Auto Industry, ESG

Manning the batteries

Oil major joins China’s EV race with NIO partnership


From rival to partner: NIO teams up with Sinopec on battery swapping

If there’s one thing that can be confidently said about China’s development over the past few decades, it’s that change happens at lightning speed. The country typically achieves whatever milestone is under consideration far quicker than anyone in the outside world expects.

Yet, go back one year and it would have been rash to forecast that one of the country’s three state-owned oil majors was rapidly heading for a lower valuation than a six year-old electric vehicle (EV) start-up – particularly one that was then on the verge of bankruptcy.

That’s just what happened earlier this year when the market capitalisation of NIO overtook that of Sinopec, the world’s largest oil refiner by capacity.

It was another highly symbolic moment signifying the shifting of the tectonic plates away from ‘old economy’, fossil fuel-led companies to ‘new economy’, green-tinged ones. Over the past month, Sinopec has reclaimed some lost ground. It now sits on a $78 billion market value compared to NIO’s $59 billion.

However, Sinopec knows that in order to remain competitive it has to transform itself into a clean energy company. As such, it plans to become a carbon-neutral entity and wants to achieve this target 10 years ahead of China’s own 2060 goal.

One new business line is hydrogen. The group plans to start distributing the fuel at 100 of its 30,000 “gas” stations by the end of this year and at 1,000 by 2025 (for more on this energy source see this week’s “Energy and Resources”).

Zhang Yuzhuo, the company’s president, recently described Sinopec as essentially a “distribution company” and one that doesn’t necessarily need to confine itself to sales of petrol and diesel. This underlines its recent efforts in growing its retail business. The oil firm’s offerings now range from freshly brewed coffee to vegetables.

Go back five years and the group was preparing to spin off Sinopec Marketing, its vast service station network. At that point, future profits were premised on the convenience stores attached to the country’s largest network of filling stations.

That IPO never saw the light of day, in part due to the shift away from the internal combustion engine. But perhaps the strategy will now re-emerge in another form, thanks to another new business line: electric battery swap stations.

In mid-April, Sinopec signed a strategic agreement with NIO. By 2025, one sixth of its filling stations will come with a NIO battery swap facility. This represents a big step up for NIO, which currently has 201 battery swap stations of its own and plans to boost the number to 500 by December.

The new stations are not only fully automated but also allow EV drivers to “refuel” their vehicles faster than drivers of combustion engine cars. At the click of a single button, it takes four-and-a-half minutes for a depleted electric battery to be swapped for a fully-charged one. NIO has made its Battery-as-a-Service (BaaS) scheme a key selling point and it’s one of the reasons why its stock price has outperformed other EV start-ups. Financial analysts believe the company will double vehicle sales from 44,000 units in 2020 to about 90,000 this year, notwithstanding an ongoing semiconductor chip shortage, which forced NIO to suspend production at its Hefei plant for five days earlier this month.

Competition continues to heat up, with this week’s Shanghai Auto Show featuring the debuts of a number of electric carmaking newcomers.

One of them was Huawei. As we reported in WiC520, its founder Ren Zhengfei has always said that its will work with OEMs rather than compete against them. The telecom equipment maker unveiled its first automotive solution on Sunday. An EV model co-developed with a unit of state-owned carmaker BAIC: the Arcfox Alpha-S comes with an autonomous driving system powered by Huawei’s Harmony operating system, its Kirin processors and 5G connectivity.

Drone manufacturer DJI has also pushed forward with its EV plans after formally launching DJI Automotive during the car show. However, executives were keen to point out that the company already has five-year’s experience in the sector thanks to its affiliate Livox, which has developed the lidar technology (remote sensors), that Guangzhou-based EV firm XPENG has purchased for its forthcoming P5 model.

Tesla, meanwhile, had to contend with a rash of negative headlines at the Shanghai event after a disgruntled customer jumped onto the roof of a Model 3, claiming that faulty brakes almost killed her family in February. Shanghai police said the woman would be detained for five days for “causing chaos” at the show. She did succeed in drawing attention to complaints about Tesla’s service and prompted an unusual apology from the American firm, which said on its weibo account it would undertake a review of its local operation.

The about-face came after state media accused Tesla of “shirking responsibility” and not being “sincere” in handling customer complaints. Even the anti-corruption watchdog has weighed in with a say.

“Individuals should not take extreme measures, and enterprises should not be arrogant and unreasonable,” the Central Commission for Discipline Inspection said in a statement.

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