EV adoption probably isn’t moving into rentals until they provide charging the same way single family homes do - overnight Level 2 charging at resi rates. Home charging - whether single-family or rental - doesn’t need fast charging, and probably doesn’t make sense for fast charging. An apartment building charger will almost always just do one charge per day, to the car that parks there overnight. So it makes no sense for that to be anything other than a “dumb” Level 2 charger.
As for the market…no, it’s going to be pretty small. Because it’s not only that 80% of the charging takes place at home, but it’s also that electrons are much much cheaper than gas. Again, look at the Norway example. In 2022, the electron market was about $88 per vehicle, compared to about $1,600 per vehicle for ICE cars (12K km at 6 l/100 km at $8 per gallon). Roughly 6% of the revenue.
I think we’re on the same page here (though I don’t think it’s going to be all that profitable to sell the Superchargers). There’s not much use for a charging network business, because there probably isn’t going to be a business model for charging stations like gas stations. Just chargers that are placed here and there in various locations, like someone might place a vending machine in a few unused square feet to get some extra cash.
Not needed. EVs aren’t nearly that common. My wife’s work has free charging, but there is a 4-hour time limit. That means twice as many cars can charge. It could double again with a two hour limit.
No, it is just something nice to have. It is a perk for the professional staff. You might be surprised how many companies already do offer free charging. The worker bees in the factor aren’t going to get it any time soon. But I think it will be a more or less expected amenity for professional workers in the future. I mean, it kind of already is around here.
No, I wouldn’t characterize that way. I think we have a fundamental disagreement as I think there is a demonstrated business model for charging stations. It is just that the distribution of the stations will be different ultimately from current gas stations.
Maybe I misunderstand your point - or we’re just using the terminology differently. I think you’ll have people continuing to install chargers - the physical devices that allow an EV to fill up. I just don’t think there’s going to be very many charging stations. No repeat of what we saw with gasoline, where you had people coming in to build new facilities for the purpose of selling gas to customers. IOW, the sort of thing that Tesla’s been doing - buying/leasing land to construct a group of chargers on, like the proposal in Yeehaw Junction - isn’t going to be happening much, if at all.
So, yeah - you’ll still have folks buying the Supercharger equipment from Shanghai or Buffalo. But the business of opening up charging stations - Tesla (or anyone) looking for sites and installing chargers on properties it controls and running the chargers - probably doesn’t make any more sense.
There will be tens of thousands of charging stations. (This is dwarfed by the nearly 200,000 gas stations in the US, of course.)
And why would you confine this to “buying leasing land” when it’s already happening in other venues. Again: WalMart parking lots. Fast chargers, requiring some significant buildout (unless they’re getting enough power to run a 4 or 8 pack out of the atmosphere or something.)
The few that I have seen are in WalMart lots, one in a shopping center, one in a travel center with big convenience store. Standalones? Nope, haven’t seen that, nor would I expect to.
Oh, so totally disagree. I don’t think it’s a rocket ship business by any stretch, but a nice comfortable way to deploy capital and get a steady income stream? Yeah, somebody’s gonna do it. Heck, they already are.
The salient quote being “around here.” Elsewhere, meanwhile, not around here. As this discussion has progressed over the past weeks I have taken to asking professional friends still in the workforce if they have it. (And this is in a city where I see at least 2 or 3 Tesla’s on the road every time I go out .) I have yet to get a “yes” answer. Doctor neighbor on one side. (Anesthesiologist, actually). No. Therapist. No. SVP of Marketing firm handling clients like Coke & Bush’s Beans. No. I will say there were two Level 2 chargers in one of the parking garages downtown, but they have both been removed, so…
I’ll keep asking, but I truly believe the enthusiasm for this “perk” is well ahead of the curve, and I think it is more likely to be withdrawn (or offered at a cost) than expanded to all employees.
It’s entertaining to read all the speculation about why Tesla made this move. I’m not going to pretend to understand why. For all I know, the Supercharger Team was infiltrated by DEI group think and Musk found out about it.
The email sent out to Supercharger suppliers and contractors doesn’t inspire much confidence that this was a well-thought-out plan.
To all concerned:
You may be aware that there has been a recent adjustment with the Supercharger organization which is presently undergoing a sudden and thorough restructuring. If you have already received this email, please disregard it as we are attempting to connect with our suppliers and contractors. As part of this process, we are in the midst of establishing new leadership roles, prioritizing projects, and streamlining our payment procedures. Due to the transitional nature of this phase, we are asking for your patience with our response time.
I understand that this period of change may be challenging and that patience is not easy when expecting to be paid, however, I want to express my sincere appreciation for your understanding and support as we navigate through this transition. At this time, please hold on breaking ground on any newly awarded construction projects and planned pre-construction walks. If currently working on an active Supercharging construction site, please continue. Contact [email redacted] for further questions, comments, and concerns. Additionally, hold on working on any new material orders. Contact [email redacted] for further questions, comments, and concerns. If waiting on delayed payment, please contact [email redacted] for a status update. Thank you for your cooperation and patience.
More cars meant more gas stations, because gas stations made money selling gas ;
Tesla has to be adding a markup on the local electricity rates at the superchargers. And I would expect they would add a surcharge for non-Teslas on top of that. The electricity isn’t free and they’re absolutely not giving it away!
Unless it was mandated as part of the deals & subsidies that they not do that? Which would be just the trigger to make Elon raise his middle finger and walk away.
Maybe it’s some long play to get payback from the legacy carmakers for providing the NACS standard? Or get them to pony up for the maintenance?
Chargepoint and EVgo already failed because they weren’t supported by a car company or “the industry”. The real estate under CP/EVG is worth nothing. Pure expense for VW and the nonprofit… no wonder everyone walked away.
This is unlike the corner convenience stores for gas stations and many Superchargers, because the retail mall owners or convenience store owners (like Sheetz, etc) are getting the economic benefit of the added traffic from the charging stations. Not Tesla, I assume.
If there wasn’t a cost-sharing agreement set up for Tesla to offload the ongoing maintenance and upgrade cost, well, I’m guessing that would have triggered Musk to say “I’m out” without a renegotiated deal.
Depending on what you are calling a dumb charger, I’d have to disagree. To me a dumb charger (like I have in my garage) is just a cable you plug in and charging starts (subject to any time delay the car circuits modify).
If you install these in a small or large apartment complex anyone can drive in and charge. This means non-renters can take spot and get a free charge; or anyone can stay as long as they want., like forget and stay all weekend.
More likely they’ll install a smart charger (if you want to call it that) like a Chargepoint. Here the property owner can set pricing (if any), time limits and restrict access to only those on the approved list. And I think they can setup things like free for 4 hours, then a fee and even something like free to all for an hour, then a fee for people not on the list.
This is one (of several) areas where we disagree. IMO, a good charging station consists of three components: solar, battery, supercharger. Solar provides free energy. Getting energy for free and then selling it for a premium is high margin. The battery allows you to store energy from solar and, when necessary, grid electricity bought when rates are at their daily minimum. Buy electricity low and selling it high is high margin.
In this model, profitability is hard to avoid if your superchargers are low maintenance and reliable. What determines the amount of profits is volume. Tesla currently has over 2000 US stations. It has identified those in locations with high volume and has stated that its new priority will be to expand the number of chargers at locations. Makes sense to do that and, where appropriate, retrofit them for solar.
The second profitable business model is that of WaWa where the chargers are part of a synergistic collection of revenue streams. This works in lower volume areas and will add charging sites beyond the 2000+ Tesla has already established.
The number of new charging stations will depend largely on the WaWa model, and I don’t see why that shouldn’t be successful. Once installed, the daily overhead cost of the supercharger is pretty low. It’s a bit like public pay phones, which I believe generated a fair amount profits in it’s day. Or service stations providing fee-based tire filling stations. Or ATM machines, which one sees all over the place.
Look at the Norway data. What customers are complaining about is having to wait in line to use the public chargers. That is a pretty good indication that despite home charging, there is a big market for a public charging network
But that’s my point - EV’s aren’t going to really move into the rental population if it’s annoying like that. Home charging mostly takes place at night. If I’m living in an apartment and I park for the evening, I don’t want to have to go downstairs and move my car at 10:00 at night to clear the charging space so that Chargepoint can possibly get a second charge. Which they probably won’t get. A charging space in an apartment is going to be used for one charge per evening. Which is why it doesn’t make a lot of sense for them to pay for a Chargepoint charger and deal with all that, rather than just have a dumb one - and tow people who aren’t residents who try to park there.
Oh, it’s easy to avoid. Which is one reason why none of the charging companies today are very profitable. You have a high fixed cost relative to your product. Your charger/solar panel/battery combo will cost tens or hundreds of thousands of dollars, while your product is a charge that’s a fraction of the cost of a gasoline fill-up. If you can’t charge enough for the electrons, you won’t earn enough of a return over time to cover your cost of capital. Moving back to a non-zero interest rate world doesn’t help with that, either.
It’s not margins that’s the issue. It’s your rate of return. Owning a charger (much less the land or lease) means tens or hundreds of thousands of dollars in capital locked up. There are probably investors who are okay with tying up their capital for a weak rate of return - but if you’re Tesla, you’ve got much better things to do with that capital. So you shift to just selling the equipment, and get out of the business of installing, owning, and operating these things.
Or it’s a pretty good indication that when you goose the market for vehicles with massive subsidies, you’ll also distort the demand for the charging in the short term. In a country without those massive subsidies (like the U.S., or increasingly parts of Europe) you have a different situation. There’s not enough money in selling electrons to incentive private businesses to provide the type of super-convenient filling stations that predominated during the ICE uptake. People went out and bought land for the sole purpose of building filling stations, because there was enough money to be made from selling the gas - so the filling stations were “optimized” for the gas-selling part. But electrons are cheap and face competition from home charging, so you can’t do that.
So you don’t get many charging stations (other than Tesla’s brand-exclusive ones) set up to maximize the sale of the electrons. Instead, they accommodate whatever the actual primary use of the facility is. You’re not scouting a parcel that’s super-convenient for motorists to buy just for charging; you’re going to stick the charger wherever the WalMart (or whatever) happens to be.
Which is fine, but it’s not something that’s going to create the positive feedback loop you need to drive EV adoption. People buying ICE cars created an enormously valuable business opportunity for people to come in and make money selling gas. And people rushed into the market and made a ton of profit. People buying EV’s have created such a weak business opportunity that not nearly enough people are coming into the market, to the point where the government has to subsidize entrants just to get them going, and all the major players (save Tesla’s brand-exclusive model) are losing money. See the difference? Opening up gasoline stations during the early days of ICE market penetration was like printing money; opening up EV chargers here in the early days of EV’s has been such a poor business proposition that it’s hindering EV growth and the government’s had to step in to try to incentivize people to do it more.
To your points AB I’d add - the convenience stores and service stations tied to the ICE introduction made that real estate investment worthwhile - that was the huge profit margin / return on those investments that made it grow.
Solar-supplied superchargers might be viable, if there were enough battery storage in the ground to support high volume and nighttime charging at v4 rates - but that of course increases the capital outlay for every supercharger station. For a gas station, the station owner doesn’t have to cover the COGS of the supply, or the maintenance of the pumps - that’s on the oil/gas company. A supercharger station powered by anything other than the local utility increases the maintenance cost (panels, battery, wiring, stupid driver damage) and who’s covering that cost in that model? And making a margin off of that?
Tesla was covering it to enable their growth in car sales. At some point, which appears to be now, EM would decide the marginal return isn’t enough anymore. Anyone wanna pick up the support cost? Circle K? Sheetz? Irving? Anyone? Bueller?
The smart chargers are software controlled. It would be pretty easy to have them setup to not enforce unplugging after 8pm, for example. If your apartment has the ability to have a dedicated parking space with a dedicated dumb charger each, then great. But most likely this won’t be the case. IMO, you want a charger with some smarts (includes sending you email/SMS notifications) prevents someone from hogging the charger or accidentally keeping it plugged in. Many EVs have a lock on the charger cord that prevents someone from unplugging them and stopping their charging session unless the car releases it.
Why bother, then? The thing about apartment charging is that it’s almost entirely going to consist of a person plugging in after work, then charging overnight. There’s no benefit to spending the extra money for a smart charger. You’re almost never going to get more than one charge per 24 hours anyway. Which reduces the value of most of the features of a smart charger and makes it a pretty poor candidate for a third-party company to invest in that location. Sure, the dumb cheap charger isn’t optimized, but it’s not worth the more than 10x expense to move from the standard home charger ($600 or so) to a commercial charger that lets you charge a fee.
Maybe gas station groups? Last year, Tesla started cutting deals to sell Supercharger hardware directly to others, inking agreements with both BP and EG Group (a big European gas station business).
With gas stations, there are companies that make the pumps (e.g. Tokheim) and companies that own the pumps and stations (e.g. Racetrac). Tesla was doing both parts of the business. They made the chargers, and then they owned and operated them. As you point out, the latter part is capital intensive and requires some ongoing outlays.
So while this seems precipitous, Tesla’s newfound willingness last year to just sell the chargers - rather than own and operate them itself - may have been a precursor to them thinking about exiting that part of the industry and just being in the business of making and selling the chargers.
Profits would presumably improve with higher Level chargers with much faster charge times. So a standalone Tesla station with 100 Level 4 chargers on the interstate would probably be a pretty profitable venture, particularly if much of the electricity was coming from solar.
Who is suggesting a positive feedback loop from EV charging? You seem to be arguing with yourself on that point. I would also note that the only reason there was a positive feedback loop for gas stations was because gas cars were a huge improvement in transportation over horses. That added value was what made selling gas so profitable. It was an accident of history.
However, once the car market matured it turns out gas is no more profitable to sell than electrons. Today, gas sales have to be paired with convenience stores to be financially viable. In fact, I suggest that EV charging will soon be more profitable than gas sales. Charging times are declining, EV adoption is rising, and the efficiency of both solar and batteries rapidly improving. All these point to rising public charging profitability.
Just keep in mind that each charger you add has diminishing returns because it won’t be used as often. The first charger, used all the time. The second charger, used when the first charger is in use. The third charger, and so on. (The chargers are fungible, of course, but by the time you get to 100 chargers, unless there are 99 people there, you didn’t really need it.)
Agree with some. EV charging can be more profitable than gas. It doesn’t require deliveries, it doesn’t require a guy sitting in a booth, it’s entirely autonomous. Yes, EV adoption is rising, but slower than we might like, and I have my doubts about using solar in any meaningful capacity, simply because of space requirements. Where are you going to put a solar array big enough to matter at a WaWa? Batteries have to come down in price a lot to make a difference, because absent the solar you still have to “fill up” at off peak times. Does the utility rate differential pay enough to make the battery purchase worthwhile? Not yet. Maybe someday.
He said that, but it’s completely inconsistent with firing the entire Supercharging team. So while they might add a few chargers here and there (and Musk recognizes the benefit of maintaining the perception that they’re not walking away from the existing network), firing the entire team means that they’re mostly getting out of the business of new installations. Sure, they might add a charging station here and there at their existing sites - but they’ve entered the market of just selling the equipment to third parties.
Which again, makes a lot of sense! Tesla’s got much better things to do with its capital (if you’re Musk) than having it sit around in charging stations passively earning a modest return.
That blog doesn’t estimate what actual charging businesses are earning - or can earn - it just says what they’re aiming for. That’s pretty inconsistent with what real world results have been. Most of the article is the author’s hypothetical pro forma of what a charging operation might look like - and honestly, using a 40% utilization rate in your calculations when the industry is struggling to get even half that isn’t a great sign.
Sorry - it’s just that having that kind of loop is one of the key ways (perhaps the only ways) that this becomes a good business to be in. My main point is that running charging stations (different than being the ones to make and sell the charging equipment) doesn’t seem like it’s likely to be that great a business to be in. Running charging stations means a capital outlay for a pretty small stream of revenue - because electrons are cheap and available at home. It looks like it’s going to be a tiny business. Even in Norway, where EV’s reign, third-party chargers are only selling about $88 worth of electrons to each driver per year - compared to $2K or so in gas for ICE drivers. Because everyone charges at home.
The only way that the public charging industry can really grow in the U.S., IMHO, is if you get that positive feedback loop - public charging encourages people who don’t have charging at home to adopt EV’s. Otherwise, you’ll see the same continuing pattern - the overwhelming majority of charging takes place at home, and what remains is a small market. One that someone might be able to earn out a modest rate of return, but not a great choice for Tesla.
Does it? Too early I think to assume too much with Musk.
You keep making this claim about positive feedback loops without much evidence that they have any significant impact on auto demand. Where is the evidence that the number of gas stations impacted gas car sales? There was early demand for cars because cars are much better than animals for transportation. That demand drove the establishment of gas stations. No real need to invoke a feedback loop. If there was one, it probably wasn’t all that significant compared to the improvement over animal transportation and better roads.
Makes no sense. Gas was not much different in that it rarely was a major profit producer at the retail level. Even the early gas stations made most of their money from services like oil changes, tire sales, and repairs. Any product whose price is advertised on a big public sign is more likely to be low margin or even a loss leader. Gas station sales has almost always been supplemented by other revenue streams, so it is not all that different from what you are claiming will be the case with EV charging.
One explanation is that because EV adoption in Norway is happening so fast, the public charging network either hasn’t kept paced or is not efficiently distributed. Norwegians would use it more if it were more available. This possibility is suggested by Norwegian complaints of long lines at these stations.
You’re still looking at enough solar panels to put over one space, on average. A WaWa could conceivably put 2 large panels over a two car stall. This supercharger can put 50 panels over a 50 stall set up. I don’t see how that’s so much better.
Interesting article. I don’t claim to understand why the utilities rates would “spike”, other than “peak time” demands, but if EA is doing this and spending the capital there must be something to it.
No, that’s wrong. Gas stations were profitable from the days of Rockefeller, and the industry vertically structured to capture the dollars from extraction to final delivery. Much of that stayed in place until the government (and more likely market forces) starting bringing about antitrust and divestment in the 1990’s. There were also lots of independents, it’s true, and gas stations (both independent and corporate) did start adding ancillary services (oil changes, car wash, etc.) but not because they “had to” but because it was a way to add profit. Many, many thousands, just sold gas, and did fine.