Electric vehicle owners are looking for somewhere to plug in their EVs. And investors looking for the next hot EV stock are mulling whether EV charging and infrastructure companies are worth the cash. But fundamental changes in how consumers charge EVs and the continued dominance of Tesla Motors are set to leave EV charging stocks out in the cold.
With automakers still driving forward with production of electric vehicles and hybrids, a small battery of companies has sprung up hoping to address America's charging needs. Blink, ChargePoint Holdings, EVGo and Wallbox are among the publicly-traded companies specializing in creating charging infrastructure for electric vehicles.
These companies are getting a chilly reception from the market. Blink shares are struggling to rebound but remain near its 42-week low hit in January. Its rival, ChargePoint, has tumbled from all-time highs in 2020, with shares hitting their lowest levels in January.
Why EV Chargers Aren't Like Gas Stations
EV charging companies aim to create a charging network modeled after the reach and coverage of gas stations. But 80% of EV charging is done at home, with users citing convenience and the low cost of residential charging, according to research from the U.S. Department of Energy.
EV owners don't charge vehicles at centralized recharging points in the same way combustion engine-driven cars fill up at gas stations, experts say. "The ability to charge an electric vehicle at home is a fundamental shift in the way we're dealing with our vehicles," Alex Knizek told Investor's Business Daily. Knizek is manager of automotive testing and insights at Consumer Reports. "You can't fill up your gas-powered car at home, but with EVs, not only is that a new thing, it's a major convenience of having an EV."
Tesla's Charging Network Dominates In Size
Tesla's moves on the EV charging front have also spelled trouble for EV charging stocks. The automaker began building out its Supercharger network in 2012, the year the company rolled out its first Model S. Tesla's focus on charging stations has paid off: the company now has the largest EV charging network in the U.S. A Bloomberg report found that as of 2023, Tesla has a bigger charging network than all of its rivals combined.
That first-mover advantage paid dividends when Tesla's charging plug saw widespread adoption from rival automakers. In May 2023, Ford announced a deal to use Tesla's charging stations, closely followed by GM and other rival automakers. The moves culminated in Tesla's charging plug becoming the North American Charging Standard, the de facto U.S. standard.
With a market cap of $645 billion, Tesla is certainly far more valuable than its EV charging rivals. But the company's shares have continued to oscillate within a 150-point range over the last year. The stock showed signs of consolidation from February until June last year. But since then it has continued to hover around the upper range of its consolidation.
Tesla's Vertical Integration Pays Off — At The Expense Of EV Charging Stocks
Tesla's focus on a seamless experience for owners of its EVs has also created a halo effect around its superchargers. "No doubt Tesla's Supercharging network is the most reliable, and I can anecdotally say that's true even for myself," Knizek said. He attributes the Tesla Supercharger's reputation to the company's vertical integration, producing cars and chargers that work seamlessly together. "You pretty much know your experience is going to be pretty consistent regardless of which one you go to in the car," he said.
Knizek also cites the phenomenon called "charging anxiety" when it comes to public infrastructure charging stations. He said many consumers find themselves asking: "What's the charging situation going to be like when I show up? Is the charger functioning? Will there be a line? Is it going to be fast?"
Consumer Reports finds that worries about the charging experience are fast replacing range anxiety as the number one problem among new EV owners. Range anxiety is a concern over whether an EV recharging location is available when a charge is needed.
Gaps For EV Charging Stocks To Thrive
Despite Tesla's dominance and the evolving habits of EV owners, EV charging stocks can still keep a toehold in the U.S. market.
Experts say the most obvious way is for EV charging companies to help build out the network of public chargers. "We need to put high speed charging every 50 miles off the highway in the U.S.," Chris Pierce told IBD. Pierce is senior equity research analyst at Needham & Company, "The adoption is never going to happen unless you can get in your car at a moment's notice and not worry about charging."
Even a company as dominant as Tesla can't put a charger in every shop, corner and nook, opening up a market opportunity for other EV charging stocks. Smaller EV charging companies can survive by focusing on rounding out nationwide EV infrastructure coverage, and by pursuing deals to charge fleet vehicles.
Beyond Private EV Owners
Pierce also pointed to the gap in demand beyond private EV owners. In the commercial market, there is a huge demand for charging stations that could serve school buses, municipal services and fleet vehicles. "People don't take the cars home with them, they drive their car to sleep at a lot and take their personal vehicle out on the road," he said. "That truck needs to charge overnight somewhere."
EV charging infrastructure can also become a workplace or retailer amenity, in turn providing charging companies with troves of user data, says Pierce. He cites Blink's success in setting up chargers at auto dealerships, post offices and with fleet vehicles.
Blink's Advantages
In fact, among EV charging players, Blink enjoys important competitive advantages.
Pierce also says unlike its competitors, Blink has industry-leading margins, which can combine with a niche play to put the EV infrastructure provider in a secure market position, even if it's forced to operate on the periphery of major incumbents like Tesla.
In a statement to IBD, Blink Charging says it is focused on multifamily residences like apartment complexes and rental communities. Blink says renters are increasingly willing to pay more for access to on-site community charging. "We are continuously and diligently advancing EV charging infrastructure by recognizing a significant fact: The vast majority of charging actually occurs at home on L2 chargers," Blink Charging president and CEO Brendan Jones told IBD.
Other EV charging stocks may not be so lucky. And investors are closely watching to see whether EV charging companies are worth the investment.
"If (EV charging stocks) can't show growth and profitability, how much capital are investors going to put into these companies?" Pierce said. "I think there is room to believe not all these companies are going to survive."
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