EV charging stations have hit the bottom of their market. The stock market has pummeled the major non-Tesla players. Gas stations are flying high. What does it all mean? It’s better to be an EV charger manufacturer than an EV charger operator.
A stabilizing charging market
Stable Auto reports that since November 2023, DC Fast charger utilization has been hovering around 18% each month after a steady rise from around 10% at the start of 2023. This is consistent with what I’ve seen anecdotally here in Raleigh. Tesla supercharger stations always have someone at them, but previously the Electrify America station in the Target parking lot near my house has been consistently full of an array of EVs from Hyundai IONIQs to VW ID.4s.
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Level 2 chargers have been flat at around 7% utilization for the last 18 months, giving some indication that we just won’t see these used much further as a public charger concept. They probably work well in places that would have an overnight stay, such as a hotel. It makes more sense for a hotel to provide “free” charging in this case in exchange for joining a loyalty program, much like they do with WiFi today. No loyalty program? Pay a flat fee to charge your car per night. Personally, I think hotels would benefit from investing in level 1 chargers that can add 40-50 miles during an overnight stay, which is plenty for a typical business user with a rental car. This would help avoid panel upgrades and let them maximize the usefulness of available parking. Either way, I don’t see a future where public level 2 charging grows from where it is now. It’s best suited for home charging. Otherwise, it is stuck in an uncanny valley.
McKinsey talks about a 15% utilization rate being the crossover point to profitability for a given charging station. Now we’re over that threshold on a US average basis, so the low-hanging fruit is likely being picked, at least until charging stations consistently get over 30% utilization and warrant expansion. Siting and differentiation will make all the difference going forward.
Gas station bulls
When I was in college, I worked at a corner gas station off of Exit 34 for I-87 for the summer. The owners always said that it doesn’t matter how much gas people buy, it’s all about the friendly face that asks them if they need anything else when they come inside. To the operator of the station, the business is one of coffee and candy with gas sales being a way to get customers in the door. Places like Bucee’s, Sheetz, and Wawa have taken this to the next level, generating a cultish brand around fueling up and filling up in one go. Those are all privately held companies, but the big public players have all been doing extremely well for the last 5 years despite COVID-19 dips:
Compare that to the last 5 years of major non-Tesla EV charger operators who saw a massive run-up during the 2021 stock market boom and only Blink has stayed above their price from five years ago:
The stock market appears to believe that the future of EV charging is gas stations will add EV chargers and operate them, thus maintaining their current business model while driving these independent EV charging operators to consolidate or fail. This is consistent with David Ferris’s take on the Biden Administration’s EV charging funding being a big win for gas stations. Even Warren Buffett believes gas stations are going to win the day with Pilot Flying J being bought by Berkshire Hathaway in 2023.
Where are the chargers?
I don’t see this future for gas stations because charging an EV is not like fueling a car. While around one-third of Americans do not have access to a garage or carport, around two-thirds do! Charging at home is more convenient and cheaper, so why go to a gas station? If I own a car but don’t have a place to charge at home, I probably commute to work where workplace chargers could be another more convenient and cheaper alternative to a gas station. If I’m on a road trip, I may want to get an energy drink and a gas station hot dog, but if I want other options, I can stop at a place like Target to charge and have more shopping options. I may choose to charge up at Waffle House if it's the middle of the night and I need a cup of coffee and the potential for some excitement. In aggregate, fewer gas-powered cars will break the business model of gas stations, leaving them to service mostly long-haul truckers on road trips. It may take another decade, but the die has been cast.
This is why Tesla might get away with tossing aside their durable advantage in the charging space. It is crowded with competition and no clear winner is emerging. Low-overhead upstarts like Chargerzilla will put further pricing pressure on operators and profitability will be squeezed. The best places to be are providing the OEM chargers that come standard with EVs and boots-on-the-ground electricians to perform the installations. I suppose that being able to build will never go out of style.