Affordable EVs Could Be Available to the Masses in the Next Five Years

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A Vietnamese automaker, VinFast, has revealed a battery subscription model at the New York International Auto Show for its two electric SUVs to make affordable EVs. It aims to sell in the United States market by the year’s end (1). 

The company also invested about 2 billion USD in building its first US production unit in North Carolina and announced a collaboration with Electrify America to give its customers access to a fast-charging network. VinFast hinted that it might soon announce other similar collaborations. 

The battery leasing model of VinFast involves selling its two SUVs, the VF8, a five-passenger midsize SUV, and the VF9, a seven-passenger SUV, and no battery pack is included in the price. Instead, customers can lease the battery for a monthly fee according to their drive distance.

This model could help the company make more accessible and affordable EVs. In addition, it could also extend the life cycle of the vehicle itself. Gogoro, a Taiwanese company that recently went public through a special purpose acquisition merger, popularized its electric bike and moped battery swapping ecosystem in Taiwan. It largely happened because of the ease factor of swapping batteries instead of waiting for them to finish charging (2). 

In addition, since batteries are often the first part of a vehicle to break, being able to replace them instead of the whole car could keep vehicles on the roads for long. 

But, there is no clarity on whether these measures by VinFast will make the entire process more confusing to EV customers, especially when they are in a region where it is challenging to trade in a battery. VinFast plans to open more than 60 stores across the United States (3). 

Also, the scheme seems more complicated since VinFast said that by the end of 2023, half of the battery would be for lease while the rest would be for sale along with the car’s purchase. 

VinFast
VinFast’s Presentation in NY International Auto Show 2020, Image: VinFast

The VF 8 costs from 40,700 USD to 48,000 USD depending on the battery pack and trim, and the price range from VF 9 has a price range of 55,500 USD to 61,000 USD. However, VinFast has not yet clarified the difference in vehicle prices if a customer chooses the battery renting route. 

For drivers who can keep to 310 miles of use per month, VinFast is proposing a flexible plan of 35 USD per month for the VF 8 and 44 USD for the VF 9. For the VF 8 and VF 9, going above the 310-mile limit will cost drivers 11 cents a mile and 15 cents a mile, respectively.

Below is a breakdown of VinFast’s battery subscription plans:

EV battery subscription for affordable EVs
Source: Electrek

Read Also: Wireless Chargers are the Next Evolution of EV Market

As per the Federal Highway Administration of the United States Department of Transportation (4), the average person travels over 1,000 miles per month.

Hence, the fixed lease plan may be better for the average American motorist. Customers can get unlimited miles for 110 USD per month on the VF 8 and 160 USD per month on the VF 9. To attract new orders, VinFast is temporarily freezing the monthly cost of the fixed plan during the vehicle’s lifetime.

“By separating the battery’s price from the car’s acquisition value, VinFast assumes all risks associated with the vehicle’s battery and ensures affordable EVs and enable customers with peace of mind about the battery’s quality,” the company said in a statement.

VinFast also announced that it would offer a lifetime battery warranty that would cover all maintenance and repair charges and a free battery replacement if the charging capacity fell below 70%.

This unique strategy is the latest effort by auto companies to get potential customers to purchase electric vehicles despite their higher initial cost. Experts anticipate that these innovations by auto makers would help with affordable EVs with their pricing soon matching those of gasoline-powered vehicles.

Read Also: Dumb Devices are Making a Come Back Across Industries

EV Batteries Leasing

VinFast’s battery lease strategy entails selling SUVs without battery packs to reduce the vehicle’s base price. Customers would rent batteries for a monthly fee based on their mileage. The leases would be for battery swap shops, and VinFast says it plans to open at least 60 of them across the United States. 

Hyundai plans to establish a battery lease scheme in the same spirit to lower initial car costs by 30-40%.

Early last year, Hyundai Motor signed a Memorandum of Understanding with South Korea’s Ministry of Trade, Industry, and Energy and Hyundai Glovis, LG Energy Solution, and KST Mobility to promote an electric vehicle ecosystem and long-term battery reuse. 

The initiative, which will include a battery leasing component, will be actively observed by others in the auto industry and governments interested in adopting affordable EVs, according to one analyst speaking to just-auto (5).

According to Bakar Sadik Agwan, Senior Automotive Consulting Analyst at GlobalData (6), the MoU has the potential to help South Korea’s EV growth and will serve as a model for OEMs throughout the world. He believes that a focus on batteries is necessary to increase EV acceptance and make affordable EVs.

“The cost of procurement and the availability of charging infrastructure and worries about battery life,” Bakar explains, “are major issues that influence the large-scale uptake of electric vehicles.”

He points out that OEMs worldwide are experimenting with new business models to increase the uptake of electric vehicles, one of which is battery-as-a-service.

“An EV without a battery saves 30-40% on upfront costs. The battery may be rented or leased separately, spreading the expense of owning and maintaining a car over its lifetime,” Bakar claims.

GlobalData’s estimates suggest that a consumer can lease an electric vehicle battery for almost eight years for the same price as buying one (7).

“For individuals who do not travel a large number of kilometers each year, leasing is a preferable option,” Bakar noted.

Adding further, “renting or leasing batteries has additional advantages such as prompt assessment of residual battery values by the service provider, free and warranted replacements, and service provider help in a failure.” 

With a renting or leasing model covering battery repair, service, and replacement, shared mobility, logistics, and delivery organizations with big fleets will see considerable cost savings.

Bakar also talked about how several OEMs and governments have already implemented a battery renting or leasing business model in key areas like China and Europe. However, it has not yet achieved the needed level of worldwide commercialization. 

“Hyundai’s implementation of the EV ecosystem, which includes battery rentals or leases, can serve as a model for other OEMs, governments, and stakeholders, such as energy providers and mobility firms. It would make affordable EVs and increase the electric vehicles uptake in different nations.”

Read Also: India is Ramping Up its EV Goals to Gain Dominance in World Market

Affordable EVs

The issue with EVs is that they are about 7k to 10k USD more expensive than their gasoline-powered counterparts. 

The much-anticipated Ford F-150 Lightning, for example, starts at 40,000 USD compared to 30,000 USD for its traditional truck (8). With a starting price of 39,900 USD, the future Tesla Cybertruck will compete with the F-150 Lightning for a piece of the 124 billion USD pickup industry (9). 

A gas-powered Nissan Sentra is still cheaper at 19,610 USD, despite the Nissan Leaf being the cheapest EV on the market at 27,400 USD and a range of 149 miles. 

Notably, GM and Honda have teamed up to create a series of “cheap EVs” for North America, South America, and China, with production beginning in 2027 (10).

“The progress we’ve made with GM since announcing our EV battery development collaboration in 2018, followed by co-development of electric vehicles like the Honda Prologue, has validated the win-win relationship that can provide new value for our customers,” said Honda senior managing executive officer Shinji Aoyama (11). “By utilizing our strength in developing and producing high-quality, compact-class vehicles, this new series of inexpensive EVs will build on this connection.”

“Our collaboration with Honda and the continued development of Ultium is the foundation of this project, enabling us to leverage our global scale to enable a cheaper cost foundation for this new series of electric cars for millions of customers,” said Doug Parks, GM executive vice president, Global Product Development, Purchasing, and Supply Chain (12).

Read Also: This New Delivery Robot Can Revolutionize Last-Mile Delivery

Bring Down EVs Cost

Bloomberg NEF anticipated that EVs would attain price parity with gas-powered cars by 2025, with battery prices likely to drop by 77 percent and global EV sales expected to reach 14 million (13). 

However, a surge in commodity prices and lengthy supply chain concerns could push that date back to 2026 or later (Suggested Reading: The Economic World War Brings Us an Expensive Decade). 

In the United States, the first leg of the EV truck market race will be decided by Cybertruck versus Lightning sales. Ford is hoping that the additional features of the F-150 Lightning will appeal to buyers in the midwest and south of the US, where EV adoption has been slow. Musk earlier stated that the Panasonic 4680 lithium-ion battery might bring the Model 3 down to 25,000 USD in price (14) (Suggested Reading: Tesla Could Soon Replace Lithium with Sodium-ion Batteries).

Market leaders may need to implement innovative business structures such as battery leases and improve battery technology to avail affordable EVs to the masses (15). While such a plan appears to save consumers money upfront, it may offer automakers more profits in the long term.

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Rucha Joshi, currently managing a team of over 20 content writers at TimesNext is fueled by her passion for creative writing. She is eager to turn information into action. With her hunger for knowledge, she considers herself a forever student and a passionate leader.

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