OPERATIONS MANAGEMENT RESEARCH STRATEGIC PLAN | RESEARCH AND SCHOLARSHIP
How a Battery Leasing Model Could Increase Adoption of Electric Vehicles
June 18, 2024 ·
Contributed by: Andrea Lawson
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A new flexible battery leasing model could help solve two major problems in the adoption of electric vehicles, says a McMaster researcher.
Lingling Shi, an assistant professor of operations management at the DeGroote School of Business says the model addresses two major challenges facing consumers: high price points and concerns about range capacity (or how far one can drive before having to charge their vehicle battery).
The leasing model would allow customers to select a battery that suits their driving habits at the time, temporarily upgrading or downgrading as needed.
Shi says the two problems — cost and range capacity — can’t be solved simultaneously the way we do things now, as a high-capacity battery that would improve a vehicle’s driving range would also increase the price.
“We’re looking at probably 20 to 30 per cent off the vehicle purchase price if we’re not including batteries,” says Shi. “And we get into the interesting part, which is the flexibility it offers.”
That flexibility means a person’s daily commute could be well-served by a short-range battery, but for a weekend getaway or vacation they could lease a battery with a longer range for a fraction of the cost.
For manufacturers, battery leases could potentially increase profits by providing a new source of revenue.
As addressing climate change becomes increasingly important, electric vehicles have received a lot of attention because of their ability to reduce carbon emissions.
Shi, who co-founded an electric vehicle technology company and worked in the industry for several years, says a conversation with her young son following an especially hot day in Texas spurred her to look at the adoption of electric vehicles from a variety of perspectives.
“We were talking about the hot temperature and my son said, ‘Our Earth has a fever.’ I realized this is an issue young kids are thinking about too,” says Shi.
“I thought, ‘How can I look at this from the perspectives of different participants (manufacturers, consumers, government, etc.)?’ What research can I do?”
A wider adoption of the leasing model would also mean fewer wasted resources on batteries to meet customers’ driving needs, with greater benefit to the environment as a result.
“The biggest reason batteries may be expensive in the future is because they use finite resources like lithium, nickel, cobalt, and other critical minerals,” says Shi.
Electric vehicle batteries are still a developing technology, and ongoing research investment is keeping production costs high, notes Shi, who wants to continue to focus her research on green technology adoption and sustainable business models, as well as options for battery recycling.
