Why Tesla Launched Battery Swapping; Is It Now In Danger?

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Tesla Supercharger fast-charging system for electric cars

Tesla Supercharger fast-charging system for electric cars

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Tesla Motors has surprised a lot of skeptics in its decade of existence.

But last month's announcement of battery swapping for Model S cars traveling long distances deserves some additional context.

It adds a new and quicker way for some Model S drivers to cover distances beyond the battery range of their cars, for sure.

ZEV credits

But it's also a way for Tesla to maximize the California zero-emission vehicle credits it earns for each Model S it sells.

In the first quarter of this year, those credits made the difference between profit and loss for Tesla Motors [NSDQ:TSLA].

While Tesla CEO Elon Musk says Tesla is assuming that revenue from sales of ZEV credits falls to zero by the end of this year, the company certainly won't turn down such sales if they occur.

Tesla Motors Supercharger Network In 2015 - released May 2013

Tesla Motors Supercharger Network In 2015 - released May 2013

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And the ability to swap batteries--designed into the Model S from the start--lets Tesla earn the maximum number per car under the existing rules.

"Fast refueling" important

Under the somewhat arcane rules governing how ZEV credits are awarded, fast "refueling" turns out to count for a lot.

This likely dates back to the days when fleets of zero-emission hydrogen fuel-cell vehicles were envisioned by California regulators, all refueled similarly to gasoline cars at newly built hydrogen fueling stations.

On page 16 of a 36-page Final Regulation Order titled "Zero Emission Vehicle Regulation: 2009 through 2017 Model Years," the rules governing "fast refueling" for 2009 through 2017 vehicles are spelled out.

Maximum credits are awarded to vehicles that can "accumulate at least 190 or 285 miles, respectively, in 15 minutes or less."

Even the upgraded Tesla Supercharger quick-charging system can't quite hit that bar--so battery swapping comes into play.

Tesla Supercharger obelisk

Tesla Supercharger obelisk

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Rule change proposed

However, as noted by Bloomberg and others, CARB is considering a rule change that could remove pack-swapping as an option for meeting the "fast refueling" requirement.

The proposed change would add a sentence reading, Range accumulation through battery exchange is ineligible for meeting “fast refueling capability.”

The Board held a workshop on May 20 to consider the proposal, but no rule changes have been issued thus far.

According to CARB's Anna Wong, the workshop on May 20 was well attended.

Comments this fall

The next step will be for the Board to release a Staff Report with the proposed changes in early September, Wong said.

That will "begin a 45-day public comment period" on the proposal, she said, after which, "we will take our proposal to the Board October 24 and 25."

"Members of the public are welcome to attend the hearing," according to Wong, "and make comments when [the] staff’s proposal is presented."

Will Tesla proceed?

If the proposal is adopted, we question whether Tesla will move ahead with its proposed network of swap stations located at some of its Supercharger quick-charging locations.

Tesla communications manager Shanna Hendriks avoided answering the question went sent her about whether the company would move ahead with its battery-swapping plans if the rule change were adopted.

She wrote:

Tesla's battery swapping is to provide consumers with a choice. It is a way to appease the consumers who think a free 30-minute stop at a Supercharger is still too long to make electric vehicles make sense.

Model S was designed and built since the beginning to have swapping capabilities. We will let our customers decide if they like the battery swap option or if free Supercharging is preferred.


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Comments (27)
  1. Why would they specifically exclude battery swapping? Blatantly targeting Tesla for meeting their requirements is BS.

  2. It makes no sense for CARB to favor hydrogen fuel cell cars over storage battery cars. We still have many years until hydrogen pipelines are installed to bring solar generated hydrogen from the southwest to the cooler parts of the country. In the meantime, hydrogen will be generated from fracked natural gas, hardly a green solution. Tesla is going to use solar energy to charge it's batteries. If you have a storage battery car, as more electricity is generated with wind or solar, you create less emissions without changing the car. I have a Nissan Leaf. I pay MLG&W $16 per month to buy enough renewable electricity to charge my car without any carbon emissions.

  3. Follow the trail!

  4. Where's the po0p!

  5. CARB doesn't seem anti-Tesla: their regulations have made Tesla a fortune in ZEV credit trade revue and when the other carmakers came to complain about it they were basically told to shove off and comply already.

    Still one wonders why it is down on batteryswapping and why they even bother to come up with an exclusion if Tesla is right that the ZEV credit trade has largely run its course. There is something I'm missing here...

  6. I don't think the swapping concept had to do with earning ZEV credits that with most carmakers doing their own compliance cars will soon no longer have the sort of value that justifies the massive investment needed.

    I think it was the fruit of typical Elon Musk creative thinking. Musk said that Tesla is partnering with the utilities on grid energy storage, with Supercharger stations acting as a "grid buffer." That means placing large battery packs next to charging stations which is a bit of a lemon in terms of cost. What if that investment could be used to generate extra income and help Model S sales by using swappable battery packs for this grid buffer function?

    Don't underestimate Elon Musk's capacity to turn lemons into lemonade!

  7. What might kill the battery swap concept though is Tesla’s Chief Technical Officer JB Straubel's hint that Tesla is working on "hypercharging"; 80% charge in 5 minutes!


  8. Chris O,

    @johnvoelcker is missing the point. @elonmusk was going to put in the batteries ANYWAY. "Battery Backup" was always a part of the Solar/Charger/Battery triad that supports the "fueling" infrastructure.

    This is a non-denial because there is nothing to deny.

    "Model S was designed and built since the beginning to have swapping capabilities. We will let our customers decide if they like the battery swap option or if free Supercharging is preferred."

    Batteries are coming whether in swap for or as battery backup.

  9. Elon Musk understood immediately that on long trips, even waiting 30 minutes for a recharge would engender consumer resistance. Battery swapping is the only method that even comes close to refilling a gas tank at a gas pump. If it takes more than 5 or 10 minutes, it will be bad news for selling electrics. But how to make money on it is the tough part. We know how a gas station makes money, but what is the economic incentive for maintaining an electric recharging/battery-swapping station? That's going to be the tough one. In the old "Better Place" solution, the customer only leases and does not own the battery in the first place, and only buys "miles" or kilometers the way a cell phone customer buys minutes in his or her plan.

  10. Tesla has said they will charge for battery swapping. They will also charge/credit the driver if they don't come back by the same swapping station to get their original battery back to account for the difference in age/use of the original battery with the one that was swapped into the car.

    I agree with other comments that this seems like a jab at Tesla by CARB if they make that change. Tesla is one of the only companies making an effort to comply with CARB's regulations and now CARB is going to stick it to Tesla?? I don't believe that Tesla is doing this for the credits, but don't take away anything that encourages less oil consumption and less pollution! Come on CARB!!

  11. Actually having to pause for 20-30 minutes to fill up for every 2 hours of driving sounds pretty acceptable to me, especially if the alternative for this mandatory R&R is paying $60 for a swap. That fee is one of the ways the recharging/swapping stations pay for themselves. Other benefits come in form of the "free for life" slogan for the Supercharger part which is worth millions in marketing expenses and having a big pile of batteries next to the Superchargers could help avoiding cost due to peak energy rates and generate revenue through grid services.

  12. Knowing intimately how gas stations make money, the profits are less and less so the desire to have customers frequently swap their battery then load up on pop and snacks would be very welcome.

    As a fan of the Betterplace Solution, the less that is owned the better for the owner since they are not on the hook for the "part" if it fails out of warranty.

  13. First no one can do the specs as just too much energy needed to go over 200 miles in that size car. To put in 75kwhr in 15 minutes takes 350kw or enough to power 250 homes!!

    So battery swapping is the logical way to do it. And why the Nissan Leaf is also swap ready and being used that way in Israel.

    The only reason to not allow the credit is if they don't want EV's to be practical. It's a whole system and you need all the parts if you want it to be successful.

    Though their is a solution, lightweight, aero EV's that need small battery packs of 10kwhr for 100 miles which one can fast charge in 15 minutes from present level2 charge stations or the coming DC chargers.

    But waiting to charge is just uninterrupted internet time now.

  14. As far as profitable Tesla has far surpassed any other car model profitability timeline which normally takes 3 yrs from starting production. In that context tesla is kicking azz and taking names.

    They are already putting fear into the Lux sedan market sucking sales from them so much they have had negative growth in sales.

    And facts are they can't keep up with a single person running a low cost flexible car company. There is a reason they went bankrupt and why it'll happen again.

  15. Tesla will build the stations if its customers support them, irrespective of CARB or credits. They have a clear history of experimenting to see what works. My prediction would be at least two swap stations at either end of the Interstate I-80 cross-country corridor. For anybody with a 60 kWh battery, swapping for a rental 85 kWh battery before a long road trip is a no-brainer. Even if you already have a big battery, wouldn't you rather do the range charging on a rental battery and preserve yours? Just like the superchargers, battery swapping is all about facilitating long distance traveling. Basing a whole business model on shaky government credits would be pretty dumb and I don't see anything about Tesla so far that says DUMB.

  16. Even though I support Tesla, I still think the battery swapping is questionable business model. Offering customer choice is a great thing. But as the model line up expands, they would have to make sure the different type and size of batteries will be supported. That can be simpilfied if all the battery are "standardized" for Tesla.

    From CARB's point view, supporting battery swapping is NOT good for the spread of BEVs unless all automaker standardize on battery pack and bring the cost down. I don't see that happening. Without that, the investment entry to BEV market will be extremely high and company will be less likely to do it. CARB wants to encourage all "forms" of so called "zero emission". It is NOT EV only supporter.

  17. Not exactly the topic, but incorporating solar cells into the bodies design would be a fitting way to keep the innovation going. Why not take advantage of parking or driving under the sun.

  18. B/c it doesn't add much power and adds some weight and cost.

    For a car like Tesla S, you will be lucky to get 500W solar panel on that surface of that car. At that rate, you will be lucky to generate about 2.5KWh in 8 hrs of sunlight.

    Like I said, solar panels belong on the roof of parking structure, NOT on top of cars.

  19. Why is it assumed the trade in credits will disappear when the compliance requirement for pure EVs jumps to 3 per cent in 2015? Are the large OEMs on course to hit that number? Sales so far suggest they'll fall well short, in which case they'd need some of Tesla's credits.

  20. Just because most OEMs game the ZEV credit system does't mean they all do.
    Tesla's battery swapping is part of a long term business strategy, not a short term fad like hydrogen cars. I don't think Tesla is going to rely on CARB or any other gov. rules to keep them successful in the long run.

    It may turn out that battery swapping may not become that popular, needed, or used that much. We will see. They are saying they are going to offer it and see what the customers say. Good way to do it.

  21. Well said, I think giving customer choices is a great thing. However, it will cost Tesla some cash in providing that service. "Getting Paid" for it is a great way to recover some of that cost.

  22. If they really want to make the rule useful, tie it to the number of locations at which said refueling can take place. Then you only get credit for your super hydrogen tank, battery swapping, or battery hypercharging if you do the leg work and install usable locations. No matter what fuel you use, it doesn't matter if the car is capable of accepting energy that fast if you can't actually get it anywhere convenient.

  23. So half the stations are targeted for the east coast, 100% of them are designed to eventually pay for themselves via billing customers for the charged batteries, the company has already stated numerous times it expects zero revenue from ZEV credits in Q4 of this year, but you believe that if they can't get >extra< revenues from doing this, they will abandon something they announced just a month ago?

    And the face-saving excuse will be what? We lied?

  24. The other ridiculous thing about the premise implied in this story is that the CARB workshop was a month >before< the battery-swap announcement. Isn't that evidence enough that Tesla made the decision to go through with battery swapping knowing full well it might not be getting additional ZEV credits for it?

  25. Tesla actually talked about "battery exchange" back in March when they released their 10-k for the Q4 2012.

    And they have talked about it since at least 2009 since Musk has been saying all along that the Model S was designed for battery swapping.

    So these CARB people had plenty of time to think about what to do about it.
    It was even predicted before these people were supposed to meet.

  26. Tesla could still "fall back" on this very simple solution of an on-demand range extending service: www.eptender.com

    It does very much solve the point of occasional long distances, with a much more pragmatic and economical solution!

  27. That has to be about the worst idea imaginable and will absolutely never be part of Tesla's solution to range extension.

    There are some fantasies that involve a frunk-mounted fuel cell with the hydrogen already on board. If you want to go "out there", I'd stick with that crazy idea and ignore toting a buggy around.

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