Although electric vehicles have been headline-worthy for close to a decade, two recent developments are especially significant. In February, the Bipartisan Infrastructure Law was passed in the United States, including $7.5 billion to build out a nationwide network of 500,000 electric vehicle chargers. In July, it was reported that 5% of new vehicles are EVs. These two factors contribute to a dynamic significantly increasing the speed of the build-out of nationwide charging networks.
Having been in the telecommunications industry for two decades, I am struck by how much the EV charging industry parallels the early stages of mobile network infrastructure build-out. These exciting times bring coinciding opportunities and pitfalls. These pitfalls can be avoided if a few changes are made during this high-growth development phase.
Early stage
After the wireless network technology of the 1980s was proven, the PCS spectrum auction created significant growth. The carriers engaged in a land rush, building their networks as quickly as possible to capture customers. Initially, cellular phone numbers were not portable – able to move between carriers. This created the assumption that a customer would be a customer for life. However, as the industry matured, as numbers became portable, and as penetration increased, what was once a growth industry evolved into an operating industry. Things like margins, customer service, and customer retention took precedence over simply building sites to add subscribers.
In 2006, over 75% of the US population had a mobile phone. Smartphones were just a drop in the bucket. Less than 3% of phones were of the smart variety. With the advent of the iPhone in 2007, we saw smartphones surpass 5% market penetration and then, over the course of ten years, grow to 80% of the market.
With EVs being 5% of new cars being sold and the introduction of the Ford F-150 Lightning - the F-150 being the best-selling vehicle in America for over four decades - we are on the cusp of an exponential growth of EV charging networks.
Similar assets
Although it is clear that an array of antennas and the associated radio base station equipment are different from an EV charging station, there are similarities. Apart from the low-level differences, both are hardware assets that need to be connected to a network for multiple purposes, including data collection, usage authorization, and payment collections. They need to be physically installed, connected to power, and the power usage needs to be tracked. Also, as charging technologies evolve, the hardware will need to be upgraded.
Large volumes now!
The deployment process is highly labor intensive. It requires:
- finding sites
- signing contracts
- sorting land use issues, such as permits and zoning
- designing the site
- procuring and installing the equipment
- commissioning the site, and
- managing the ongoing relationship with the landowners and ensuring that the physical asset is always functional.
In addition, during the high growth phase of a build-out, there is much competition for the limited number of companies that can do these tasks in the timeframe allotted and at the level of competency required. Thus, vendors will do most of the heavy lifting of the actual build-out.
EV charging network operators can reduce risk and increase their speed to market by utilizing vendors with proven track records of high-volume deployments. Minimizing the number of vendor hand-offs along the value chain creates efficiencies and reduces issues that plagued the mobile network operators’ rollouts in the early years. However, suppose there are circumstances where multiple vendors will be used. In that case, it is necessary to have the right technology tools to allow transparency across the entire process chain so that the EV charging companies can pinpoint any issues and develop solutions before rolling out.
Future consolidation
Many companies are working on building out networks, and more will arise as various revenue models are proven and more public and private funding is injected into this space. However, consolidation will eventually occur. Much like roaming across multiple networks was a hurdle for some people to become cell phone customers, EV owners will not want to be forced to use multiple apps or have wildly different experiences from one charger to the next. As gas stations provide a similar fill-up experience regardless of brand, EV chargers will evolve. This will result in consolidation at some point because there won’t be significant factors differentiating the brands.
Similarly, there has been significant consolidation in the wireless industry, resulting in three carriers (in most countries) today, down from dozens in the early years. Being involved with many of the acquisitions, and knowing that consolidation is coming at some point, some actions can be implemented today that will add value and make mergers easier. Consistent data treatment, consolidated databases, and consistent legal templates were not used in the early days of wireless and made consolidation more difficult. These factors decreased the velocity at which acquirees could merge with larger entities, reducing shareholder value. Given the way the wireless industry has led to the creation of tower companies, are there adjacent industries that may be potential suitors down the road, and if so, what can be done now to make a company more attractive as an investment or acquisition target?
Assets that must be managed
Chargers, the charging units themselves and the locations that host these units, are assets in a network. That network provides a service and is also a source of revenue. There needs to be a significant amount of thought put into how these assets will be managed once they are commissioned. There are too many stories regarding broken chargers, chargers that could not connect to the network (thus not accept payments), or are out of commission for some other reason. Each time this happens, it damages the brand reputation of that charging network operator and the manufacturer of the charging unit itself.
Market forces during the growth phase
There are similar forces at work, driving speed-to-market above all else. Although we understand the importance of achieving deployment targets and capturing customers, we also have seen the damage caused by moving too quickly and delivering a sub-par product. In these early years of mass adoption, poor charging experiences will only slow the adoption process when more adoption is needed to drive more consumers to purchase EVs and make use of the charging networks being built. EV charging companies will want to learn from past mistakes in an adjacent industry to solidify their futures.