery swap boxes, and other relevant standards according to market demand, promote the establishment of new business entities such as battery banks and battery asset companies, and jointly create and promote the promotion and landing of new business models.

Ping An Securities believes that in order to achieve high sales and ownership of EVs in China, the difficulties faced by consumers must be solved through various means. In an era of rapid changes in battery technology, separating the body from the battery shifts the risk of the battery to the consumer, which is conducive to increasing EV penetration.

China's EV battery swap is mainly driven by Nio, BAIC, and a few other car companies. This year, policymakers began to frequently mention and encourage the development of battery swap mode.

In April, the country's new energy subsidy policy encouraged the development of "battery swap mode". Electric vehicles over RMB 300,000 will no longer be eligible for subsidies, while vehicles using battery swap technology will continue to receive subsidies.

In May, the Chinese government work report for the first time to include charging and battery swap into the category of "new infrastructure".

August 12, BAIC New Energy, Nio led drafting of GB/T "Battery Swap Safety Requirements for Electric Vehicles" recommended national standard passed the review, this is the first national standard on "battery swap" up to now.

The "battery swap model" has significant advantages, said Li Zhe and Cui Yifan, analysts at Essence Securities, adding the "battery swap mode" has entered a period of accelerated penetration.

They believe the technology is relatively mature after several years of accumulation, and the policy level is more conducive to exerting scale effect.

By July 2020, Nio, Aulton New Energy, and Hangzhou Botann have a total of 457 battery swap stations. Some companies are the first to deploy battery swap equipment, taking the first-mover advantage.

Essence Securities estimates that the demand for battery swap equipment will reach RMB 1.54 billion in 2021.

In the medium and long term, with the continuous construction of battery swap stations, Essence Securities expects that the equipment market will generate 18 billion RMB in 2025.