Navigant Research Blog

Rough Road Ahead for EV Charging Network Providers

Scott Shepard — November 30, 2012

Electric vehicle (EV) battery swap pioneer Better Place ousted its founder and CEO last month and lost three additional executives earlier this month.  Layoffs are reportedly planned.  The company also received $100 million in new funding earlier this month, the bulk of it from Israel Corp., the holding company of billionaire Idan Ofer, Better Place’s chairman.  That round brings the total invested in the startup to more than $850 million.  More recently, Israel Corp. threatened to cut off additional funding, and new CEO Evan Thornley is attempting to craft a new business plan.

There are many reasons for the company’s recent shakeup, but the most important is that Better Place, like many companies in the fledgling EV charging service industry, is simply too far ahead of the EV market.  The company offers the most elaborate services in an industry plagued by uncertainties over EV consumer acceptability, EV owner charging behavior, and a lack of standards for charging equipment.  The struggles at Better Place portend the next stage of EV charging service industry consolidation as some of these uncertainties find answers.

The long running belief in the automotive industry is that, in order to make the electric motor a viable competitor to the internal combustion engine, a charging infrastructure must exist to ease EV owners’ anxiety over driving ranges.  Exactly how that infrastructure should be developed is an unanswered question – as explained in Pike Research’s recent webinar on the topic, The Future of EV Charging Stations.  Besides the Better Place battery swap model, companies have developed AC (level 1 and level 2) and DC charging networks based on either pay-as-you-go plans or monthly subscriptions.  Such networks are provided by ECOtality, Coulomb Technologies, and RWE among many others.

AC charging provides power outputs of 1 to 7 kilowatts (kW) and can fill a depleted battery over a matter of hours.  DC chargers use outputs of 25 to 90 kW and reduce charge times to as much as a half hour depending on the vehicle’s battery capacity.  DC-only charging networks are offered by Aerovironment and Tesla stateside, ABB in Europe, and are the norm in Japan, where charging services are provided by the Japan Charge Network (JCN) and the Charging Network Development Organization LLC.

A Mishmash of Models

The problem with selling public AC charging services is that you’re competing against every EV owner’s garage (where almost 80%-90% of charging takes place), plus every retail location that is willing to give electricity away for free, to lure EV owners into the store.  Networks focused on DC chargers don’t have it much better.  If the number of EV sales is low, then the number of EVs compatible with DC fast charging is lower.  The Nissan Leaf, Mitsubishi iMiEV, and Tesla Model S are the only mass-produced DC compatible vehicles stateside.  Tesla’s proprietary Model S network is incompatible with the CHAdeMO standard used by the other two EV makers, and net sales in North America of the Leaf and iMiEV since both were introduced 2 years ago are slightly over 17,000.

Better Place’s model is unique, as its network of stations in Israel and Denmark take a depleted battery from an EV and replace it with a charged one in as few as 5 minutes.  The technology is advanced, but it’s also expensive compared to an AC or DC charging station.  Battery swapping also requires auto manufacturers to agree on a standard format and location within the vehicle so that replacement can be automated, and thus far OEMs, not surprisingly, are sticking with their independent battery designs.  Lastly, Better Place is a subscription service and relies on members, therefore, it needs lots of EVs on roads, something that’s not happening in great numbers anywhere.

Even though the market for EVs has more than doubled in the last year, it has drastically trailed expectations.  Those expectations fueled major investments in charging infrastructure service networks that now sit idle.  Companies operating on any of the above business models are by no means doomed, as Pike Research forecasts annual sales of EV charging systems will hit 1.75 million globally in 2020.  Early charging equipment entrants will survive by capturing greater market shares and cornering their respective areas – or by having deep-pocketed, patient investors like Ofer.  The market isn’t big enough for every idea.  Next year should be interesting in terms of who survives and who gets bought.

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