Compared to complex internal combustion engines, electric motors are remarkably simple, with really just one main moving part. Overall, an EV should require less maintenance than an ICE car, though they do have one big, heavy Achilles’ Heel: the battery pack. Battery packs, even advanced as modern ones are, are best thought of as a consumable since theyw degrade over time. They’re also cripplingly expensive to replace, and are the main limiting factor if you’re considering buying a used EV: How much life does this battery pack have left? I’d never really want to own an EV’s battery, and there’s now one company that’s planning to offer an alternative idea: Vietnam’s first major automaker, VinFast.
VinFast was started in 2017 by Vietnam’s first billionaire, Phạm_Nhật_Vượng. Phạm (that’s his surname; I didn’t realize this before, but Vietnamese convention has the surname first) made his fortune by starting an instant noodle company in the Ukrainian market, and then sold that company to Nestlé. This may be the first car company to be started with instant noodle money, though Sakichi Toyoda started out making weaving looms, and what is a thread but a textile noodle, right? No? Okay, fine.
For its EV projects, VinFast is getting engineering help from BMW; in fact, the Vietnamese company’s first two gasoline cars, the LUX A2.0 and LUX SA2.0 (which came out for the 2018 model year), were based on the BMW 5 series and X5, respectively. MagnaSteyr is providing manufacturing assistance, and the EVs are styled by Italian design house Pininfarina, so this new EV company certainly has help from established and respected sources.
VinFast’s two new EVs, the VF8 two-row crossover and VF9 three-row SUV are the ones I want to talk about today, because they offer the battery solution I’m interested in. While I think easily swappable, standardized batteries are the ideal solution, at least from a consumer standpoint, what VinFast is proposing may be the next best thing: battery leasing.
VinFast is planning on moving ahead with its battery leasing plan for these two models in the United States, a plan expected to start in June of this year. VinFast is also building a factory for these vehicles right here in my home state of North Carolina, so soon these will be available with the same commitment to quality that other North Carolina high tech manufactured items offer — items like like the confusingly-named Texas Pete hot sauce.
It’ll Cost The Average Driver $110 or $160 A Month To Lease Their Own Car’s Battery
The plan will work like this: You can buy a VF8 (starting at $40,700) or a VF9 (starting at $55,500) and then you pick a battery lease plan. There’s a lower-mileage plan (up to 310 miles/month) which is $35/month for the VF8 and $44 for the VF9, but if you go over the 310 miles, then it’s 11 cents per mile for the smaller crossover and 15 cents per mile for the bigger one.
Okay, so the 310-mile plan is pretty damn limiting. If you pick this one, you’re driving occasionally, at most. Maybe that would make sense for people who work at home or only use their car for a couple of short road trips per month.
The range of the battery packs for the two vehicles is 250 to 300 miles for the VF8 or 262 to 369 for the VF9 (the range is based on battery size selected for each car). Those are decent numbers, not anything really remarkable, but certainly on par with most mainstream EVs on the market today.
If you don’t want to be bound by some mile limit, then you can get an unlimited miles plan for your VF8 for $110/month or $160/month for your VF9. For orders this year, that cost will be frozen for the life of the vehicle, and, significantly, the price will transfer to the next owner if the car is sold used.
The company explains their thinking about this plan like this:
“By separating the price of the battery from the acquisition value of the automobile, VinFast takes on all the risks related to the vehicle’s battery and ensures a reasonable price for its products. VinFast also commits to provide a lifetime battery warranty covering all maintenance and repair costs, and will replace the battery for free when charging capacity dips below 70 percent.”
So, instead of factoring the cost of the battery pack into the car when you buy it, you pay for it each month, at prices that range from a mid-tier Hulu subscription to a fancier wine-of-the-month club subscription. They replace the battery for free when capacity drops below 70%, which is similar to what companies like Tesla offer on their battery warranties, but those are only for eight years or 100,000 to 150,000 miles (depending on model).
Now, $40 and $50 grand aren’t exactly dirt cheap cars, but as of February 2022, the average price of an EV is over $60,000, so it does appear that buyers will realize at least some savings if they forego “owning” a battery. You are, of course, still paying for that battery, but in monthly payments of $110 instead of an extra $10,000 on the price or so — though I’m just making this assumption that the car would otherwise cost $10 grand more (you’d have to cross-shop this with competitors).
Like all lease arrangements, you’re going to pay more for the same thing, and that may not make sense to some buyers, but if you think the initial cost reduction versus the competition is reasonable (I can’t say I think that for sure, not having seen the cars) then I can see it making sense.
If you plan on keeping the car a long time, and think of this method as almost a sort of battery pack insurance, then I think paying for the use of a battery piecemeal over the life of the car is a good idea, because not having to worry about the looming threat of a massive battery replacement fee is something that will appeal to many buyers.
I’m not someone who would ever want to lease a car, but I also wouldn’t want to own a battery pack, because the fundamental nature of them does mean they decay, as a normal result of time and use. And, sure, everything on any car takes wear and is more likely to break with time and use, but there’s nothing really equivalent to a monolithic component that can cost roughly between $10,000 to $20,000 to replace.
If you don’t plan on owning the car more than eight years then no, this solution does not make sense, because federal law requires a minimum 8 year/100,000 mile warranty for batteries.
Where I think this really changes the game is on the used car market, which otherwise is pretty bleak for EVs. By modern standards, an eight-year old car with 100,000 miles isn’t even that used, but if you knew there was a potential $13,000 to $22,000 repair looming on the horizon to replace a worn battery pack, why the hell would you risk it?
The VinFast lease model solves this problem: The used car buyer gets an EV with a battery pack they don’t have to worry about devastating them financially, and VinFast has a revenue stream continuing from sales of their used cars. All in all, it’s a pretty clever win-win solution, I think.
Still, will enough people think the plan makes sense to buy these new so there’s enough to end up on the used car market? I’m not sure.
In the interest of full disclosure, David does not like this plan at all. In fact, we’ve been discuss-arguing about it off and on for the past day or so, so we may as well give everyone a say, because I think this is an interesting situation, and likely not the last time we’ll encounter it.
I’m going to let David give his take on this first, because, dammit, you have a right to know:
[David’s thoughts: Hi Autopians, David here. For me to really make a sound assessment on this concept, I’m going to have to look at the numbers, which I just don’t have right now. First things first, I’ll need to see how the Vinfast’s pricing compares to that of the competition once the Vietnamese company’s cars launch. Are buyers actually realizing savings up front by leasing the batteries? How much, and after how many months of payments do those savings disappear?
I have to say: If I went to a dealership today and they sold me a car and said: “Hey, do you want to pay $110 a month in case, in 15 years, your engine blows up?” I’d answer: “Why the hell is my engine going to blow up? Screw this.” I’m still not cool with accepting that a battery will be significantly compromised so soon. And honestly, I’m not convinced it necessarily will be.
One concern I have with this leasing plan is that there’s just too much happening in the EV R&D space right now. Imagine I buy a Vinfast and plunk down $110 a month for the battery. Fifteen years in, I’ve dropped $19,800, and my battery dies. Vinfast will replace it: Great! Or not, because by then who knows if my car is worth a damn; its battery technology could be so outdated that nobody wants it, and my dumb arse just dropped $19,800 (over time) on a car that’s worth pennies (imaging dropping $19,800 to put old tech into your 2007 car). Maybe Vinfast will put an updated battery in at that time? Who knows. And again, if I’m saving a bunch up front, then that $19,800 figure drops; I just don’t have that information.
I’m sure the resale value would go up should I sell the car after 8 or 9 years, as the buyers would know that, so long as they keep paying $110 a month, they’ll be getting a free battery from Vinfast when it fails. But whether those resale numbers justify the expense of all those payments, I’d just have to run the numbers. Honestly, I just don’t know enough at this point, but I remain skeptical of this strategy.
Our brilliant news writer Thomas Hundal has opinions and thoughts, too, so let’s hear him out:
If I’m being honest, VinFast’s battery lease program is much cheaper than I expected. The unlimited-mileage plan on their VF 8 compact luxury crossover comes out to $110 a month, $1,320 a year, or $19,800 over a 15 year period. While that sounds bad when it’s added up, a gas-powered car also eats a lot of money in powertrain maintenance and repairs over a 15-year time span.
Timing belts, valve adjustments, ignition coils, synthetic oil changes, oxygen sensors, none of this stuff is cheap. If you’re not the sort of person to get your hands greasy and like to sit in a dealership chair and drink dealership coffee and eat dealership muffins while your car receives dealership maintenance, it’s not hard to spend somewhere in the ballpark of $1,320 a year keeping an older car’s engine running.
Honestly, that’s really the key here. Battery leasing makes the most sense for people who are in it for the long-haul. People who want a hassle-free experience. The sort of people who’ve owned Toyota after Toyota after Toyota because they appreciate stuff that’s built to last. In all honesty, electric cars aren’t built to last quite as well as gas-powered cars. Lithium-ion batteries degrade with every discharge cycle, that’s just their nature.
If you want to keep a car forever, $110 a month to lease a battery genuinely isn’t half bad. In fact, it gets better over time for the people who agree to a locked-in leasing plan. In fifteen years, $110 should have less buying power than it does now, so battery leasing costs will get cheaper as inflation rises.Of course, long-haulers aren’t the only people who could see benefits. A battery lease system could also be a boon to small businesses and freelancers should battery leases get classified as vehicle maintenance come tax time. Imagine being able to completely write-off the cost of the battery in your business vehicle. Pretty sweet, right?
It’s also worth considering the mindset of the average consumer. Monthly payments are typically easier to budget than varying expenses, and peace of mind plays a huge role in making big financial decisions.Truth be told, all of these potential benefits hinge on one very important question. Will OEM parts support still exist in 13, 14, 15 years? VinFast seems to think so, but business plans can change. Besides, we’re living in an era where electric cars are almost like personal computers were in the 2000s – you’re almost afraid to buy one knowing that something even better may be just around the corner. What’s around the corner in 13 years?
Perhaps we’ll see similar tech to what we have now, but perhaps solid state batteries will become cheap and plentiful. It’s hard to say. Still, if parts support continues for 15 years, long-haulers and used shoppers are in for a delight.
While it’s not quite the consumer-first solution that standardized, easily swappable EV batteries would provide, this does make EV ownership more appealing for those, like me, that have no interest in actually owning an EV battery pack. It also dramatically changes the game for future EV used car sales, too, which is important, especially since new cars are so expensive, and likely will remain so.
I’m curious to see how this all plays out.