Why Invest Now on EV Infra?

Most people will tell you that electric vehicles will have a high marketshare in the future and that electric drivetrains have a lot of advantages over the conventional powertrains. However, if you ask the same people about short-term development this year and next, they tend to be more conservative about things like market share for EVs, cost-efficiency and consumer preferences. This short-term conservatism also has an impact on the infrastructure investments, the market is looking for a “tipping point” or an “inflection point” before starting to invest.

So the next question is: when will we reach the “tipping point”? I do not have an answer to that nor does anyone else (if someone says they do, then they are not being honest to themselves). However, in hindsight the answer is just as obvious as the timing of the mobile phone revolution or the breakthrough of flat-screen TVs. Once the revolution has happened some companies will emerge as winners and some as losers.

Is there any way to anticipate the increase in demand for EV infrastructure and services? Personally, what I look for are early indications of market changes in the automotive industry to predict the demand for the infrastructure. Obviously, there are other things to evaluate as well (such as the split between private and public charging, cost levels etc) but increasing choice of EV models means that more people will also buy them, which will then generate more demand for the charging services.

Contrary to some of the views I have seen, the right indicator for the market growth is not the appearance of the first EVs on the market. This is important, but still represents the early market, not the volume market. The appearance of competition amongst the suppliers of a particular good indicates that things are starting to heat up. This is especially true, if one of the companies competing is a new entrant in the market. Generally competition in a market that is going through a revolutionary phase means that the technology begins to mature and an increasing number of customers is showing interest in a new product category.

If we look at the EV market, there have been some interesting developments in the last six months. The first is the reversal of strategy at Audi, who in the springtime still maintained that they will not develop an EV. In the Los Angeles autoshow, they unveiled a full-electric SUV that will compete head-to-head with Tesla. Other automakers that have announced full-EV or plug-in hybrid development in the last 6 months include Porcsche, Aston Martin, Volvo and Honda among others.

The second noteworthy development are the sales numbers and mix. Disregarding Norway sales in EVs, a few selected figures: in Switzerland Tesla Model S is currently selling about the same number of cars in the premium segment as Mercedes E-class, Audi A6 and BMW 5-series, in the first 9 months of the year Tesla sales numbers in Westeern Europe are bigger than BMW 7-series and Audi A8 combined and in the US September 2015 sales figures indicate that BMW i3 sales were 5.5% of the total outselling the 1/2 series, the 6 series, the 7 series, the Z4, and the X1 combined. Clearly the demand for plug-in vehicles in growing.

So, back to the original question: why invest now in EV infra? The answer is that in order to succeed in the market, one needs to be in the market before the growth phase hits. Otherwise there is a risk that entry is no longer possible. In most countries (apart from perhaps Norway) market entry is not too late.

On the other hand, it seems that significant growth will happen already in 2016 since sales numbers of the current models are growing. To further increase the demand, model year 2017 will see the introduction of Chevy Bolt, next generation Nissan Leaf and Tesla Model 3 into the market. The competition in the automotive industry is taking shape, this will move to the EV charging services next and the companies that will start investing now are in a good position to read the benefits in 2016 and 2017.

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