EV Charging Has A Profit Problem, Which Means It Has An Investment Problem

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A recent piece at Jalopnik brought together multiple sources to show that there’s a big problem facing EV charging: profits. When EV charging can’t turn a profit, it can’t attract the investment needed to build more charging. This, in turn, could spell trouble for the future of EVs themselves, because even the billions already being spent will not be enough.

This problem isn’t the only one facing the industry, unfortunately. EV sales are at record numbers, but growth in sales is slowing down when experts predicted it would be taking off. This means EVs are sitting on dealer lots for longer, which makes dealers rethink investment in EV sales. Now, the charging side is suffering similar problems.

First, Jalopnik summarizes the findings of a Wall Street Journal article, which says, in part:

The charging providers don’t expect to turn profitable for about a year and face the prospect of EV market leader Tesla opening much of its popular charging network to other drivers starting in 2024. The blistering pace of U.S. sales growth for EVs has moderated. Some charging executives say they are running into challenges that include customer unease about the direction of the economy, higher costs and delayed deliveries of EVs to fleet customers.

ChargePoint Holdings have tumbled 74% this year, and the company missed initial revenue projections for the third quarter. Blink Charging shares have dropped 67%, while EVgo is down 21%, and both project annual losses.

Not only are there not enough EV drivers using charging stations for them to turn a profit, but the opening of the Tesla Supercharger network to other EVs means that all of these providers are going to be facing some serious competition for those few drivers. This means that even more EV charging growth is needed, and that’s not what’s happening on the ground.

This, combined with reliability problems these charging providers have been working to resolve, has led to some serious stock price drops. This leaves the companies with less breathing room to expand at a time when the EV industry needs them to be expanding more.

Fast Charging Is Really, Really Expensive To Provide

A big problem with this whole mess is that EV fast charging stations are very expensive to install and run.

For one, the cost of buying the equipment and installing it can be obscene. A very basic 50 kW station that many would barely consider to be fast charging can cost $50,000 per stall. Faster ones that make the drivers of the latest EVs happier can cost as much as $200k per unit. When you need to get at least four stalls to make for both capacity and redundancy, these costs approach $1 million at the low end when considering the other needed construction and power upgrades to get them all put in. Worse, it’s probably necessary to put in 8 or 16 stalls (if not more) to make room for future growth.

Once all this money is spent, it doesn’t really get much better. Demand fees alone, before the per kWh energy charges, can be thousands of dollars per month. Or, the stations can be even more expensive because you’d need battery storage to avoid the high peak wattage that drives high demand charges.

Making charging profitable at this point isn’t easy because EV drivers feel the need to save money over driving a gas-powered car. When the cost per minute or per kWh is too high, road trips start costing more in an EV than they cost in a comparable ICE car, which kills desire for the whole thing (nobody’s going to buy an EV unless there are real cost savings).

It’s Not Like Gas Stations, At All

The other thing that hurts EV charging is that it’s not anything like running a gas station.

The most important difference is that EV drivers don’t use public charging that much. When it’s cheaper and more convenient to charge at home, most EV drivers aren’t going to use public chargers except when absolutely necessary. Road trips are a big use case, as you’re simply going too far away from home, but unusual days where a person does a lot of driving can lead to a need to charge up.

The big exception to this is commercial and rideshare vehicles. People who do enough driving every day to need more than the vehicle’s range may have to stop one or more times per shift to get the job done. But, that’s a small percentage of overall vehicles, and may be even more price sensitive.

The time spent leads to another issue: people aren’t going to be happy with normal gas station amenities. A little cinderblock building with a few drinks and snacks is sufficient for most gas car drivers because they’re not looking to stay around for 20-60 minutes. So, normal gas stations that are barely getting by anyway are at a disadvantage, leaving them to not be able to invest in them. This favors big chains and premium facilities like truck stops.

The remaining nice places to put EV chargers in at are now going to be more competitive. Instead of having site hosts that are begging charging companies to come set up, charging companies are going to compete for prime sites. This, in turn, leads to dedicated charging stations with dedicated amenities at some point (which could bring the profits back).

Will This Get Fixed?

While EV sales aren’t growing as fast as hoped (or hyped), EVs are still getting sold. More importantly, most EVs are too new to be leaving the road yet. So, the population of EVs on the road is still growing. This means that utilization will still climb, which in turn means that profits will come. So, the current situation is only going to delay and not prevent the growth of infrastructure.

But, the remaining question of when is still important.

For one, too much consolidation can be bad for drivers. If all of the other companies can’t keep growing in Tesla’s shadow, we could get a monopoly or near-monopoly situation. Historically that has never worked out for customers, even if you really love Tesla. Having only one or two other players could be bad, too, because that will result in a company being the proverbial only girl in town in some places.

Personally, even when my Bolt gets a Tesla adapter, I’m going to support the other charging companies as much as possible because we need them to succeed. Drivers of all EVs should consider supporting the underdogs here, too.

Featured image by Jennifer Sensiba.

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