EV Charging: Market Predictions and Outlook Through 2025
Macroeconomic impact, private funding, and mass market penetration
In likely a few months, there will be almost the same number of EV charging ports as there are gas stations in the US. That’s about 115K stations in total. Indeed, the charging industry has come a long way over the last 10 years. As annual US EV sales have grown from 17K to 630K between 2011 and 2021 (43% compounded growth), a proliferation of charger deployments has followed. There are now an estimated 108K public charger plugs across 46K stations, excluding the outsized portion of plugs installed in private homes. Against the background of Biden’s $5M National Electric Vehicle Infrastructure (NEVI) Formula Program, the strategic EV shift by major carmakers, and consumer sentiment towards unpredictable oil prices, it seems the EV charging market is just getting started. With steady private backing over the past decade, many charging companies are also heading into an unfamiliar period of capital uncertainty, where venture funding has receded and the prospects of capitalizing through entering public markets becomes less clear. Against this backdrop, I believe the next 2 to 3 years will manifest an important inflection point of growth and change within the charging ecosystem. Below, I share five of my predictions and outlook for EV charging through 2025.
Industry Consolidation: The global EV charging competitor landscape is highly fragmented, with hundreds of manufacturers, operators, and other solution providers jostling for a piece of a fast growing market. Most of these companies will need to demonstrate their edge not just through technology, but also sales motion, business model, and partners while preserving their cash. In contrast, deep-pocketed industrial conglomerates and public charging companies may view the next two years as an rare opportunity to accelerate their charging strategy and vertically integrate by acquiring companies at heavily discounted prices. We have already begun seeing some activity emerge over the past few months, with Blink acquiring SemaConnect so they can gain US manufacturing coverage and qualify for Biden’s infrastructure bill. Schneider Electric also acquired EV Connect, a leading white-label open-standards charging platform, to gain direct interface with the end customer.
Growing Adoption of Mobile Energy Storage: Biden’s infrastructure bill calls for the deployment of up to 10,000 ultra-fast chargers, which doubles the existing installed base. As this infrastructure development is carried out, one of the major risks will be the outsized burden placed onto the grid and resulting outages. Additionally, if the existing site is not equipped for the amount of energy demand, the new chargers will also be unable to deliver the promised power and speed to the EVs. Instead of reworking the underlying grid connections, competitive charging developers will look to steadily invest in energy storage systems (ESS), although capex investments remain steep due to expensive raw material costs. Such systems can serve as energy buffers to deliver the best charging experience to drivers without impacting the grid load. For example, Electrify America, which is one of the largest US fast-charging networks, announced last December their installation of Tesla Powerpack systems behind 140 DC fast charging stations, enabling it to simultaneously power over 200 EVs at a charging station at 150 kW power.
Increased Data Sharing Among Competitors: As more EV chargers are deployed into the wild, drivers have started to also notice more charger malfunctions, whether it is broken systems, payment system failures, or even purely design flaws (e.g., cable not long enough). A recent research conducted by UC Berkeley found that 23% of the 657 public chargers they tested were not functional. The reality is that drivers do not have visibility into these potential issues and the complex stakeholder ecosystem (utility provider, developer, operator, payment processor, etc.) makes it very difficult for malfunctions to be promptly addressed. Although I do not believe this would greatly impede the adoption of EVs, it does create consternation among a growing and important class of drivers that may become less incentivized to use public charging. There are several debates on how to address these issues, with one approach being to require charging providers to share real-time and accurate data like availability and pricing over an open standard, supported by government enforcement over maintenance and service level agreements. The Open Charge Point Interface (OCPI) standard, which facilitates roaming agreements between network providers, is one example that could become a robust solution if adopted at scale. The standard is voluntary today and still early in adoption, but it has made progress over recent years. As more charging operators start to enter the space and hardware becomes more commoditized, I expect to see more of them migrating onto this standard, or another, to drive demand and support a reliable charging experience for drivers.
Unlocking Deployments to the Mass Market: Although we are starting to see more chargers in familiar spaces (e.g., offices, gas stations, malls), there are still unique challenges that inhibit chargers from becoming more widely deployed to the mass market, whether it be insufficient grid capacity, limited internet connectivity, or something else. Fortunately, there are new startups working on solutions to overcome or circumvent these challenges. For example, companies like Heycharge and Xeal are enabling chargers to be installed in underground garages through their token-based transaction technology, which helps to bypass limited internet connectivity. Others like Moxion Power are developing ultra-mobile energy storage units to support flexible high-power fleet charging at depots, car dealerships, and other facilities, so that they do not need to rework their grid connections. As these solutions ultimately help to expand the EV charging market, I believe they will remain highly attractive for private investors, even during a time of broad capital pullback.
China will Continue to Lead EV Charging Rollout: While China was slow to adopt EVs at first, attractive government incentives and aggressive policies have catalyzed EV sales to make up 16% of new car sales in 2021, compared to only 5% in the US. As a result, EV infrastructure has risen in swarms across urban cities, to not only support passenger vehicles but also the large share of electrified buses, trucks, and two-wheelers. Unlike other regions, EV infrastructure is also a lot easier to find and use in China, where there is just a single standard for interoperability and seamless payments with WeChat and Alipay. China has already initiated phase 2 of its charging plan, which aims to expand charging stations into rural counties and villages across the country, coupled with new EV sales incentives for rural residents. China’s near-term goal is to have enough EV infrastructure to support up to 20 million EVs by 2025. While the new US infrastructure bill will stimulate expansion and EV sales continue to break record levels, my expectation is that China will still lead the world in EV charger growth through 2025.
The ecosystem for EV charging is forward-facing and filled with innovation and I am looking forward to what is ahead over the next few years. As a driver of an electric vehicle myself, I selfishly admit that I hope for some of these predictions to come as soon as possible. Beyond these predictions, there are important areas that will take longer to be addressed in the long-term, such as cybersecurity protection for charging networks, resilience protection of our grid infrastructure, and fast charging for larger vehicle types (e.g., class 8). More of that to come in a future issue…
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