Musk Sells Crowd On the Future of Electric Vehicles With Battery Swapping

For a dose of how Elon Musk is selling the vision of electric vehicles, check out this video of the new Tesla swapping station in action (see “Why Tesla Thinks It Can Make Battery Swapping Work”). In the video–which was taken at a gathering of mainly Model S owners in LA–a Tesla Model S pulls up on stage, and an automated system removes its depleted battery and replaces it with a fully-charged one. Meanwhile a video runs in the background of someone refueling a gas powered car. The battery swap is finished faster than the refueling. Indeed, while the gas-powered car continues to fill up, another Model S drives on stage and has its battery replaced.

“Hopefully this is what convinces people finally that electric cars are the future,” Musk said.

Musk provided a few more details about Tesla’s swap stations, which will be installed at the busiest of Tesla’s supercharging stations. It will use automated technology that Tesla now uses to build its cars. As I and others have speculated, the owners will be able to retrieve their original batteries, or choose to keep the new one (sometimes for a fee). Unlike supercharging, which is free, drivers will have to pay for a battery swap.

According to reports, that fee will be $60, comparable to the cost of refueling a gas-powered car. The swap system will reportedly cost $500,000 and have 50 batteries on hand. It wasn’t clear whether that figure included the cost for the batteries, which each cost thousands of dollars. The electricity for a full charge costs about $10. Just factoring in that, and not the maintenance costs or the costs to replace the batteries, and you’d need 10,000 swaps to pay for a station. The economics will depend, among other things, on how much people opt to swap, and how frequently the batteries will need to be replaced.

“Utilization rates will probably be low,” says Dougherty analyst Andrea James. “I don’t know that battery swapping will take off right away, which should limit Tesla’s initial capital investment.” 

Tesla recently had its first profitable quarter, although it’s yet to make a profit on selling cars alone. A significant source of revenue was from credits it sold to automakers to allow them to comply with California regulations. That revenue is expected to decrease.