Cambyses Financial Advisors LLC

Vehicle Charging - State of the Industry - September 2023

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As the EV industry evolves, charging infrastructure, its performance, or availability has emerged as the primary focus of customer dissatisfaction with both the infrastructure and EVs themselves.

 

Customer dissatisfaction starts with the vehicles themselves: As with Internal Combustion Engine autos, most EV driving activity takes place within 100 miles of home. An EV round trip within that zone presents few anxieties. EVs currently in the market have an average range of 211 miles. Half of the EV models have ranges greater than 300 miles, and two models have ranges greater than 400 miles. It is when EV owners leave their own neighborhood that their range-anxiety manifests.

 

Charger speed:

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Approximately 80% of the technology currently deployed is, simply, too slow. Level 2 chargers {AC, 208-240 Volt, delivered through a dedicated charging device} charge an EV to 80 percent from empty in 4-10 hours. That rate is acceptable only if you are content to limit your daily driving to 300-400 miles and/or have access to overnight charging facilities.

 

Until November 2022, Tesla’s DC charging platform (DC, 400-1000 Volt) was incompatible with other manufacturers plug-in connectors. This limited competitor access to Tesla’s high speed charging platform (Full charge in 20-60 minutes.) Tesla has since agreed to allow several manufacturers (Notably, Ford and GM), to use Tesla’s connectors – which, through “Musk Magic,” have now been dubbed the “North American Charging Standard (NACS).” Not to be outdone, a coalition of seven manufacturers [*1] recently agreed to deploy up to 30,000 fast charging installations that support both NACS and Combined Charging Standard connectors.

 

Charger Geography:

 

The Department of Energy reports there are approximately 51,000 public charging stations in the U.S. (March 2023). The Petroleum Institute reports nearly three times as many gas stations are in operation. EV’s presently account for ~1.5% of vehicles, so this would seem a reasonable supply. Looking deeper, however, we find:

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1. EV charging stations are, predominantly, an urban phenomenon. Charging locations are concentrated in metropolitan areas – exacerbating the range issues in states and regions where population centers are far apart. As one writer observed, with an average EV range of 210 miles, a Nebraska Driver could not travel from Lincoln to North Platte in their EV.
    

2. Charging Station distribution is heavily skewed. California has about 30% of commercial charging stations (14,040 of 51,000) – nearly four times as many as New York (the state with the second most stations). Alaska, Mississippi, and the Dakotas each have fewer than 100 stations. Based on population, the Plains States are a veritable desert of EV charging. [*2]

 

We don’t expect these patterns to abate in the near future.

 

Convenience, Availability, and Maintenance:

 

Companies that invest in reliable hardware and robust maintenance practices earn EV users’ trust. Unfortunately, with the exception of Tesla and Volta, the major charging networks don’t seem to have gotten this message. A recent JD Power survey [*3] reports that twenty to thirty-five percent of EV drivers have arrived and departed from a charging station without gaining any range (charge) on their EV. Drivers report malfunctioning equipment, incompatibility, and lengthy delays for service as their primary sources of dissatisfaction.

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This dissatisfaction is one factor driving manufacturers to internalize their charging infrastructure, or to align themselves with one or more of the emerging charging coalitions, This, in turn, impairs the future value of “pure-play” charging companies – a process reflected in both their revenue growth and their stock prices. It also portends a movement toward vertical integration and consolidation within the EV manufacturing industry itself. [*4]

 

Boredom:

 

We admit we didn’t see this one coming – no matter how obvious it is in retrospect. Long charging times imply long periods sitting around and waiting. For the most part, there is very little to do while you wait.

 

This suggests there may be mixed-use-business opportunities that provide entertainment, recreation, food, or rest areas in conjunction with charging services. Perhaps, an enhanced version of gas-station mini-marts? The risk, for entertainment-recreation offerings, is that charging time improves to the point where there is no need for entertainment. This will probably drive most operators toward mini-mart and eating venue options. Just what the world needs – more fast food and strip malls.

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[*1] BMW, General Motors, Honda, Hyundai, Kia, Mercedes-Benz,  and Stellantis

[*2] The Plains states are sparsely populated outside major urban areas and intermittent cold weather contributes to shorter battery life and slows EV adoption. The area’s staunchly Red politics and dependence on e.g., alcohol fuel revenue completes the picture.

[*3] https://www.jdpower.com/business/press-releases/2023-us-electric-vehicle-experience-evx-public-charging-study We are hesitant to cite JD Power’s “trend” statistics due to the paucity of data on which they are based. Three data points, in our estimation, are not sufficient to establish or validate a “trend.”

[*4] We anticipated consolidation would first manifest in EV manufacturers’ supply chains. So far merger-consolidation (vertical integration) on the supply side has focused on batteries, semiconductors, and raw materials. Post-manufacture consolidation has emphasized dealer-distributorship and (most recently) charging infrastructure.