Biden wants to build a national EV charging system under $2 trillion infrastructure plan, but it won’t be easy

• Charging stations for electric vehicles will be part of a $2 trillion infrastructure bill being pushed by the Biden administration.
• It’s going to take more than government support to successfully expand EV infrastructure.
• AlixPartners estimates $300 billion will be needed to build out a global charging network to accommodate the expected growth of EVs by 2030, including $50 billion in the U.S. alone.

President Joe Biden is prioritizing a national EV charging network under his $2 trillion infrastructure bill, promising to have at least 500,000 of the devices installed across the U.S. by 2030.

The Biden administration is rolling out Wednesday a $174 billion plan to spur the development and adoption of electric vehicles that includes money to retool factories and boost domestic supply of materials, tax incentives for EV buyers, and grant and incentive programs for charging infrastructure.

But it’s going to take more than government support to successfully expand EV infrastructure. There aren’t enough EV drivers to make it a viable business yet, and building a network of chargers is far more complex than it sounds. It takes a mix of private-public partnerships that can involve local municipalities, businesses and utility companies as well as automakers and an emerging group of EV charging companies. It’s
not as simple as having a gas station at every corner.

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

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

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

While automakers like General Motors and Volkswagen are heavily investing in improving performance and lowering prices of EVs to catch up to Tesla, they’re far less interested in building, owning and operating their own charging networks.

The profit margins and amount of effort involved to maintain them just doesn’t make sense. Tesla,an early leader in the industry, built its own charging network out of necessity and, in part, to help sell its cars.

Mainstream adoption

Most automakers are partnering with third-party companies to provide charging stations. Their strategy, combined with enthusiasm from Wall Street for EVs, has driven investor demand for charging companies such as ChargePoint and EVgo. ChargePoint went public through a reverse merger with a special purpose acquisition company, or SPAC, in March. EVgo plans to do the same in the second quarter.

There are about 41,400 EV charging stations in the U.S., according to the Department of Energy. Fewer than 5,000 are fast chargers. That compares with more than 136,400 gas stations, according to GasBuddy

“The answer is not one size fits all,” ChargePoint CEO Pasquale Romano told CNBC.
“You’re going to need an entire universe of charging infrastructure that is easy to use and accessible for the different scenarios to kind of play out.”

Charging suppliers and operators have largely focused infrastructure at destination points in urban and suburban areas such as grocery stores and other places where people regularly shop.

Businesses consider it a draw for EV owners. There’s also a growing call for additional fast chargers between major cities to enable faster and longer trips for EVs. Tesla has been building out such a network for its owners for nearly a decade.

‘Peanut butter and jelly’
GM has committed to releasing 30 or more EVs through 2025 under a $27 billion investment in electric and autonomous vehicles. It also is one of many companies to focus on EVs following the success of Tesla.

Volvo has announced plans to become an all-EV company by 2030, while Volkswagen has a mission of being the world’s largest manufacturer of electric vehicles.

“We’re moving into this year at a tipping point for EVs and really an inflection point on sustainability, inclusion, and growth,” GM CEO Mary Barra said Thursday during a JPMorgan Securities conference.

Public chargers are needed to power those vehicles, but companies such as EVgo need the demand for charging to be there to justify their business. Many have described it as a “chicken and egg” scenario regarding which is needed first.

Levy, who served as deputy chief of staff at the Department of Energy under the Obama administration, characterizes it as “peanut butter and jelly” instead.

“It’s not ‘chicken and egg’ because we’re not starting from scratch,” he said. “We have charging, we have EVs. It’s not what comes first. It’s peanut butter and jelly, in that we need to build these things out in a complementary way.”

About 30% of Americans don’t have access to home or workplace charging that they may need in the future, according to Levy.

As for 2020, IHS Markit reports EVs were only 1.8% of new light-duty vehicle registrations in the U.S. AlixPartners expects there to be 18 million EVs on U.S. roadways by the end of 2030.

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

“We’re essentially crowdfunding for the driver one business at a time, the largest network of EV chargers in the area for them and they see it all as one network through our mobile application,” ChargePoint’s Romano said.

“It all says ChargePoint, we don’t own any of it. It’s just all looks like we own it to the driver and that’s what we want is to create a model where each business does their part.”

ChargePoint is Cowen’s “top pick” for the recharging market, which the investment firm believes will be a total addressable market of about $27 billion by 2040. The company went public March 1 through a SPAC deal with Switchback Energy Acquisition Corp.

While largely new to public investors, Cowen believes “the sector is poised for tremendous growth and value creation, underpinned by a large, strong unit economics, and recurring revenue,” according to a report on EV charging earlier this month.

But that growth needs to come with EV sales as well as incentives and investments from several sources, including the federal government, according to officials.

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

Source: cnbc