December 7, 2022

President Joe Biden speaks as he meets with senators from both parties at the White House on February 11, 2021.

Doug Mills-Pool / Getty Images

President Joe Biden is prioritizing a national EV charging system as part of his $ 2 trillion infrastructure bill and promises to install at least 500,000 devices in the US by 2030.

The Biden government on Wednesday launches a $ 174 billion plan to spur electric vehicle development and adoption. This includes money for converting factories and increasing domestic material supplies, tax incentives for buyers of electric vehicles, and subsidy and incentive programs for charging infrastructure.

But it will take more than government support to successfully expand the EV infrastructure. There aren’t enough EV drivers yet to make the business profitable, and building a network of chargers is far more complex than it sounds. It takes a mix of public-private partnerships that can involve local communities, businesses and utilities, as well as automakers and an emerging group of EV charging companies. It’s not that easy to have a gas station on every corner.

“As EVs become the primary vehicles for people, it’s certainly not that we’re going to replace the gas station with the charging station, and that’s it,” said Mark Wakefield, executive director and global co-leader of automotive and industrial practice at AlixPartners .

$ 300 billion

AlixPartners estimates that it will take $ 300 billion to build a global charging system to match the expected growth in electric vehicles through 2030, including $ 50 billion in the US alone. The cost of EV chargers varies depending on the “state of charge” of the charger. The higher the level, the faster the charge and the more expensive it is to install.

EV charging station

Source: charging station

“It’s a big pill that anyone can swallow,” said Wakefield. “These are really, really expensive, especially these quick chargers,” which some automakers are promising, will only take 10 minutes to charge up to about 80% of upcoming electric vehicles. This is similar to lower tier chargers, including home power outlets, which last several hours. Level three chargers cost an average of $ 120.00 to $ 260,000, according to AlixPartners. “These aren’t cheap.”

But the demand for the networks is not quite there yet. Plug-in vehicles, which include electric vehicles and hybrid electric vehicles with traditional engines, accounted for only about 2% of the more than 17 million new vehicles sold domestically in 2019, according to the Energy Department. But many believe that now is the beginning of the end of gasoline vehicles.

“It’s no longer about if and it’s no longer about when, now the question is how fast? Because we know the automakers have put the money into the retrofit,” said Jonathan Levy, EV’s chief commercial officer EVgo charging company.

While automakers like General Motors and Volkswagen are investing heavily in improving the performance and lowering prices of electric vehicles to catch up with Tesla, they are far less interested in building, owning, and operating their own charging systems. The profit margins and the effort to maintain them just don’t make sense. Tesla, an early industry leader, built its own charging system out of necessity, in part to help sell its cars.

Mainstream adoption

Most automakers work with third party companies to provide charging stations. Their strategy, combined with Wall Street’s craze for electric vehicles, has driven investor demand for fees for companies like ChargePoint and EVgo. ChargePoint went public in March through a reverse merger with a special purpose vehicle (SPAC). EVgo plans to do the same in the second quarter.

According to the Department of Energy, there are approximately 41,400 EV charging stations in the United States. Fewer than 5,000 are fast chargers. According to GasBuddy, this corresponds to more than 136,400 filling stations.

“The answer isn’t one size fits all,” ChargePoint CEO Pasquale Romano told CNBC. “You need a whole universe of charging infrastructures that are easy to use and accessible for the various scenarios.”

Fee suppliers and operators have largely focused their infrastructure on destinations in urban and suburban areas such as grocery stores and other places where shopping is frequent. Companies consider it a tie for EV owners. There is also a growing demand for additional fast chargers between major cities to enable faster and longer journeys for electric vehicles. Tesla has been building such a network for its owners for nearly a decade.

‘Peanut Butter and Jam’

GM is committed to releasing 30 or more electric vehicles by 2025 as part of a $ 27 billion investment in electric and autonomous vehicles. It’s also one of many companies to focus on electric vehicles after Tesla’s success. Volvo has announced plans to become an all-EV company by 2030, while Volkswagen has a mission to be the world’s largest manufacturer of electric vehicles.

“We are starting this year at a turning point for electric vehicles and a turning point for sustainability, inclusion and growth,” said Mary Barra, CEO of GM, at a JPMorgan Securities conference Thursday.

Public chargers are needed to power these vehicles, but companies like EVgo need charging fees to justify their business. Many have described it as a “chicken and egg” scenario that is needed first. Levy, who served as deputy chief of staff in the Department of Energy under the Obama administration, calls it “peanut butter and jelly” instead.

“It’s not ‘chicken and eggs’ because we’re not starting from scratch,” he said. “We need to recharge, we have electric vehicles. It’s not what comes first. It’s peanut butter and jelly because we need to expand these things in a complementary way.”

Levy says about 30% of Americans don’t have access to home or work fees that they may need in the future.

According to IHS Markit for 2020, electric vehicles accounted for just 1.8% of new light commercial vehicle registrations in the US. AlixPartners expects 18 million electric vehicles to be on US roads by the end of 2030.

Business models

EVgo, which plans to go public in the second quarter as part of a $ 2.6 billion SPAC deal, owns and operates more than 800 charging stations in 67 major markets in 34 states. The company’s business model is different from ChargePoint, which sells stations to businesses and other entities and then charges them subscription fees to be part of their network.

“We are essentially crowdfunding for the driver, one company at a time, the largest network of EV chargers in the region for them, and they see everything as one network through our mobile application,” said Romano of ChargePoint. “Everything says ChargePoint, we own none of this. It just looks like we own the driver and that’s what we want is to create a model where every company does their part.”

A Tesla Inc. vehicle is charged at a charging station in San Mateo, California, United States on Tuesday, September 22, 2020.

David Paul Morris | Bloomberg | Getty Images

ChargePoint is Cowen’s “top pick” for the recharge market, which the investment firm believes will have a total addressable market of approximately $ 27 billion by 2040. The company went under a SPAC contract with Switchback Energy Acquisition Corp. on March 1. on the stock exchange.

While Cowen is largely new to public investors, Cowen believes “the sector is poised for tremendous growth and value added backed by a big, strong unit economy and recurring revenue,” according to an EV charging report beginning this month.

But that growth must go hand in hand with electric vehicle sales, incentives and investment from various sources, including the federal government, according to official figures.

“Right now, you absolutely need government funding at some level,” said Wakefield. “The reality is that automakers don’t have the money. The utilities have some of the money, but the business case isn’t there. It’s so expensive.”