Battery as a service versus complete vehicle sales : a perspective of consumer resale anxiety

Abstract

A Battery-as-a-Service (BaaS) strategy is viewed as a promising solution to alleviate consumer anxiety about the future depreciation of electric vehicles (EVs). This sales strategy involves leasing batteries rather than selling them outright, thereby mitigating the negative impact of rapid battery depreciation on vehicle value. This paper develops a game-theoretic model to investigate the impact of BaaS on competition between electric and fuel vehicles. The profit-maximizing EV manufacturer chooses between the Complete-Vehicle-Sales (CVS) strategy and the BaaS strategy. Our analysis yields three main findings. First, to enhance profits through BaaS over CVS, an EV manufacturer must ensure that the EV depreciation rate with BaaS is at least slightly lower than with CVS. Achieving higher EV sales under BaaS compared to CVS requires a further reduction in depreciation. Second, a win-win situation for both vehicle manufacturers occurs if the EV depreciation rate under BaaS is reduced to a moderate level. Considering additional battery acquisitions in BaaS can result in a mutually beneficial outcome for the three parties, including the battery supplier. Third, a lower depreciation rate can increase consumer surplus, but it does not always benefit the environment, as it may lead to higher overall vehicle purchases and usage in the market. Managerial Relevance Statement: An innovative sales strategy, BaaS, which relies on battery-swapping technology and a battery leasing model, can effectively mitigate EVs' competitive disadvantages in terms of market value retention; however, it imposes high costs on EV manufacturers. This article provides strategic support for BaaS's viability by examining it from the perspective of consumers' resale anxiety and identifying the circumstances under which this arises. In addition, since BaaS can shift energy replenishment to nonpeak hours, its adoption also has positive implications for grid energy storage, potentially further optimizing carbon efficiency. To realize the BaaS model's full potential, a combined effort from industry and policymakers is crucial to jointly address and overcome its cost challenges. Policymakers can promote broader market participation by fostering an open industry environment or by providing direct investment and subsidies for companies adopting the BaaS model, thereby easing their financial challenges. These insights serve to guide sales practices in the EV industry. This article also contributes to sustainable development goals (SDGs) 13.