Navigant Research Blog

Leasing EV Chargers and Profiting

— July 10, 2014

There are about as many business models for operating electric vehicle (EV) charging stations as there are flavors of Baskin-Robbins ice cream, but so far, none of them have been clearly profitable.  While worldwide sales of plug-in electric vehicles (PEVs) have grown to more than 12,000 monthly, in most locations today, there isn’t enough traffic for EV charging stations to directly pay back their cost within 3 years, which is a typical required return on investment.

Several hardware companies are trying to lower the cost of the equipment, which could reduce the payback period.  In the United Kingdom, electric vehicle supply equipment (EVSE) company POD Point is now leasing charging stations to lower the upfront cost.  For approximately £50 ($85) per month installed, POD Point will provide a commercial charger, which the company says requires just two charging sessions per day to be profitable.  Leasing can be a viable option for companies looking for an easy way to enter the market, and the leasing company has a vested interest in making sure that the stations remain operational.

Dig It

For companies that prefer to purchase the hardware outright, ClipperCreek recently began to offer a commercial charger for just $395 before installation costs.  A pay-by-mobile phone system from Liberty Access Technologies that manages up to 10 charging stations and enables fees to be collected can be added on.

The cost of installation, which can require trenching, running conduit curbside, and upgraded power delivery to the location, remains the Achilles’ heel of profitable EV charging, and unfortunately, there’s little leeway in reducing the contractor and cabling fees.

Automakers are getting involved to lower the cost and pain of EV charging.  Tesla bundles the costs of accessing its SuperCharger network with the vehicle purchase price, while Nissan is paying for the first 2 years of charging a LEAF with its recently announced No Charge to Charge program.  Nissan has teamed up with AeroVironment, NRG, and the Car Charging Group on the EZ-Charge program, which gives EV owners a single payment card for accessing chargers from these EVSE providers.  EV charging company ChargePoint was supposed to work with EZ-Charge too, but backed out of the agreement.

In Japan, Nissan has joined with Toyota, Honda, and Mitsubishi to form Nippon Charge Service, an EV charging company that will provide incentives for companies to offer commercial EV charging at retail outlets.

Lattes Not Included

As detailed in Navigant Research’s Electric Vehicle Charging Equipment report, to be profitable today, most commercial EV charging stations need to bundle the cost of charging with some other service or fee structure.  These include combining EV charging with conventional parking fees, valet service at a hotel, or offering subscription services that combine home and public charging (a la the NRG eVgo network).  Startup Volta in Hawaii and Juice Bar have taken another approach by using advertising revenue to reduce the cost of a charging station, a growing trend that is likely to increase in popularity.

There will come a day soon, however, when EV penetration will be sufficient in some regions to make pay-as-you-go EV charging services profitable.  Gas prices will likely continue to rise (gasoline in the United States  is up $0.16 from last year at this time, according to AAA) and EV charging service providers will have more flexibility in pricing, since electricity as a fuel will increasingly be a better deal ‑ making profitability easier to attain.

 

Workers of the World Unite for EV Charging

— June 18, 2014

One of the keys to growing sales of plug-in electric vehicles (PEVs) is enabling more people to charge their cars at work.  Workplace charging gives employees a consistent location away from home that effectively doubles their electric driving range for commuting while encouraging employees to buy EVs.

“Workplace charging sells vehicles,” said Mark Duvall, director of Electric Transportation and Energy Storage at the Electric Power Research Institute (EPRI), in a recent phone interview.  Duvall said EPRI’s office in Palo Alto, California offers eight workplace chargers, and he often plugs in his Nissan LEAF there.

Companies such as Google, Coca-Cola, General Motors (GM), and others understand the benefits of offering workplace charging and are participating in the U.S. Department of Energy’s Workplace Charging Challenge, a program in which companies pledge to make charging available for their employees.  In May, GM said that the company has installed 401 chargers for their employees, and GM dealerships now have nearly 6,000 EV chargers in place.

Split the Charges

According to Navigant Research’s Electric Vehicle Charging Equipment report, more than 12,000 workplace chargers will be sold in the United States this year.  By the end of the decade, annual sales will surpass 63,000.

Workplace charging helps companies attract and retain employees who value corporate sustainability.  However, minimizing the cost to the employers while maximizing the utility of the charging stations has its challenges.

The employees who arrive earliest get to plug in first, and since in most cases charging can be completed in a few hours, companies need to establish policies that encourage employees to move their cars to enable others to be able to charge later in the day.  Another alternative is buying charging stations with two plugs, offered by some companies, including Eaton and ChargePoint.  Able to service two parking spots simultaneously, these systems can intelligently divide the available power between EVs.  EPRI is studying ways to increase the load factor (utilization) of chargers on a single circuit, which Duvall says in many cases could serve between four to six PEVs at work per day.

Aboveground Option

The lowest-cost options for employers are to either purchase a non-networked charger and absorb the expense of the equipment and electricity as a cost of doing business, or let an EV charging network operating company maintain the stations and collect the fees to eliminate ongoing costs, according to Duvall.

EV charging station installation can be a considerable expense if additional power has to be brought onsite or if trenching is required to bring power to the parking lot.  One alternative is Envision Solar’s EV ARC solar-powered charging station, which produces all of its energy and stores it in a battery pack, thereby eliminating the need for employers to break ground.  Google has reportedly added the EV ARC to its growing stable of workplace EV chargers.

Duvall will be discussing EPRI’s research into reducing the cost of workplace charging when EV industry participants gather to share their plans for increasing EV adoption at the Plug-In 2014 conference in San Jose, California from July 28 to July 30.

 

U.S. Drivers’ Wait for Electric SUVs Continues

— June 5, 2014

Sales of plug-in vehicles in the United States continue to grow at an encouraging rate, but American customers looking for larger vehicles can only wait and watch developments in Europe with envy.

First, Tesla Motors postponed the launch of its crossover Model X until 2015, and now the Mitsubishi Outlander plug-in hybrid electric vehicle (PHEV) sport utility vehicle (SUV) won’t be coming to the United States until late 2015 or possibly 2016.  Mitsubishi blames California regulators for the delay, saying that adding the required battery monitor that reports the health of the pack has delayed the launch by more than a year.

That’s too bad, considering the success of the Outlander PHEV in Europe, where it makes up nearly a third of all Outlander sales and recently won an award from Fleet World for Mitsubishi’s aggressive pricing strategy.  The Outlander PHEV is available for lease in the United Kingdom for as little as £219 ($366) a month or for purchase starting at $47,200 after the government incentive.  In EV-crazed Norway, the Outlander PHEV even outsold the Tesla Model S in April.

I Want My SUV

Europeans can also buy the Volvo V60 plug-in wagon, which is doing so well that a sport package is being added.  Volvo hasn’t committed to bringing the plug-in diesel vehicle to the United States, since diesels make up such a small part of the U.S. market.

Since we Yanks are crazy for our SUVs, the lost opportunity due to the delays is significant.  Mitsubishi is on track to sell approximately 33,000 gasoline Outlanders in the United States in 2014, so selling 10,000 or more of the PHEVs annually should be achievable once the vehicle is launched.  Based on the success of its first two vehicles, demand for Tesla’s Model X will likely also be high once it enters the market.

The environmental benefits of buying a plug-in versus a low-MPG SUV are several times more than shifting from an internal combustion compact to a plug-in.  For example, the gas Outlander PHEV reduces CO2 emissions by more than 70% when compared to the diesel model, according to Mitsubishi.  Since SUVs are among the most carbon-intensive vehicles on the market, the net reduction in fuel consumed is much greater.

Many families who have become accustomed to the storage and passenger capacity of an SUV would never go to a smaller plug-in vehicle.  So for soccer moms and dads in the United States, buying a plug-in SUV remains a dream deferred, at least for now.

 

Luxury EV Sales Outpace Overall Market

— May 13, 2014

The plug-in electric vehicle (PEV) market continued to see strong growth in early 2014, and the high-end segment is likely to expand most quickly during the remaining months.  According to data from HybridCars.com, sales of PEVs in the United States grew by 24% during the first quarter of 2014 compared to the prior year and now make up approximately 0.6% of new light duty vehicle sales.

But if you look at sales from only the luxury vehicle segment, the penetration rate jumps to nearly 3% of new vehicles sold.  Nearly all of those sales (94%) came from just one company – Tesla Motors.  Two models accounted for the rest of the luxury EVs sold: the Cadillac ELR and the Porsche Panamera S E-Hybrid, both plug-in hybrids.

PEV Market Penetration by Vehicle Type, United States: 1Q 2014

(Sources: Navigant Research, HybridCars.com, AutoNews.com, Tesla Motors)

PEVs are doing well in the luxury market not only because the Tesla Model S is a great looking and performing vehicle, but also because its target audience is unfazed by its higher price tag.  Whereas Chevrolet, Nissan, Ford, and others are asking consumers to spend an additional $5,000 to $10,000 for a comparable looking electric compact or sedan (albeit with more features, such as navigation and telematics), Tesla and the other luxury makers are requiring customers to spend about as much as they normally would.  Upselling is always more challenging than asking customers to choose between equally priced options.

Top-Down Approach

Navigant Research projected that the luxury market would be an area of great interest and activity this year as part of our free annual white paper, Electric Vehicle Predictions: 10 Predictions for 2014.  Tesla, which reported sales of 6,457 vehicles during 1Q in its recent quarterly filing, continues to thrive, but competition is coming.  (Tesla does not identify how many of its vehicles were sold outside of the United States separately, so the PEV percentage in the United States is slightly inflated.)

Until recently, the only other luxury options have been the Cadillac ELR and Porsche Panamera S E-Hybrid (the Fisker Karma was also briefly on the market).  However, BMW will soon have two models available, and Mercedes just announced an aggressively priced battery electric vehicle.  And, within a year, Audi and Volvo will also be in the mix with new PEVs for sale in the United States.

While the styling from some of the luxury PEVs may not mirror their internal combustion engine counterparts, the interior creature comforts and vehicle performance will tempt consumers who are interested in avoiding paying more at the pump.  The rapid expansion of luxury PEV models available should enable the segment to stay well ahead of the overall PEV market penetration for the foreseeable future.  We can expect even more luxury PEVs to be announced before the year is over.

The overall PEV penetration rates will only grow if automakers pursue more segments and the high costs of batteries today makes moving from the top down a reasonable strategy.  Tesla and Chrysler are also eying other potential opportunities for PEVs – the SUV and minivan segments.

If you’d like to hear more on the future of electric vehicles, I’ll be speaking at the Electric Drive Transportation Association annual conference on May 20 in Indianapolis.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Electric Vehicles, Energy Storage, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Smart Grid Practice, Smart Transportation Practice, Utility Innovations

By Author


{"userID":"","pageName":"John Gartner","path":"\/author\/john-gartner","date":"7\/23\/2014"}