ChargePoint Holdings trades at $12.59 a share, a far cry from the $30.11 price tag it commanded shortly after its SPAC merger closing. EVgo goes for around $7.04 per share; less than half of what it fetched following the close of its SPAC merger. And Volta, which traded for roughly $9 a share following its public-market debut, is now $0.99 per share.
Much of that could be chalked up tothe excessive enthusiasmthat SPACs generated in 2021. If anything, though, the investment case for EV charging seems to have gotten stronger since then.
The Inflation Reduction Act includesattractive perks for EVsthat should drive demand for charging infrastructure, as well as tax credits specific to EV chargers. California has mandates in place that require all new vehicles sold from 2035 on to be zero-emission and for ride-share companies to start electrifying their fleets starting in 2023. The infrastructure bill, passed in late 2021, earmarked$7.5 billion of investmenttoward new EV chargers over the next decade.
There is clearly a big white space for EV charging in the U.S. If half of all vehicles sold are zero-emission vehicles by 2030, in line with federal targets, the U.S. would require 1.2 million public EV chargers and 28 million private EV chargers by then, per McKinsey estimates. That would be 20 times more than 2021 levels in total. In the short term, a big risk is the speed of EV adoption, which is facing additional speed bumps from supply-chain issues. These issues also Heard on the Street: EV charging still has speed bumps ahead causing headaches for manufacturers of EV charging equipment.
For most investors, a good place to start might be to look at EV charging companies with the scale and liquidity to weather potential delays. ChargePoint and EVgo safely fall into that bucket and are the two largest pure-play charging operators in the U.S. and Canada as of 2021, according to data from BloombergNEF.
EVgo, which owns and operates charging stations, offers pure-play exposure on range anxiety. The company operates level 3 chargers, also known as direct-current fast chargers, which got a big boost from the infrastructure bill. The bill carved out $5 billion of funding to build out EV chargers along highway corridors, which should benefit fast-charger providers.
The biggest risk for EVgo, however, is that fast charging stations don’t get used as much as the company might think. Its revenue depends on how frequently the chargers are used. It is tough to predict how most U.S. EV drivers’ charging habits will look; while Europe is a more mature market for chargers, James West, equity analyst at Evercore, says that it isn’t a great comparison. Not only is Europe more densely populated, but the charging market there is also unique because many companies offer free charging in their office parks as corporate perks, he noted.
Because EVgo tends to own its chargers, which are heavy on capital, picking the wrong location can be a costly mistake for the company. Ultimately, in the very long run, there is also the risk that EVgo starts competing with convenience stores that will require very thin margins on their EV charging, as they do for gasoline today, relying on the chargers merely as traffic drivers to make profit on snacks and coffee.
ChargePoint offers a more balanced bet across use cases. It sells charging equipment and software across all three levels of chargers—from slower home use to speedy level 3. Its hardware can only be bought if bundled with its own software, which makes the revenue stream on the software sticky. Unlike EVgo, ChargePoint’s revenue doesn’t directly depend on charger utilization. It also leans hard on its software, which makes it a differentiator from hardware-only original equipment manufacturers.
“Most of the EV charging OEMs [original equipment manufacturers] are trying to do something very similar, and their intellectual property is maybe unique today but we think the industry will eventually get commoditized,” says Maheep Mandloi, equity analyst at Credit Suisse.
Investors have more ways to get exposure to the picks and shovels of the EV wave, including Tritium which focuses on level 3 charging. Wallbox focuses on home charging, and a few others straddle different types of chargers, such as ABB,Blink Chargingand Volta.
“Clearly it’s kind of a battleground,” says Ryan Fisher, lead charging infrastructure analyst at BloombergNEF. “The narrative has shifted from companies thinking EV charging won’t make money to areas where people can see where it makes sense as a business,” he said.
There is money to be made at the end of the road, but with supply-chain speed bumps and still fuzzy visibility on EV charging behavior, investors probably should split their bets across a few different plugs.