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The World’s Largest Electric Vehicle Charging Network

When it comes to choosing which particular stocks to invest in, the majority of first-time retail investors will approach the matter using common sense and intuition. Or so they think. It’s a problem that people in finance often refer to as “domestic bias.” That is to say, invest in what you are familiar with. For example:

  • Marijuana dispensaries are popping up everywhere = invest in marijuana stocks.
  • They keep talking about gene editing on the evening news = invest in gene editing stocks.
  • Electric cars are popping up everywhere = invest in materials used to make batteries, like lithium

In that last example, you can probably think of a number of ways to invest in the electric vehicle thesis in addition to just investing in lithium stocks. You might also consider investing in the companies that are making all the electric cars, or the companies that are building out the electric vehicle charging stations needed to power the cars. In other words, you might consider investing in the gas stations of tomorrow. So, which company is currently building out the world’s largest electric vehicle charging network?

Just over three years ago, we published a list of  7 Electric Vehicle Charging Companies, one of which we speculated was going to come out ahead. The name of the company wasn’t Blink (BLNK). That was an electric vehicle charging stock we covered earlier this year which has now lost 2/3 of its value. The company with the world’s largest electric vehicle charging network today is called ChargePoint – and they recently took in a massive funding round from some very notable investors.

ChargePoint’s Electric Vehicle Charging Network

Click for company websiteFounded in 2007, Silicon Valley startup ChargePoint has taken in just over $532 million in funding so far from some big corporate names like Chevron, BMW, Toyota, Siemens, Daimler, and American Electric Power. Nearly half of that funding came in the form of a Series H round that closed just two weeks ago, money which they’re using to build out the world’s largest electric vehicle charging network. Every two seconds, someone plugs an electric vehicle into the ChargePoint network of around 60,000 charging stations.

It’s important to note that ChargePoint’s value-add is focused on software, and much less so on hardware. They acquired a sizable number of charging spots from General Electric last year (1,800 commercial and about 8,000 residential), and certainly haven’t built all of the other 50,000 charging stations themselves. Their charging network supports stations built by other manufacturers, such as the ones seen below:

EV Charging Stations Support by the ChargePoint Electric Vehicle Charging Network

EV Charging Stations Support by the ChargePoint Electric Vehicle Charging Network – Source: ChargePoint

The ChargePoint Software Service Plan lets hardware manufacturers control access, set pricing, display advertising, monitor status, and generate usage reports. ChargePoint even takes care of the customer service, providing 24/7 call center support to drivers. With that said, they’re also focused on developing cutting-edge hardware. The company’s new “fast charger” stations can provide a 155-mile (250-kilometer) range in about 10 minutes. That’s starting to reach par with the amount of time it takes to fill your car with petrol.

Growing The World’s Largest EV Charging Network

The company’s CEO, Pasquale Romano, recently discussed at a tech conference in Portugal, called Web Summit, about how the availability of charging stations at your workplace means that you will be six times more likely to buy an electric vehicle. He also talked about how the company’s international expansion plans are ramping up. It’s only taken one year for ChargePoint to build out about 1,000 stations across 17 countries in the European Union so far. That number is expected to grow exponentially with global expansion plans announced this past September that are nothing short of staggering. By 2025, ChargePoint expects to increase the number of EV charging spots by 50 times:

ChargePoint Expansion Plans

CB Insights refers to this as “bad data viz,” but you should still get the message – Source: ChargePoint

The majority of these stations will be evenly split between Europe and North America, with smaller percentages in Oceania (Australia and New Zealand).

Within the next five years, it is estimated that no fewer than 40 new EV models will hit the road. That increased selection is “a tipping point when it comes to EV adoption,” said Mr. Romano. And of the new customers who have already decided to purchase an electric vehicle for the first time, over 70% of them have signed up with ChargePoint. Of those that have already signed up, 98% renew their subscriptions.

Not everyone thinks that these ambitious growth plans make sense. A recent article by Forbes talks about how there is a danger ChargePoint may be overestimating the demand for their charging stations. That potential mistake means that profitability may be further out than anticipated, especially given the capital expenditures needed to build out and maintain all this infrastructure. Just how long will it take for ChargePoint’s investors to see a profit on their investment? We can check the numbers with some back-of-the-napkin math.

How Many Charging Stations Do We Need?

The sort of “fast charging” outlets that ChargePoint is building mean that you need fewer outlets to service more cars. If we’re talking about charging an electric car as fast as we can charge a petrol car, then EV charging stations and gas station pumps are synonymous. An EV charging station with 12 outlets alongside a highway could charge 12 cars every 10 minutes, about the same number as a petrol station. According to the U.S. government, in 2004 there were 168,000 retail outlets in the United States that sell petrol, a number that has likely decreased meaningfully in the past 14 years. That means that at a maximum, we would need around 2 million charge points for public use. But then, we need to consider that a 10-minute charge only provides a range of 155 miles. According to an article by Cleantechnica, the median range for gasoline vehicles is around 412 miles. This means electric vehicles need to “gas up” more often – at least for now.

ChargePoint plans to build out 1 million charge points in North America, according to their stated expansion plans. Assuming that their expansion plans will largely target the United States, that means they’ll have enough infrastructure to support half of all cars being electric – if all those charge points are fast charge, which seems highly unlikely. As of December 2018, they claim to only have around 950 “fast charge” spots that would be capable of charging a car as fast as a petrol station. Of course, you only need those types of speeds in situations where people need to charge fast. Charge stations located at your home, at your workplace, or at the grocery store, will all have varying requirements for charging speeds. No doubt ChargePoint has some very clever people devising their growth plans, so perhaps it will all balance itself out over time.

Conclusion

As in many cases, the companies that manage to come out ahead when it comes to investing in emerging technologies are privately held and off limits for retail investors. If you’re thinking about investing in electric vehicle charging stations because 35% of all vehicles sold will be electric by 2040, you’d probably be best served to avoid any of the “electric vehicle charging stocks,” like Blink, which have some very fierce competition in the way of ChargePoint.

In just three years’ time, ChargePoint has managed to more than double the number of locations they provide. They’ve also refined their business model so that any company that’s producing a charging station can find value using their platform, and any new electric vehicle owner is 70% likely to subscribe. With several large oil companies looking at investing in electric vehicle charging networks – namely Shell and BP – they’re likely to find no shortage of suitors when it comes to looking for an exit. The question is, will it be a profitable exit for their investors?

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