Media under the Outing 100 Club focuses on the evolution of the automotive industry

Author: Li Yizhi

In April of this year, China produced 161,000 pure electric vehicles, a year-on-year increase of nearly 250%, setting a recent record high. However, across the ocean in the United States, they do not want to fall behind the electric vehicle transformation.

Just like the previous Democratic president, Obama (Note: During his term, Obama issued a large number of measures to encourage the development of electric vehicles, with Tesla being the biggest beneficiary), the newly elected president of the United States, Biden, is determined to promote the electric vehicle revolution.

This means that there will be a large investment in public charging stations. In the new infrastructure plan issued by Biden, the United States is expected to invest $15 billion and build 500,000 public charging stations by 2030. However, a problem has emerged. So far, no public charging station operator in the United States knows how to achieve profitability.

Charging stations and electric vehicles significantly affect each other’s supply and demand. In the development process, the unavoidable problem of “which comes first, the chicken or the egg?” arises.

In the United States, most electric vehicle owners currently charge at home, and the utilization rate of public charging stations is very low. This leads to a very direct result: the scale of public charging station construction is far behind China and Europe. In 2019, the number of public charging stations in China was eight times that of the United States, and the speed of growth has further accelerated this year.

Due to the mileage anxiety of electric vehicles, before the widespread deployment of public charging stations, most American consumers will choose to purchase gasoline-powered vehicles. This cycle is a cause for concern for the Biden administration.

Despite this, investors in public charging stations are still flocking in. They firmly believe that the industry’s explosive growth is already imminent. Pessimists and skeptics warn that many charging station companies will declare bankruptcy before finding a profitable model.

However, the $15 billion budget prepared by Biden for 500,000 public charging stations has given rise to market optimism. Since Biden’s election, investors have been hot on companies related to electric vehicle charging. The risk is that pioneers may become martyrs, and the sudden enthusiasm of capital may be quenched.

Chris Nelder, who studies the automotive charging market at the RMI Energy Research Institute, believes that “(this industry) will definitely require several years of investment before it can generate returns.”

Demand is insufficient, subsidies come to promote

Nelder firmly believes that electric vehicle charging is definitely a profitable business. However, the key turning point of profitability is the number one problem looming over charging companies.For the past 10 years, the electric vehicle (EV) charging industry has been seeking a profitable business model.

Last year, the two oldest companies in the industry, Blink Charging and Beam Global, both had revenues of less than $10 million. However, this did not prevent crazy investors from raising Blink’s stock price 500%. Today, even though the peak has passed, Blink’s market value is still $1.6 billion. Before being cut in half this year, Beam’s stock price had increased by 300%.

The largest charging company in the United States, ChargePoint, has just gone public through a special purpose acquisition company (SPAC), and other companies such as EVgo and Volta are expected to follow suit.

Going public and raising funds urgently can help them fight the fact that the charging business is not profitable.

To understand the difficulty of making profits from public charging stations, one should look at the situation of “elder brother” gas stations. In the United States, refueling is also a low-profit business. Most of the profits come from the high-frequency demand for fuel, which allows stations to sell snacks, coffee, and cigarettes. On the other hand, even low-profit charging is difficult to maintain basic frequency in public charging stations.

Because the United States is vast and sparsely populated, many car owners have their own garages. Unless they live in densely populated cities like New York and San Francisco, electric vehicle owners often charge their cars in their home garages (which is cheaper). As long as they do not drive long distances, the range provided by most electric vehicles is sufficient for commuting. Car owners cannot find a reason to charge frequently at public charging stations. The United States Department of Energy estimates that 80% of electric vehicle charging occurs at home.

It is also worth noting that even if car owners are willing to charge their cars in public charging stations, these stations are not used to their fullest potential. For example, if a car owner parks his car in a charging space at 9 p.m. and goes home, then for the next 10 hours, this charging station will be unable to receive any other “customers”, and the car owner may only pay a few dollars in electricity fees.

Ultimately, the demand for public charging stations in the US market is not high enough.

Last year, 259,000 electric cars were sold in the United States, setting a new record. Among these newly sold electric vehicles, 79% were manufactured by Tesla. Tesla has built a supercharging network in the United States, but it cannot be used by other car brands. General Motors recently signed cooperation agreements with seven charging service providers to ensure that its electric vehicle owners have access to charging stations.Tesla’s Supercharger network has formed a complete closed loop. According to Bloomberg’s new energy finance analyst Fisher, “Is there any need for Tesla owners to use public charging networks? No.” In the infrastructure plan that will be reviewed by the US Congress, the Biden administration hopes to expand demand for charging piles through a total of $15 billion in fiscal spending. According to the White House, part of the funding will be used to subsidize incentives for the installation of charging piles, and the other part will be used to support research and development projects to reduce the cost of charging piles.

Various Struggles for Profit

In the United States, charging station service providers are still fighting for survival. Before facing the life-and-death question of how to make a profit, they each have their own answers.

ChargePoint directly sells charging stations and provides different levels of operational support, but does not charge car owners for charging. Their typical customers may be Silicon Valley companies willing to provide free charging benefits to their employees. Even if ChargePoint’s supported charging stations are rarely used, they can still receive fees paid by companies.

“I don’t want to turn car owners into customers, because I may starve to death before the market starts,” said Pasquale Romano, CEO of Charge Point. “Charging fees don’t make much money.”

Other companies like EVgo operate charging piles themselves and charge for each charging session.

Blink supports both business models by operating the charging station by themselves, but if customers want to buy the pile, it is also possible. For CEO Michael Farkas, the most important thing at present is to build charging stations in places with demand as much as possible, and the issue of profitability can be postponed.

The soon-to-be-listed Volta plans to incorporate charging advertisements into its profit model. Volta’s charging piles have a 55-inch screen, and supermarkets can cooperate with it to place charging piles in their parking lots, and promote sales ads on the screens.

Beam Global has launched a charging pile product with a solar-powered canopy, which although looks insufficient for charging power, has the advantage of being self-sufficient in energy, without having to undergo major modifications of the parking lot by burying wires. In the United States, Beam Global has sufficient reasons to develop such a self-generating and easy-to-install product, because installing charging piles in the United States means substantial time costs-need for the construction party to apply for construction permits, as well as permits to access the public power grid.Meanwhile, this also means significant economic cost. According to BloombergNEF data, the price of a charging pile in the US ranges from $2000 for low-end products to $100,000 for top-end products. Scaling up production will significantly reduce hardware costs, which will be an important factor for many charging companies to turn losses into profits.

It’s worth noting that both the Biden administration’s incentive policies and how “Tianwen” is profitable are experiences that China’s car charging industry has gone through and is still experiencing.

Earlier, the domestic charging industry was affected by market demand, and also had problems such as slower development than planned and difficult profitability. But by 2019, China’s new energy vehicle industry policy began to consciously tilt toward charging, including but not limited to increasing direct subsidies for charging piles, promoting the construction of unified charging standards, and encouraging battery swapping. In China, a public charging pile operator (Teld) announced profitability. In the Chinese market, public charging pile operations have begun to enter the industry integration phase.

As the Biden administration’s infrastructure plan puts the US charging industry on the upswing, will these US companies replicate the path of their Chinese peers or take a different path due to many differences in the US and Chinese car industries?

Perhaps the development of the US charging industry can also become a mirror for the domestic charging industry.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.