The tug of war in the EV charging ecosystem

Published on January 31, 2019 by Binayak Ransingh

Burgeoning growth of the global EV market has led to a revolution in the automotive and energy sectors. New electric vehicle (EV) sales surpassed 1m units in 2017, growing 54% from 2016. The EV market is currently dominated by developed geographies such as China, the US, Japan, the UK, France, Germany, Norway and Sweden, which contribute more than 90% of global new EV sales. We expect supportive policies and cost reductions to drive the EV market significantly, to reach 125m units sold by 2030. In the International Energy Agency’s EV30@30 scenario, the number of electric LDVs could reach 220m units by 2030.

New EV sales vs. new passenger car sales, 2017

Source: International Organization of Motor Vehicle Manufacturs(OICA),International Energy Agency(IEA), Acuity Knowledge Partners

EV supply equipment stock vs. EV stock, 2005-17

Source: International Energy Agency(IEA),Acuity Knowledge Partners

Players in various sectors have shown an interest in participating in the EV charging supply equipment ecosystem, to capture opportunities in the EV market. Oil and gas majors, power utilities, automotive OEMs, and other players in other sectors have started operating in the EV market through acquisitions and partnerships.

Oil and gas majors looking for opportunities beyond the petroleum sector

Oil and gas (O&G) companies have started to invest in the EV charging space through acquisitions in the past two years. They are diversifying beyond petroleum, to compensate for the decline in petroleum product sales due to the increase in the number of EVs. Retail fuel outlets are being integrated with EV charging stations so that more EVs could be served. This helps O&G companies to make a quick move in the market space and compete with the utilities.

Power utilities – Potential players in the EV charging space

The increase in the number of EVs has afforded power utilities easy entry into the EV charging space. The utilities benefit from already being in the electricity supply business and from being able to add to market competition by charging EVs at lower costs than other players. The utilities could also integrate vehicle-to-grid solutions with their existing business model to generate additional revenue. This would benefit the EV owner and the utilities, providing the infrastructure for energy transmission from the EV to the grid.

Automotive OEMs’ ambitious EV plans – Dependent on the EV charging infrastructure

Automotive OEMs have collaborated with utilities, charging network providers, oil and gas companies, financial services and leasing companies, vehicle users and charging infrastructure providers to increase consumer acceptance of EVs. They have also partnered with other OEMs, forming associations to provide EV charging infrastructure to consumers. Some OEMs like Tesla and Volkswagen directly provide their own network to their customer base. Hence, automotive players have the option of building their own EV charging networks or relying on third-party networks. This represents a new ecosystem within the EV charging market, which would play a key role in the establishment and growth of the global EV market.

EV charging network provider – An attractive gateway to the EV charging ecosystem

Acquisition of an EV charging network provider has become the most attractive gateway for other industry participants to enter the EV charging space. However, some individually operating EV charging network providers such as ChargePoint and Blink dominate the market and have further strengthened their positions in the increasingly competitive market by diversifying their reach through partnerships and expanding their service portfolios through acquisitions and collaborations with EV charging equipment manufacturers and technology startups. The hardware used by these network providers is individually owned and financed. The companies also offer different payment mechanisms, in an effort to enhance their customer bases.

Other industry participants have also shown interest in the EV charging ecosystem

Other industry participants are also trying to benefit from the opportunities afforded by this new market. Installing charging stations to attract EV owners to commercial areas (such as malls, restaurants, and pubs) has become a trend in most developed markets. A number of technology startups have also joined the mainstream players, integrating their services with the EV charging network. In addition, many public agencies have taken steps to install charging stations, to encourage the use of EVs. All this market activity drives the EV adoption rate in most developed markets. We believe such steps should be taken in other markets with high potential.

Increasing competition in the EV charging market amid an uncertain future and low demand

The EV charging market faces the risk of uncertainty in the near future. Establishing profitable business models has also become a challenge for market participants because of high upfront investment costs, competition from home charging, and low demand. Nevertheless, they are investing in the market to strengthen their positions in different geographies. We believe this will increase competition in the EV charging market and that companies should, therefore, adopt long-term, sustainable business models to tap the opportunities in the EV charging ecosystem.

Acuity Knowledge Partners’ Energy & Utilities team has been actively supporting its clients in various areas such as market and competitive intelligence, strategy research, financial modelling, M&A support, valuations, and supplier management research support. The team has 40 years of combined industry experience and has executed projects on trending themes such as smart grid, renewable energy, EV and charging infrastructure, small-scale LNG, process automation, home generation, and connected homes.

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