You might think that being a manufacturer of EV charging equipment would be a comfortable position to be in these days. With the market expected to grow from $400 million to more than $4 billion accoring to our most recent report Electric Vehicle Charging Equipment in just five years, vehicle charging is an electrified market ready to be plugged into for profits.
Here are four reasons to think again.
1. The prices of chargers are about to go down rapidly, in some cases to zero.
The price of EVSEs has been relatively stable during the past two years thanks to few competitors, low volumes, and government contracts. The government’s plan to install 18,000 EV chargers in homes and public spaces provides a lucrative market for Coulomb Technologies and Ecotality, but the actual work is a lot further behind than expected after more than 2 years. (Ecotality is having its own technical issues.) The price of a home unit is around $2,000, including equipment and installation, but Toyota’s just-announced charger from Leviton cuts the price in half to $999 installed. The Leviton charger costs less because it’s matched to the capabilities of the Toyota Prius Plug-in, offering charging at 3.3 kw rather than providing a faster capability (Level 2 at 6.6 kw) than the vehicle can accommodate. For consumers, an expected 7 percent annual price decrease is a great trend that will continue; for companies looking for sizeable margins, not so much.
Selling into the commercial market is getting more complicated too. Many manufacturers are offering business owners packages that bundle their equipment with maintenance services that enable networks of chargers to be monitored. Enter the EV-charging-as-service-provider group of companies (EV Connect, Car Charging Group, 350Green etc.), who make the equipment available for free to property owners, buy the equipment in bulk, and form relationships with customers themselves. While these companies could be stable volume customers for the hardware companies, they are making it tough to sell equipment and are taking a chunk of the revenue stream.
In the world of DC charging, prices are falling faster than viewership of the Emmys. Nissan has cut the price of its CHAdeMO quick charger by nearly half, which will likewise erode the margins for competitors.
2. EV’s continue to roll out slowly.
Sales of EVs continue to lag behind forecasts due to supply constraints. While Nissan and GM publicly appear almost giddy with demand and the public reaction to their vehicles, finding available vehicles remains a challenge. It’s hard to adopt a national sales strategy of EV chargers when there are no vehicles in most of the country. That situation will improve by 2013, but it will make for a bumpy 2012.
3. California isn’t helping.
While California is THE market to be in for chargers/EVs, a recently passed boneheaded law, allowing cars that aren’t actively charging to be towed away from charging stations, isn’t exactly a talking point for EV car salespeople. If the charging is free, or if customers pay for the block of time they are parked, shouldn’t California’s finest find a better use of their time? Also in California, the company that sells salsa by the gallon (Costco) has said no to free upgrades of its long-dormant EV charging stations to the latest standards and is instead ripping out the existing infrastructure. That curious decision isn’t much of a consumer-confidence booster.
4. Partnerships are reducing marketing channels.
Having your EV charger chosen as the recommended equipment by one of the big EV companies is a big boost for a company’s sales channel. Most of the big fish have already been landed, with the recent tie-ups between Mercedes/Smart and SPX and Toyota-Leviton winnowing the opportunities for smaller EVSE companies to sign on with a large OEM. Competing for OEM contracts with the big companies (GE, Leviton, Eaton, Siemens) with experience in power delivery is no small task.
Despite these challenges, it’s hard not to be attracted to what will quickly become a $4 billion industry. Smaller companies such as Shorepower Technologies and Clipper Creek are finding their niches by focusing on service and flexibility, but with all of the established competitors, starting a new EVSE company is likely unwise. The elevator to the top of EV charging only has room for so many, which may require getting a bit closer to other folks than is comfortable.
John Gartner is a senior analyst at Pike Research and a co-founder of Matter Network.