Hyundai signs MOU with South Korean government and industry partners to demo EV battery leasing business
Hyundai Motor Company recently signed a memorandum of understanding (MOU) to work with the South Korean government as well as logistics, battery and mobility companies to demonstrate the electric vehicle (EV) battery leasing business.
Through this agreement, Hyundai aims to foster an EV ecosystem by alleviating the initial cost burden of EV purchases and by providing innovative services that enable eco-friendly reuse of batteries.
Hyundai Motor signed the MOU with South Korea’s Ministry of Trade, Industry and Energy as well as Hyundai Glovis, LG Energy Solution and KST Mobility for the rental of electric taxi batteries and the sustainable reuse of EV batteries in energy storage systems (ESS).
Under the agreement, KST Mobility, the taxi operator, will sell the ownership of batteries in newly purchased EVs to Hyundai Glovis, the battery lessor. KST Mobility then pays a monthly fee for battery usage. As a result, KST Mobility is able to have lower initial investment for EV purchases.
When the batteries are swapped after extensive usage, the removed batteries are reused in energy storage systems (ESS) for fast-charging EV taxis. To save cost, ESS is charged in the middle of the night when electricity rates are lowest and then charges EV taxis during daytime when electricity is comparatively expensive.
In this business model, Hyundai will oversee overall business operations while selling battery electric vehicles (BEV) to KST Mobility. Hyundai is also responsible for providing battery warranty and replacement batteries for vehicles that return batteries after use.
Hyundai Glovis will operate a battery rental service and recover batteries after initial usage. Recently, Hyundai Glovis enhanced relevant capabilities by acquiring a patent for a container that can efficiently transport large quantities of used batteries.
LG Energy Solution will analyze safety and residual value by purchasing batteries after use. It will also install these batteries into ESS units for fast-charging service and sell them to KST Mobility to utilize the chargers for its fleet of EV taxis. The driving and battery data from these EVs are shared with all parties under the MOU.
The Ministry of Trade, Industry and Energy plans to support the project actively in consultation with relevant ministries.
With the commercialization of battery rental service, Hyundai Motor expects that customers will be able to purchase BEVs at lower cost because they will only pay for the vehicle excluding battery cost. This is expected to foster EV adoption and expand the EV ecosystem.
In addition, this enterprise will demonstrate and validate the safety of used EVs and allow all involved parties to find means to appraise residual value of used batteries. This is expected to encourage the reuse of EV batteries. The shared EV battery data will also allow other new business opportunities to be explored.
Commenting on the news, Bakar Sadik Agwan, Senior Automotive Consulting Analyst at GlobalData, a leading research and consulting company, observed:
The MoU has potential to support the EV growth in South Korea and will be a use case for OEMs across the world. The cost of acquisition along with the availability of charging infrastructure and concerns related to battery-life are key factors that affect the large-scale uptake of electric vehicles. OEMs across the globe have been exploring opportunities to increase the uptake of electric vehicles through innovative business models, battery-as-a-service being one of them.
An EV sans battery reduces vehicle upfront cost by 30-40% and battery can separately be rented out or leased, dividing the cost of owning and maintaining over a vehicle’s lifetime. As per GlobalData estimates, a customer can lease EV battery for over 8 years at a price that is equivalent to the purchase cost of an EV battery. Leasing is a better option for customers, who do not clock high number of kilometers every year.
Renting or leasing out batteries offers additional benefits such as timely inspection of battery residual values by service provider, free/warranted replacements and assistance by service provider in events of breakdown. Shared mobility, logistics and delivery companies with large fleets will gain significant cost-benefits with renting/leasing model covering repair, service and replacement of batteries.
Some OEMs and governments in key markets such as China and Europe already have an active battery renting or leasing business model. However, it has not reached the required rate of commercialization globally. Hyundai’s implementation of the EV ecosystem with battery being rented or leased out can be a good example for other OEMs, government and stakeholders such as energy companies and mobility players across various countries to replicate the model to boost the uptake of electric vehicles.