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EV-charging industry is doing everything except making money

EV-charging industry is doing everything except making money
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President Joe Biden’s plan to wean U.S. drivers off fossil fuels requires massive investment in public charging stations to power the electric-car revolution. So far, none of the companies that deploy the equipment has figured out how to make a profit.

The dilemma boils down to demand, and its chicken-and-egg nature. Most electric-vehicle drivers charge their cars at home, so many public charging stations get little use.

But lots of people still driving gasoline-powered cars won’t consider going electric until they see charging stations widely deployed, for fear that they will run out of juice on the road.

Speculators are piling into the industry, convinced that boom times are around the corner, while short sellers and other skeptics warn that some of these companies will go belly-up long before they figure out how to make money. Biden’s plan to spend US$15 billion to help create 500,000 more public stations by 2030 is feeding the optimism, with investors flocking to EV charging companies since his election. The risk is that the early movers will get badly burned, potentially souring capital markets on the industry for years to come.

“It’s definitely going to require years of investment before they get any return,” said Chris Nelder, who has studied the economics of charging for the RMI energy research institute.

Nelder is sure that electric-vehicle charging will eventually be profitable. But when that tipping point will arrive is one of the biggest questions hanging over charging companies.

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A decade into its existence, the industry is still hunting for a winning business model. Two of the more established names, Blink Charging Co. and Beam Global, made less than US$10 million in revenue last year. That didn’t stop investors from sending Blink shares up more than 500 per cent after Biden’s November win, and while it has come well off its peak the company’s market valuation is still north of US$1.6 billion. Beam jumped more than 300 per cent, though it has lost about half its value this year.

The biggest U.S. company, ChargePoint Holdings Inc., just went public via a special purpose acquisition company, or SPAC. Others including EVgo Services and Volta Industries Inc. are poised to follow.

Fueling cars and trucks has always been a low-margin business, with gasoline stations making much of their money from selling snacks, coffee, and cigarettes. The business is even tougher when it comes to EVs. Unless they live in dense cities like New York or San Francisco, drivers do the vast majority of charging at home — their garage is their gas station. They use public chargers infrequently, with most vehicles offering more than enough range to complete daily errands without a top-off. The U.S. Department of Energy estimates that 80 per cent of EV charging happens at home.

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Then there is the relatively small number of vehicles involved. Americans bought 259,000 new electric cars last year, a record according to BloombergNEF, but it’s still just 2 per cent of total car and truck sales. And of those new EVs, 79 per cent were made by Tesla, which has its own branded network of “superchargers” that can’t be used by any other electric car.

The Biden administration hopes it can boost some of that demand with the proposed spending, part of its infrastructure plan now before Congress. Some of the money would go toward grants and incentive programs to install chargers, according to a fact sheet from the White House, and some would go toward research into lowering the cost of the chargers themselves.

The charging companies are positioning themselves for profitability in different ways.

An electric Volvo parked in an EV charging spot. Tolga Akmen/AFP / Getty

ChargePoint sells stations and offers various degrees of operational support, but doesn’t get paid from the charging itself. A typical client might be a Silicon Valley company that offers its employees free charging at work as a perk. If a particular station gets little use, ChargePoint still gets paid.

“I wouldn’t want a driver as a customer, because I think I’d starve to death,” said Pasquale Romano, ChargePoint’s chief executive officer, in an interview. “There’s not a lot of money in electricity.”

Other companies, like EVgo, own the chargers they deploy and make money each time they’re used.

Blink, meanwhile, takes both approaches at once. The company prefers to own and operate as many of its stations as possible, but if a property owner wants to buy the chargers from Blink outright, that’s fine, too. The biggest priority is locking up good sites in high-demand areas, according to CEO Michael Farkas.

“Right now, this is a land grab,” Farkas said in an interview. “For us this is about getting as many locations as we can, and we’ll deal with profitability later.”
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