Investors sour on EV charging companies
EV charging companies have fallen from lofty valuations amid concerns mount about their profitability.
The companies that install and operate electric-vehicle charging networks are in the middle of a building boom, but their share prices are sputtering.
ChargePoint Holdings shares have tumbled 74% this year, and the company missed initial revenue projections for the third quarter. Blink Charging shares have dropped 67%, while EVgo is down 21%, and both project annual losses.
The charging providers don’t expect to turn profitable for about a year and face the prospect of EV market leader Tesla opening much of its popular charging network to other drivers starting in 2024. The blistering pace of U.S. sales growth for EVs has moderated. Some charging executives say they are running into challenges that include customer unease about the direction of the economy, higher costs and delayed deliveries of EVs to fleet customers.
Companies say that with more EVs hitting the road, their chargers are in use more steadily—an important metric for the burgeoning industry. However, selling jolts of electricity to drivers still isn’t a moneymaker because of relatively low use rates.
“I think the investor class has grown weary of the industry’s lack of profitability," said Blink Charging’s chief executive, Brendan Jones, who added that charging stocks had previously frothy valuations.
EVgo executives recently told analysts they project profitability “in the next couple of years." ChargePoint and Blink say their adjusted earnings before interest, taxes, depreciation and amortization will turn positive by late next year.
The non-Tesla charging industry is grappling with issues including equipment reliability and a chicken-and-egg challenge. You need chargers to get people to buy EVs, but can’t make money on charging until there is a critical mass of drivers plugging in.
President Biden aims to have 500,000 public chargers in the ground by 2030. Consulting firm McKinsey estimates that around 1.5 million public chargers would be needed by then if half of car sales are electric.
The U.S. has around 159,000 public charging ports now at 60,000 locations, according to government data.
Tesla has added more than 5,500 fast chargers and 214 slower chargers this year, according to government data. Other charging companies—a group of dozens of companies that includes ChargePoint, EVgo, Blink and providers such as Volkswagen’s Electrify America—have added 3,900 fast chargers and 21,000 slower chargers. Fast chargers are more costly but can repower a car in about 30 minutes and are needed along highways. Slower chargers take several hours and are often at offices or shopping centers.
EV sales continue growing—rising 51% this year through September—though the rate has slowed from last year. Some companies such as General Motors and Ford Motor say they are seeing a more hesitant group of prospective buyers than early adopters. Ford has trimmed the scope of a planned battery plant in Michigan, citing a pullback in the outlook for future EV demand.
Some charging companies say they are sensing caution among customers.
Places such as offices, restaurants, hotels and shopping centers that might offer EV charging as an amenity are holding back on installing equipment amid questions about the economy, Rick Wilmer, ChargePoint’s newly appointed CEO told analysts this month.
“I think we’re seeing this viewed as a discretionary purchase and the CFOs of the world are being cautious with discretionary purchasing," he said about chief financial officers.
EVgo’s revenue jumped 234% in the third quarter and the company narrowed its loss to $28 million from $51 million, but it is also trying to manage higher costs. Utilities must upgrade local power distribution networks to accommodate more fast chargers, an expense passed along to companies such as EVgo, former CEO Cathy Zoi told analysts last month.
The company is trying to shave costs by installing prefabricated charging stations in places where the terrain isn’t too steep or tangled with tree roots. The first such charging installation is under way in Texas, which EVgo expects will cut installation times in half and reduce costs by 15%.
Meanwhile, EV market leader Tesla keeps adding chargers for its own drivers at a blistering pace. The Tesla network will start to open to other kinds of cars next year.
This year, it opened an average of 483 new fast-charging ports, called Superchargers, every month in the U.S., according to consulting firm EVAdoption. Tesla, which has also been building prefabricated charging stations, is outpacing all other charging networks combined. Tesla doesn’t report the financial details of its charging business.
It has a wide head start, owning about two-thirds of U.S. fast chargers, but other big players are investing in highway charging, too.
Oil giants BP and Shell, retailers such as Walmart, gas station and truck stop chains, and automakers including GM, Kia and Mercedes-Benz and Jeep maker Stellantis are among those launching charging networks.
In some instances, they are joining up with existing charging providers such as ChargePoint, which sells equipment to property owners and has contracts for operating and servicing it, or EVgo, which largely owns its own equipment but has collaborated with GM and Pilot Co. for a massive highway build-out at Pilot and FlyingJ sites. In other cases, the new entrants will add competition to the market.
Long term, EV charging is likely to “consolidate toward companies with big balance sheets," such as automakers and oil-and-gas companies, said analyst Brett Castelli of Morningstar.
Desmond Wheatley, chief executive at Beam Global, which builds off-grid chargers that tap a canopy of solar panels instead of grid power, said EV charging shares have been caught in the negative sentiment about small-cap stocks and clean energy investments, both of which have been hit as rising interest rates sent borrowing and project costs higher.
Shares in Beam Global are down 60% this year, though Wheatley is optimistic about long-term prospects because revenues are rising.
“It’s easier to get vehicles into people’s hands than it is to get chargers into the ground," Wheatley said. He says EV charging infrastructure will have to play a game of catch-up for some time.
Write to Jennifer Hiller at jennifer.hiller@wsj.com
