A BCG study from 2021… Still very relevant in 2022!
As electric vehicle sales take off, demand for public charging will explode. Providers can pursue seven strategic plays in this nascent but fast-moving market.
It may not have the same allure as bringing the latest battery-pow- ered concept car to life. But public charging represents an explosive market opportunity for participants in the rapidly evolving electric vehicle ecosystem. Sales of electric vehicles, including plug-in hy- brids, were virtually untouched by the COVID-19 pandemic—and they are on track to account for one out of every two new cars sold in Europe by 2030, according to BCG estimates. As sales of EVs grow, energy demand will increase exponentially.
Today, two-thirds of the electricity demand for EV charging is private, whether at home or in company parking lots. Over time, however, the proportion of public charging activity—at service stations, public parking spaces, and retailers’ parking lots—will balloon. By 2030, the share of electricity demand from public charging will be close to that of private vehicle charging; we estimate that the num- ber of individual public charge points throughout Europe will increase tenfold.
This growth holds great promise for the many companies that are already—or could be—catering to the EV pub- lic-charging market, a broad array that includes infrastruc- ture firms, manufacturers of charging equipment, compa- nies that install or maintain public charge points, station operators, site owners, and the charging-software providers that offer apps for payment and location searches.
Our analysis revealed seven broad strategic plays that companies can pursue in what is poised to be a fast-mov- ing market. As this market unfolds, what specific opportu- nities await these companies? What levels of profitability can they expect? And what will it take for each type to secure a leading position? Although this report focuses on Europe, where the electric vehicle is gaining ground most rapidly, we believe that our analysis has similar implica- tions for other major markets.
Rising Demand for Public Charge Points
Tighter emissions regulations, along with advance- ments in batteries (in affordability as well as the greater ranges they support), have helped EVs gain traction even faster than our initial projections. So have government subsidies, which in France and Germany amount to between €7,000 and €9,000 per EV, respectively. Bans on the future production or sale of internal combus- tion engine (ICE) vehicles—notably in China, France, and California—are yet another incentive spurring EV adoption worldwide.
We estimate that, between now and 2030, the number of charge points—pedestals for EV charging in the public infrastructure—will increase in Europe from around 200,000 to 1.8 million. This demand growth will, of course, require an increased supply: during this period, we calcu- late that electricity demand from passenger EVs will grow at a compound annual rate of 34%, to reach around 86 terrawatt hours (TWh).
To put the scale of demand growth in perspective, the EU’s 27 member states currently produce around 3,000 TWh of electricity annually, of which EV demand accounts for slightly more than 0.1%. At 86 TWh, charging demand will account for just under 3% of total electricity production by 2030, an incremental rise. The demand/supply question is thus less about meeting total volume and more about preventing local bottlenecks during peak load times—for example, when the residents of a neighborhood are all charging their cars at the same time on a Friday night in preparation for the weekend. Such situations will make grid network expansion a necessity.
Already, the sale of electricity to EV end users generates around €1.5 billion per year throughout Europe. Assuming electricity prices remain at 2020 levels, we estimate that the market will expand to some €33 billion by 2030. Two- thirds of Europe’s current vehicle energy supply comes from privately owned chargers, primarily because most early adopters of EVs have access to home charging sta- tions. In ten years, however, 40% to 50% of the energy will be supplied by public chargers—including those at semi-public stations, such as supermarket parking lots.
Certainly, there will be regional differences: in the Nordic countries, where home ownership is high, we will probably see less public charging, because charging at home is cheaper and more convenient. In countries with decentral- ized populations, such as Germany, most public charging will occur en route; in countries with centralized popula- tions, in-town destination charging will prevail.
In ten years, 40% to 50% of the energy for EVs will be supplied by public chargers.
Not only will demand grow over the next decade; so will the power output of the chargers themselves. Most char- gers today are slow—below 22 kilowatts (kW)—but cus- tomers’ preference for speed and ease will make fast chargers (22kW to 149kW) and high-power chargers (more than 149kW) increasingly popular. The latter two are pro- jected to grow from 15% of the total public charger market today to 27% by 2030. In the public-charging arena, slow chargers will predominate in cities and rural areas. High-power chargers will be most prevalent on or near highways, as minimizing wait times during charging ses- sions is more important for those en route. (High-power chargers can charge EV batteries 15 to 30 times faster than the average slow charger, so a 10-minute charge could extend a vehicle’s range by 250 kilometers.)
The European Commission, through its Alternative Fuels Infrastructure Directive, now recommends a minimum of one charge point for every ten electric vehicles. Europe currently has seven EVs per charge point; however, because EV growth will likely outpace the development of charging infrastructure, we expect the EV to charge-point ratio to increase to 17 in the next ten years. In addition, the num- ber of charging sessions taking place at public locations will skyrocket, from approximately 131 million annually today to around 2.5 billion by 2030—the equivalent of 1.2 sessions a week for every battery-powered EV.
The Emerging Marketplace for Public Charging
The charging environment is still very new. But as sales of electric vehicles rise and battery ranges increase, custom- ers will develop a broad range of needs—from private charging at home and at work to public charging while traveling and at destinations. And these needs must be addressed as seamlessly as those related to gas-powered vehicle travel currently are.
Unlike home charging, where users primarily require prac- tical and affordable charging hardware and the ability to track and manage their energy consumption, customers’ needs en route and at destinations are different. En route, the search for charging stations must be easy and conve- nient, which means users need high-speed charging to minimize wait times, broad and reliable network coverage, and simple payment mechanisms. For destination charging—at the supermarket, shopping mall, or sports arena, for example—users expect convenient access and attractive locations and offerings.
To meet these needs, a value chain has emerged. (See Exhibit 3.) It includes:
• Equipment Supply. Engineering, manufacturing, and selling AC and DC chargers.
• Installation and Field Services. Preparing sites and installing the chargers, routinely checking them, making repairs, and providing cleaning services.
• Site Ownership and Asset Ownership. Investing in sites and chargers, sourcing electricity from utilities, and selling it to end users at a markup.
• Charge Point Operation. Running the charge points at stations. This entails connecting chargers to e-mobility service providers (e-MSPs), monitoring charger status, and coordinating maintenance. While charge point operation is a value-chain step, the term “charge point operator” or “CPO” is commonly used to refer to the pioneers that operate and lease or own EV charge points and charge point establishments—companies such asAllego, Fastned, and IONITY—the EV equivalent of the gas station.
• E-Mobility Services. Providing charging and other mobility services to end users. These app- or charge- card-based services include service maps, payment mechanisms, and roaming services, in which the end user can charge at different charging networks with one charging card.
Seven Strategic Plays
At this early stage, the marketplace is not yet fully organized. Companies from different areas and sectors of the EV market are getting in on the action, with different approaches and business models that ad- dress different segments of the value chain. The picture is much like that of an anthill, in which the participants are scurrying about to test opportunities.
Patterns are emerging, though—and from them we have distilled seven core strategic plays in the EV charging value chain. Some market participants will specialize in one link in the chain, while others will provide an integrated offer- ing to establish their independence and secure bigger margins. At this point, most business models remain unprofitable; that’s a reflection of low charger utilization. Participants must therefore weigh the benefits of seeking first-mover advantage against those of waiting for an eco- nomically lucrative moment to enter the market.
The seven strategic plays include five vertical specialists— the hardware systems specialist, the installer, the site and/ or asset owner, the software platform player, and the aggre- gator—and two integrators, the turnkey provider and the end-to-end integrator. (See Exhibit 4.) Here, starting with the vertical specialists, we define each of these roles and their competitive arenas, analyze their prospects, and provide a broad-brush assessment of what it will take to win in each.
See the article for Exhibits and details on the Seven Strategic plays.
Source: Boston Consulting Group.
