Automakers turn to third parties to set up EV charging networks

July 23, 2018 01:00 AM

Over a decade, Electrify America plans to invest $2 billion in a public fast-charger network for customers of all automakers, such as owners of the Nissan Leaf, below.

Tesla is on the cusp of being stripped of its advantage in the electric vehicle marathon as rivals roll out dozens of electrified vehicles in the coming years. Unlike Tesla, the legacy automakers have deeper war chests and decades more experience with manufacturing and supply chain operations.

The California upstart, however, has a competitive moat: a global network of more than 10,500 high-speed chargers built since 2012. Charging infrastructure is one area Tesla's rivals don't fully know how to navigate.

The rest of the auto industry is steering clear of Tesla's capital- and time-intensive strategy, instead relying on a burgeoning network of chargers installed by government, utilities and private companies. It's an easier route but one that brings greater uncertainty and less control, which isn't ideal when few customers have any experience driving an EV.

"There has been a flurry of OEM announcements regarding accelerating electric vehicle introductions, but most offer little detail on charging and battery manufacturing strategy," Morgan Stanley analyst Adam Jonas said in a research note. "We see Tesla's rapidly growing infrastructure footprint as a key differentiator."

Porsche, Mercedes-Benz, BMW, Nissan, General Motors and others are plugging into third-party charging networks, such as EVgo, ChargePoint and Electrify America. In some cases, automakers have made strategic investments in the businesses.

GM pays EVgo to develop an exclusive charger network for its Maven Gig car rentals. Daimler invested about $82 million in ChargePoint as part of a $125 million funding effort by the charging network last year.

"Daimler saw they needed a business model to put EV infrastructure in," ChargePoint Chief Strategy Officer Simon Lonsdale told Automotive News.

Three years ago, Volkswagen and BMW financed a ChargePoint network of 100 public fast chargers along high-traffic corridors in the Northeast and along the West Coast.

"It was to get the message out there that it wasn't just Tesla — you could buy an e-Golf, or you could buy an i3, and also get around," Lonsdale said.

Automakers recognize charging infrastructure helps sell cars, EVgo Vice President Jonathan Levy said.

"Their core competency is making and selling cars," Levy said. "Our core competency is siting and constructing ... and owning and operating the charging stations."

While Tesla's Supercharger network has helped the automaker differentiate itself and boost sales, it's not considered a revenue generator.

"It's something they've had to take losses on," Levy said. "A lot of automakers have different views on how much appetite they have for that."

Over a decade, Electrify America plans to invest $2 billion in a public fast-charger network open to customers of all automakers. The company, financed through Volkswagen's settlement over its diesel emissions cheating, will install or have under construction more than 4,800 EV charging stations by June 2019.

Fueling vehicles is a third-party business today, Electrify America COO Brendan Jones said.

"Automakers need to take all their investment dollars and put it into developing new EVs with faster charging times and better batteries," Jones said. "Let the independents build out" the charging networks.

Network effect

The ChargePoint, Tesla and Blink Charging networks account for nearly 70% of the 51,724 electric vehicle charging outlets — the cable that plugs into the vehicle — in the U.S. as of last week.
	Network Stations	Outlets
ChargePoint	7,366	23,992
Tesla	2,999	7,758
Blink	1,478	3,494
SemaConnect	1,062	2,657
EVgo	761	2,372
Greenlots	403	992
Total public	18,473	51,724
Source: Alternative Fuels Data Center. July 18, 2018

Today, most EVs fall short of the 300- to 400-mile driving range the average modern gasoline-powered vehicle delivers. Automakers worry a lack of charging infrastructure will bring down their lofty electrification plans.

The number of plug-in models available is expected to surge to 258 by 2025, up from 49 last year, according to IHS Markit.

GM is taking a multipronged approach, making targeted investments in charging infrastructure, building partnerships with utilities and governments and simplifying customer access to public charging, such as by providing charge cards for customers in every new EV.

"We are open to all relationships," said Britta Gross, GM's director of advanced vehicle commercialization policy. "We work with federal and state governments to coach them on spending transportation dollars ... in a way that benefits where mobility is going in the future."

GM last month joined an initiative to guide local, state and federal policymakers on how to develop energy infrastructure for electrified vehicles. In May, a dozen East Coast states signed onto a regional strategy for deploying charging stations.

Automakers also are pressing states to do more to encourage EV adoption, including through infrastructure investment. California Gov. Jerry Brown has outlined a $2.5 billion plan to expand a network of EV-charging and hydrogen-fueling stations as part of the state's goal to get 5 million zero-emission cars on the road by 2030.

GM's experience with the EV1 vehicle in the late 1990s shaped its current strategy of collaboration. At the time, GM partnered with five utilities to build and operate a network of chargers. The automaker financially underwrote the investment.

"We learned a lot of lessons about what it means to pay for infrastructure," Gross said. "We learned we don't have that core expertise. We also learned ... the importance of industry standards" for chargers.

Porsche expects a network of at least 500 fast chargers nationwide by the end of 2019, including chargers at all 189 U.S. dealerships. Porsche will work with third-party charging networks to set up the remaining 300-plus fast chargers. The automaker declined to give details on the nature of the partnerships, charger locations or its financial investment.

German rival Mercedes-Benz said it plans to lean on third-party charging infrastructure investment being made by utilities, real estate landlords and private EV charging networks.

EVgo: 761 stations

"I don't think it makes a whole lot of sense if we, as Mercedes, now try to build a network of thousands of charging stations," Mercedes-Benz USA chief Dietmar Exler told Automotive News in May. "I am not sure that we are going to go down that route."

Nissan, which makes the battery-electric Leaf, has invested $60 million in the last five years installing chargers at dealerships and paying for customer access to third-party charging networks. Nissan provides customers with two years of free public charging in 55 U.S. cities via its No Charge to Charge program.

"Our objective is to advance EV adoption overall," said JeSean Hopkins, Nissan's senior manager of EV infrastructure. "The vast majority of Leaf drivers charge at home or work. What we're trying to do is fill the gap" for people in apartments and condos.

Tesla's go-it-alone strategy is unlikely to be replicated by another automaker.

Tesla: 2,999 stations

"It's a totally different business [from car-making]. It's very capital-intensive; it's very regulation-driven," said Mike Ramsey, an auto analyst with research firm Gartner. "It doesn't make sense for a single manufacturer to invest in such a build-out, unless they want to create a huge new charging business."

A more viable strategy for automakers would be to jointly fund a charging network that customers of multiple vehicle brands could use. That's already happening in Europe, where BMW, Daimler, Volkswagen and Ford Motor Co. are building a network of 400 fast-charging stations.

"It capitalizes the business and spreads the cost across a much larger user base," Ramsey said.

Compromises

Offloading the development of critical infrastructure to third parties might be more efficient for automakers, but it requires compromises. Asking customers to use a mishmash of networks can be clunky, requiring them to sign up for multiple services and carry multiple access cards. Maintenance can be hit or miss, and the last thing an EV driver running out of juice wants to do is pull into a charging stall and find it out of service.

ChargePoint: 7,366 stations

Automakers also are beholden to the charging company's rollout plan and schedule.

"If you feel like there's a big gap in coverage, if you're putting up your own charging system, a la Tesla, you get to decide where all the chargers go," Ramsey said.

As EV batteries get beefier and deliver more driving range, some argue the need for public chargers will diminish. And as workplace charging picks up momentum, range anxiety is becoming less of an issue.

Still, public charging networks are a "safety net," reassuring EV drivers that there is a backup when their battery runs low, said Rebecca Lindland, executive analyst with Kelley Blue Book.

"It's kind of like when you're driving through the desert and there's that big sign that says, 'Last gas station and last restroom for 100 miles,' " Lindland said. "Suddenly, you have to fill up the tank and go to the bathroom."

EVgo's Levy is confident demand for public chargers will swell as EVs become more mainstream and are embraced by apartment and condo dwellers.

New transportation services, such as ride-hailing and car-sharing, will further drive demand for third-party charging infrastructure.

As more EVs enter ride-hailing networks, they'll need on-the-go charging options.

"The average American is driving less than 15,000 miles a year," Levy said. "The typical [Uber or Lyft] driver can drive well upward of 50,000 miles a year."