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Electric Vehicle Charging Station Market Struggles To Be Profitable
Date: 16 July 2012
One of the major issues facing the electric vehicle (EV) charging station market is how to generate revenue profitably and sustainably. Recent research from IMS Research (recently acquired by IHS Inc. (NYSE:IHS)) shows that there are 75,000 EV charging stations currently installed globally, rising to 4.8 million in 2015. However, the industry is struggling to find ways to generate a return on this installed base.
IMS Research Senior Analyst Helena Perslow comments: “Even as volumes of charging stations ramp up in the near term, it isn’t clear which segment of the value chain will be profitable. Various business models are being experimented with, but clearly there will be winners and losers.”
Manufacturers of charging stations are in a very difficult position. Demand for electric vehicles is uncertain, yet a developed infrastructure of charging stations is a pre-requisite for growth in EV sales. Manufacturers are therefore saddled with development costs for a product for which there is no clear demand. Whilst many are taking a long-term perspective, many current projects are heavily subsidised by government funding or suppliers are having to sell below cost. Clearly this isn’t sustainable, but until volumes ramp up it is difficult to see how manufacturers can drive profitable growth.
For the actual process of vehicle charging, EV charging station owners have hit upon three main business models. First, some owners have set up large networks of charging points to which drivers can subscribe for a monthly fee. The issue with this model is that significant capital is required to set up a network and a significant number of subscribers are required to make the network profitable.
Second, some owners offer a ‘pay-per-use’ service. Large networks are not required, reducing the capital cost; however, drivers want to be able to charge quickly which requires a more expensive DC charger. IMS Research’s industry research found that consumers would be willing to pay $15-17 for a 30-minute ‘quick’ charge.
Third, some owners offer free charging in exchange for drivers’ using their other services or buying additional goods in their stores. It’s extremely difficult to measure the impact of this type of ‘loss leader’ initiative; however, a single charger would have to generate $125 per month in extra profit to pay for just the charging station, more revenue would be needed to cover installation, maintenance and electricity.
Operator/maintenance companies have taken a different approach. Typically, they do not own or purchase the EV charging stations: rather they operate and maintain EV charging stations on behalf of other companies. They will typically charge a monthly fee to manage a network and be responsible for servicing/repair. An operator/maintenance company will take a share of the charging station fees per month, but is not liable for the upfront investment. This is a more sustainable business model.
Perslow comments: “A recent project in Belgium has shown that the industry is starting to ‘home in’ on profitable, sustainable business models.” The country’s first DC charging network is based on an investment made by VitaeMobility, with the service being installed, run and maintained by ABB. For VitaeMobility, the project utilises profitable DC chargers which should provide a quick return on investment. For ABB, the investment risk has been made by another company, allowing them to focus on sustainable operation and management.
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