Reported by Pulsestacks on March 17th, the China Electric Vehicle Hundred-People Forum (2024) was held at the Diaoyutai State Guesthouse in Beijing from March 15th to 17th. With the theme of "Consolidating and Expanding the Advantage of New Energy Vehicle Development," the forum conducted in-depth discussions on various topics including the new trends in global automotive industry development, the new path of green and low-carbon transformation in the automotive industry, the new direction of intelligent and connected vehicle development, the new strategies for integrated development of automotive cities, innovation in power battery industry, as well as the application of technologies such as big computing power, big models, and big data, infrastructure construction for charging, and new changes in the automotive market and consumption.
On March 16th, Li Bin, the founder, chairman, and CEO of NIO, stated that addressing the issue of battery lifespan is urgent, as failing to do so today will lead to consequences in eight years. "We have always believed that there are two aspects to this issue: improving intrinsic research and development, and innovating in operations. It's like ensuring a person has a long lifespan; your own genes need to be good, prenatal care is important, and subsequent exercise and maintenance of the body are also meaningful."
Good afternoon, everyone! It's a great honor to be part of today's high-level forum. I'm feeling particularly excited because this year marks the tenth anniversary of the Hundred People's Meeting. First of all, congratulations on the milestone! I'm excited because I've been contemplating what to say, and I want to share some genuine sentiments. My first experience with the Hundred People's Meeting was on January 23, 2016. At that time, we were just a PowerPoint presentation; our name hadn't even been officially announced yet. But the Hundred People's Meeting provided me with a platform to speak up. This year also marks the tenth anniversary of NIO's establishment, and I sincerely thank the Hundred People's Meeting for providing a platform for communication and expression for startups in the Chinese smart electric vehicle industry. From the beginning, the Hundred People's Meeting has been open and inclusive to innovation, which has given us opportunities. It's through platforms like this that leaders from various ministries have come to know how innovative startups like ours think and how they can support us and provide opportunities for trial and error. Chairman Wan and Minister Miao have shown great concern for our startup companies and provided us with crucial support during critical times. Entrepreneurship in China is truly fulfilling; the industry is large, and support is substantial. For example, support for innovation such as the support for the earliest production models is significant. Additionally, support for battery swapping is also substantial because many Chinese households lack charging stations. This support has led to many stories, and I take this opportunity to express my gratitude.
I remember a particularly touching moment in 2019 when we were hanging by a thread, and Chairman Qingtai actively helped me brainstorm solutions. So, I take this opportunity to thank the Hundred People's Meeting, various government departments' leaders, as well as our peers and media friends for their support of NIO. Thank you all! I also hope for the continuous improvement of China's smart electric vehicle industry. I believe that consolidating and expanding the advantages of new energy vehicles is a forward-thinking theme for 2024. Today, I will share my thoughts on the topic, "Strengthening Industry Cooperation to Address Battery Lifespan Issues."
Why is this important today? 2024 is a significant year. If we look back eight years to April 29, 2015, when the four ministries issued the "Notice on Financial Support Policies for the Promotion and Application of New Energy Vehicles from 2016 to 2020," it was a crucial moment. Among other things, it established clear technical standards for the warranty of passenger car power batteries, which have become the industry standard today. This warranty standard is crucial for dispelling the concerns of private users of electric vehicles. As we all know, early electric vehicles were primarily for commercial use and received subsidies and calculations, but private buyers have different considerations. Without a good warranty standard, they wouldn't dare to buy because replacing a battery is too expensive. Therefore, since 2016, the number of private purchases of Chinese new energy vehicles has been steadily increasing annually. Today, the majority of Chinese new energy vehicle buyers are private users. The annual insurance coverage, export volume, and the market's growth indicate this shift.
If we look at the past eight years, the cumulative number of insured new energy vehicles with an eight-year warranty now exceeds 19.4 million units, which is remarkable progress. However, starting from this year, the warranty for vehicles produced eight years ago will begin to expire. This means that vehicles produced in 2016 will have their eight-year warranties expire by 2025. Considering the projected number of vehicles, there will be over 194 million new energy vehicles requiring battery warranty replacements over the next eight years. Although this figure may seem manageable, the cost of aftermarket service is significant. Even for a plug-in hybrid with a 30 kWh battery, the cost of aftermarket service is around 58,000 RMB. For a 40 kWh extended-range battery, it's around 86,000 RMB, and it's even higher for a pure electric vehicle. Currently, most warranties cover only around 70% of the battery's health for eight years or a specific mileage, and once it drops below this threshold, there's a sharp decline in performance and safety, significantly affecting the user experience. Unlike fuel tanks, battery degradation directly affects driving range. This underscores the urgency of addressing battery lifespan issues. Over the past few years, the entire new energy vehicle industry has made tremendous efforts to address safety, range, and charging efficiency issues, as well as cost and convenience. However, the industry has not raised the standard for battery lifespan, which could lead to problems in the future. If each of the estimated 200 million vehicles requires around 60,000 RMB for aftermarket service, the total cost would exceed 10 trillion RMB. Originally, we hoped for cascaded utilization of batteries, but now we know that it's not the most suitable solution, and recycling is necessary. The aging of power batteries, a high-value electrochemical product, presents a unique challenge. China, accounting for 60% of the market, faces this problem most acutely. Therefore, from my perspective, addressing battery lifespan issues is urgent. If we don't address it now, we'll pay the price in eight years. It's a simple matter because, with my background in sociology, I'm not only concerned about aging populations but also about the aging of power batteries. The lifespan of batteries, as we all know, involves both cycle life and calendar life, and it's problematic when one reaches its limit before the other. The issue arises because many of our designs have a lower calendar life compared to the actual lifespan of car users. This is a common practice, along with setting a maximum mileage for the vehicle. When either of these limits is reached, it's time for a replacement. Take for instance a Tesla that reached one million kilometers and had three battery replacements; it's just how things work, nothing too complex to grasp.
So, how do we tackle this issue? Over the past few years, we've been conducting research. At NIO, our batteries are designed to be rechargeable, replaceable, and upgradable. We also offer battery rental options. In August 2020, with support from innovation, we began focusing extensively on the lifespan issue. How long you use the battery directly impacts my business model. It's similar to the solar energy sector; initially, there was no business model for seven years, but with a 25-year span, there's a viable one. It's that simple. Hence, we believe improvements are needed both in intrinsic R&D and operational innovation.
In terms of R&D, apart from BYD, within the Chinese automotive industry, we have over 2,200 square meters of battery R&D laboratories and over 1,000 patents, 10% of which are related to battery lifespan. We've established a battery intelligent cloud operating system over these years, gathering data on materials, battery cells, battery packs, and vehicles into a unified cloud. Using our battery swapping system as an intervention system, initially employed for safety, we've now extended it to battery health, significantly enhancing battery lifespan.
With such a system in place, proactive measures can be taken to extend both calendar and cycle life. In a recent strategy meeting on long-life batteries, we've clearly outlined future technological and operational goals, aiming for a 15-year reasonable usage cycle for automobiles. Mileage worries are a thing of the past; balancing through battery swapping negates the need to worry about mileage. We've been collaborating extensively with battery manufacturers like CATL and AVIC, and achieving this is technically feasible. Setting such goals is beneficial for users and for the long-term societal benefits, as well as the healthy development of new energy vehicles globally. This isn't just our concern; it's an industry-wide issue. Last year, we opened our battery swapping network to companies like Changan, Geely, Chery, and Jianghuai, and recently, several more automotive companies are joining in. We see it as an industry-wide initiative. Just a couple of days ago, we completed 40 million battery swaps. The highest number in a day is close to 100,000, and users are very satisfied. We hope NIO's innovative attempts can inspire the industry further as we move forward together.
Once again, congratulations on the 10th anniversary of the Hundred People's Club. The next decade will surely be better, let's charge forward together. Thank you!
