NIO: Battling Tesla with Battery as a Service

Chinese electric vehicle (EV) company NIO had launched Battery as a Service (BaaS), in a competitive bid to reduce vehicle price and make its products more attractive to its consumers. By 2021, almost 40% of its consumer base had switched to using BaaS, and NIO had plans to expand its BaaS services further. BaaS offered four key benefits. Firstly, it reduced the price of the EV by about US$ 10,800. Secondly, it allowed consumers to do multiple battery swaps for a nominal US$ 152 monthly subscription fee. Thirdly, it allowed consumers to swap their batteries in a short time of 3 to 5 minutes, as opposed to 45 minutes recharge at a charging station. To support its BaaS program, NIO had installed 301 battery-swapping stations across China by July 2021, and had plans to complete 3000 swapping stations globally by 2025. Fourthly, BaaS supported a circular economy, as it potentially helped recycle batteries in a more controlled fashion, which could then be reused in other industries (like for solar panels in homes).

However, NIO’s BaaS entailed a few shortcomings despite its promise. Its implementation involved the construction of swapping stations, deployment of automated technology, and maintenance of battery stocks at stations, which was an expensive affair. Besides, technology for batteries had started to advance, and batteries could last longer in terms of miles travelled based on a single charge, reducing the need for frequent recharge at swapping stations. Given the scenario, was NIO’s BaaS venture a sustainable business model? Could it provide NIO with a strong competitive advantage?

The case illustrates how NIO used BaaS to compete in a cutthroat EV market dominated by the global leader Tesla. It allows readers to evaluate (1) the hurdles to diffusion of EV’s (2) NIO’s BaaS as a competitive strategy using the ‘BROAD FENCES’ staircase of the Everything as a service (XaaS) model (3) BaaS for tackling climate change and circular economy goals.

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