To Lease or Not To Lease (EV Batteries)

To lease or not to lease, that is the question. And it has been the question running in the minds of many carmakers as they ponder how to turn their gasoline car business model around to embrace the relatively low-maintenance electric vehicle (EV).

Lease vs. Buy, or The Case of What To Do With Evolving EV Batteries

A decade ago, the discussion was centered around whether EVs or charging stations should come first. Of course, we needed both, and still need more of both, but they are more or less growing in tandem.

That was closely followed with the “buy or lease your battery pack” question. That’s a more complicated one.

Better Place tried something in the middle — swapping EV battery packs at stations placed along common routes and highways — but that business didn’t last long.

But let’s rewind for a moment — why would you lease battery packs anyway? The answer would be the same as why many people decide to lease an EV instead of buying one. Battery technology is quickly evolving and it can make much more sense in terms of depreciation to lease than buy. With battery packs improving every year, many people and companies don’t want to be stuck with a 2015 battery in 2020.

The problem is that if everyone leases to avoid poor depreciation, someone is still stuck with poor depreciation — whether that be leasing companies or carmakers. Foreseeing such a possibility, those companies will either jack up prices or stop offering the leases.

Generally, automakers have chosen not to lease batteries — they’ve stuck to the normal deal of selling the car all together and letting the buyer deal with depreciation on their own. Renault has been one company that has gone the battery leasing route. As of this time last year, it had leased more than 100,000 battery packs. That option has so far done a good job relieving consumers’ anxieties around the often used scare tactic of battery degradation, and the option has probably been one notable reason why the Renault Zoe has so often topped the list of top selling electric cars in Europe.

But buyers like choice, and Renault recently started offering the option to buy an electric car with the battery included. Many consumers were waiting for that, but how many will actually end up choosing to buy their batteries rather than rent/lease them? Will the masses of Zoe buyers still choose buy a Zoe for €23,700 (roughly $30,000) and pay a €49 or so monthly fee for battery leasing, or will they favor buying the battery pack for an extra €8,900 ($10,000).

In the end, consumers like choice. Some think leasing makes more sense since next year’s battery pack will be better. Some decide the current capacity/range is enough and it’s cheaper in the long term to buy than to continuously lease. Most carmakers have abandoned the idea of leasing batteries, while others have turned to it in order to answer the thorny issue of how to make money on EVs that require close to no maintenance (remember that the automaker business model is based in good part on recurring maintenance and planned obsolescence of the internal combustion engine — the highly inefficient and antiquated opposing piston engine that manages a paltry 33 percent efficiency). Renault is going to test the waters and see what consumers demand after being presented with both options in a moderate-range (300 km or 185 mile) electric car.