Electric vehicles (EV) are all the rage in the investment world today. For proof look no further than the meteoric rise in the shares of EV star Tesla or any number of new EV share listings. This share price action is not unfounded – EV adoption rates around the globe are accelerating. But in the U.S., this uptake is occurring off a low base. In 2019, just 331,000 EVs were sold in the U.S., or about 2% of the total. Many industry observers anticipate EVs will represent almost 30% of new vehicle sales within a decade. The global auto industry is betting heavily on EVs with most manufacturers rolling out new line-ups in the next few years. Volvo, for one, intends for EVs to make up 50% of its sales by 2025.
Despite this impressive growth rate, several obstacles stand in the way of greater EV adoption. Acquisition costs have come down over the past decade but the price of most EVs still exceeds those of their gasoline counterparts. While low maintenance/operating costs and tax incentives can reduce cumulative lifetime EV costs, sticker shock remains an issue for many.
Resolving concerns around the ease and availability of charging is likely the greater obstacle to widespread adoption today. According to a Deloitte study, the average U.S. driver covers just 27 miles a day. This fact makes EVs, which typically carry a charge for over 200 miles, a reasonable alternative for many commuters. But EVs still fall short for two groups: drivers looking to cover long distances and those unable to recharge at home. For both groups, questions about where to recharge, how long the charging will take and how much it will cost can create what is known as “Range Anxiety.” Today, approximately 80% of vehicle charging happens at home. This approach has two advantages; EV owners do not have to wait for the hour plus that it takes to recharge, and they can benefit from lower price “off-peak” electricity rates. But only an estimated 63% of all U.S. housing units have a garage or car port which makes charging at home not an option for many potential buyers.
There are over 26,000 away-from-home EV charging stations in the U.S. today operating approximately 86,000 plugs. As the map to the left shows, most of these stations are concentrated in coastal, urban areas with high EV registrations.
Building out a more robust, national network will not be a straightforward process. In some cases, today, the construction and maintenance of charging stations are funded by state and federal governments. In other cases, the private sector (think multifamily properties or hotels) has picked up the tab. However funded, charging station networks today are not terribly profitable businesses. Revenues come from drivers either paying a fee to join the network or the amount of electricity consumed. Onsite advertising can represent another source of income. Charging may be offered as an employee perk, to generate goodwill or as a means of generating revenue from other sources (e.g., at restaurants or malls). Charge Point, one of the world’s largest EV network operators, makes most of its money selling hardware and network software. This leaves host sites responsible for maintenance, installation, zoning etc. To date, electric utilities who have a vested interest in selling more electricity, have had limited interest in owning and operating charging sites.
Technology advancements too will have a big impact on when and how the nation’s charging network evolves. Expanding battery range from 200 to 400 miles would reduce the demand for plugs and soothe range anxiety. A concerted effort to expand the number of Level 3 “fast” chargers would also help. Fast chargers, which are more expensive to site, install, and maintain, can bring an EV battery up to 80% of capacity in around 30-60 minutes.
President Joe Biden has committed to building 500,000 EV charging stations by 2030. While enhanced public funding of the initial build-out will help, a well thought out path to wider EV adoption will need to consider a range of technical, social, and economic factors.
