Editor’s Note: New York Times business content will now be included with your Finance & Commerce subscription. Not a subscriber? Start your subscription here.
In President Joe Biden’s vision for a green future, half of all new cars sold in 2030 will be electric. But something really basic stands in the way of that plan: enough outlets to plug in all those cars and trucks.
The country has tens of thousands of public charging stations – the equivalent of electric cars at gasoline pumps – with around 110,000 chargers. But energy and auto experts say that number needs to be at least five to ten times that much to meet the president’s goal. Building that much will cost tens of billions of dollars, far more than the $ 7.5 billion lawmakers set aside in the infrastructure bill.
Private investors are investing hundreds of millions of dollars in building chargers, but the company suffers from a chicken-and-egg problem: Electric car sales aren’t growing fast enough to make charging profitable. It could be years before most charging companies break even, let alone make big profits like Exxon Mobil and Chevron.
Fast chargers – those that can fill an electric car battery in 20 to 40 minutes – cost tens of thousands of dollars, but are typically used less than regular gas pumps. Yet the auto and energy industries need to build them to reassure people that they won’t be stranded in an electric car without a shot.
âElectric vehicle charging infrastructure is the biggest barrier to electric vehicle adoption,â said Asad Hussain, senior analyst at PitchBook, a research firm. âYou talk to anyone who is hesitant to buy an electric vehicle, and the # 1 concern that comes to mind is range anxiety. “
The European Union, which is more advanced in the electrification of cars, had nearly 200,000 public charging stations last year. China, where electric cars are even more prevalent than in Europe, had more than 800,000 in 2020.
European and Chinese officials have offered better incentives and imposed tighter regulations in part because they want to win a global race to build the cars and trucks of the future. U.S. policies, including the infrastructure bill, have been more modest as most Republicans and some Democrats oppose the regulations and spending needed to move away from fossil fuels quickly.
Soon, even $ 7.5 billion will not be enough to lay the groundwork for the electric age, Nick Nigro, founder of Atlas Public Policy, a Washington-based consultancy and research firm, said of federal spending. proposed for charging stations. âIs it enough? No,â he said. “But it gets things done.”
Today, most drivers plug in their electric cars at home and only occasionally use public charging stations. But these stations will be crucial, especially for those who live in apartments and people who travel long distances.
For years, startups, automakers, and other companies have slowly built chargers, mostly in California and other coastal states where most electric cars are sold. These companies use different strategies to make money, and auto experts say it’s not clear who will be successful. The company with the most stations, ChargePoint, sells chargers to individuals, workplaces, stores, condominiums and apartments, and businesses with fleets of electric vehicles. It collects subscription fees for software that manages chargers. Tesla offers charging primarily to get people to buy its cars. And others make money selling electricity to drivers.
Once a poor cousin to the trendy sector of sleek electric car manufacturing, the charging industry has been embroiled in its own gold rush. Venture capital firms invested nearly $ 1 billion in billing firms last year, more than the previous five years combined, according to PitchBook. So far in 2021, venture capital investments amount to more than $ 550 million.
On Wall Street, publicly traded special purpose acquisition companies, or SPAC, have made deals to buy eight charging companies out of 26 deals involving electric vehicles and related businesses, according to Dealogic, a research firm. The deals typically include an injection of hundreds of millions of dollars from big investors like BlackRock.
“It’s early days and people are trying to figure out what the potential looks like,” said Gabe Daoud Jr., managing director and analyst at Cowen, an investment bank.
These companies could benefit from the infrastructure bill, but it’s unclear how the Biden administration will distribute the money for the charging stations.
Another unanswered question is who will be the Exxon Mobil of the age of the electric car. It could well be car manufacturers.
Tesla, which makes about two-thirds of all electric cars sold in the United States, has built thousands of chargers, which it has made free for early adopters. The company could open its network to vehicles made by other automakers by the end of the year, CEO Elon Musk said in July.
Volkswagen also has a charging network, Electrify America, which is already available for all makes of cars. In Europe, Volkswagen, BMW, Ford Motor, Daimler and other automakers jointly own a charging company called Ionity. Drivers pay a fee in either case, but some automakers offer free charging for a few years to attract car buyers.
Energy giants like BP and Royal Dutch Shell have also jumped into the business, buying out charging companies in Europe and the United States.
And 14 electric utilities from Maine to Texas have formed the Electric Highway Coalition to build stations at intervals of 100 miles or less. Utilities elsewhere are also building chargers, as are cities like Los Angeles and New York.
They all compete in a tiny market: less than 4% of new car sales and less than 1% of vehicles on American roads are electric.
Charging companies say they can be successful even if it takes years for electric vehicles to take over. Some companies like ChargePoint have been around for over a decade, while others that raise funds don’t have much of a track record.
ChargePoint CEO Pasquale Romano says his company is avoiding some costs by bringing in contractors to build equipment and selling stations to employers who own fleets of electric vehicles, retailers and others who also buy software and maintenance subscriptions.
âEveryone thinks it can go fast, and it doesn’t,â Romano said. “You have to get on and start pedaling to help shape what that looks like.”
Volta, a small charging company, places chargers near the entrances of retailers like Whole Foods Market and Walgreens. Chargers run ads, generating revenue, and stations pay for themselves in a matter of years, said company president and co-founder Chris Wendel. âIt’s a sponsored service brought to you by brands that care about what you do. “
But some companies have stumbled. In December, TPG Pace Beneficial Finance, a SPAC backed in part by TPG, the private equity firm, announced that it would acquire EVBox, an Amsterdam-based manufacturer of charging equipment, valuing the company at 1.4 billion dollars.
In January, Jim Cramer, host of CNBC’s “Mad Money”, said that EVBox was his favorite top-up company because it is an established player in Europe. Shares of TPG Pace Beneficial climbed to $ 31 in February, from around $ 10.
But this month, the companies delayed closing the merger because EVBox has yet to release its audited financial statements for 2020. TPG Pace said in a regulatory filing that there was “significant uncertainty” about the closing the deal, and his shares fell to around $ 10.
An EVBox spokesperson declined to comment.
Cramer no longer supports the EVBox choice. âI guess we put too much faith in the financial data as it was presented to investors at the time,â he said in an email.
Since early 2020, 16 PSPC merger projects have been canceled or withdrawn. And investors and regulators have raised questions about the optimistic claims of SPAC executives and promoters.
Yet investors continue to pour money into invoicing. A charging company, EVgo, struck a SPAC deal and started trading in July. Trade in Volta started last month. Several other agreements have been announced in recent months, notably for Tritium, which manufactures fast chargers; Wallbox, which sells charging equipment, software and related services; and Allego, which operates an extensive charging network in Europe.
Some investors believe that charging cars may not be the best approach.
Last month, Ample, which aims to build stations where depleted EV batteries are replaced with charged batteries, raised $ 160 million. Raed Masri, founder of Transform VC, an investor in Ample, said the battery swap would be best for people with no place to plug in their car because it’s much faster. âThey need a fast energy delivery system, and only exchange allows it,â Masri said.
Other investors make a lot of bets. Energy Impact Partners, a New York-based private equity firm, has invested in multiple charging networks, a charging station repair app, and an app that optimizes charging.
Cassie Bowe, director of the company, said that with the rapid growth in sales of electric vehicles, there was an urgent need to create a network to support them. “There is no more time,” she said. âWe need this infrastructure quickly.
This article originally appeared in The New York Times.