This is the biggest obstacle to electric vehicle adoption; can investors benefit from it?
“Range anxiety” is one of the scariest things about driving an electric vehicle (EV), and it’s also one of the biggest barriers to its adoption.
A Consumer Report survey showed that 61% of people see charger availability holding them back from buying an EV, and the recently passed Inflation Reduction Act aims to tackle this problem head-on.
What comes first? The EV or the charging station?
It’s the classic chicken-and-egg problem.
- Chicken: Consumers are reluctant to buy EVs without chargers.
- Egg: Commercial property owners don’t want to build chargers without EVs.
While home chargers are abundant with cheaper costs (~$600-1,000), public chargers are still lacking. Fast chargers — which can cost up to $150,000 each — are even rarer.
To incentivize usage, the Inflation Reduction Act will increase tax credits for building charging stations from $30,000 per site to $100,000 per charger.
Tax credits might not save the industry’s problems…
Nearly everything clean energy has gone up in recent weeks — including some of the largest charging companies like ChargePoint (NASDAQ:CHPT) and Blink Charging (NASDAQ:BLNK) — both up nearly 50% in the past month.
But long-term, charging stocks might not be the home-run clean energy investment everyone is looking for. Here’s why…
1/ Initial costs for public chargers are high. It’s uncertain how profitable they can be and whether people are willing to pay — especially when it’s estimated that 80% of EVs are charged at home.
2/ Charging companies have no business model yet. Many are still testing different models (i.e., charge per use, selling chargers and offering support).
Growth > profits: “Right now, this is a land grab,” and “we’ll deal with profitability later,” — says Blink Charging’s CEO, who lost $70M on $35M in sales over the last 12 months.
Investors: “Did we hear government incentives?”
The abundance of government funding and growth potential has attracted competition of all sizes.
- Oil giant Shell is aiming for 500,000 charge points by 2025 with plans to put fast chargers in its gas stations.
- Major utility companies like Xcel Energy (NASDAQ:XEL) recently announced plans to build out a network of fast charging stations.
Ignoring profitability can only go so far, and it likely won’t go very far in a sector with little differentiation and much competition.