Charging has become an unavoidable issue in the daily lives of new energy vehicle owners. The construction of charging stations has also been included in the scope of national policy support on several occasions.
Following the inclusion of charging piles in the new infrastructure initiative in 2020, which was first written into the Government Work Report, the Government Work Report at the beginning of 2021 once again proposed to build new charging piles, battery swapping stations, and other facilities.
Charging stations are the "blood transfusion station" for new energy vehicles. With the "car manufacturing movement" in full swing and players from all walks of life flocking to the field, the construction of charging stations has become particularly important.
However, in the current situation, the construction of charging piles and the rise of new energy vehicles are in a "disproportionate" relationship. The amount of attention that charging piles have received in the mainstream public opinion are far less than that of new energy vehicles and car companies.
So, what is the current state of the charging pile industry in China?
Charging is really a big problem.
After the initial joy of acquiring a new energy vehicle, the initial excitement has gradually turned into current worries, as "charging" has become a major problem.
1. Incompatible charging ports
Ms. Wang, a resident of Changsha, bought a new energy vehicle in January this year. She told "Intelligent Relativity" that "the charging stations in different places are often not from the same company. When I go to a different place, I have to download the app again, get a card and top up my account. It's too troublesome."
The construction of charging stations is accelerating, but the problem of "difficulty in charging" caused by poor compatibility of charging station interfaces is not just a concern for Ms. Wang, but also affects the effectiveness of using new energy vehicles to some extent.
One reason for the incompatibility of charging pile interfaces is the "individualistic approach" taken by various new energy vehicle manufacturers regarding charging issues. The speed at which Tesla's Supercharger network has been deployed in China is quite astonishing. In 2020, Tesla built more than 410 Supercharger stations nationwide. Although Tesla vehicles sold in China after 2016 have adopted the new national standard for their charging interfaces, their Supercharger stations still maintain "exclusivity."
NIO has also accelerated its pace in building charging stations. During the Q4 2020 earnings call, Li Bin stated that the company plans to have 600 supercharging stations and 15,000 destination charging piles in China by the end of 2021. Furthermore, at the end of 2019, NIO and XPeng reached a cooperation agreement to share charging stations.
Since the new national standard was introduced at the beginning of 2016, the charging interfaces of most domestically produced new energy vehicles have been standardized, but the compatibility of charging piles is still in a relatively chaotic state.
In the new energy vehicle sector, charging stations are a brand's "private domain." Different brands of new energy vehicles have different approaches to charging station construction in order to build competitive barriers and brand differentiation, which is understandable from a business competition perspective.
A previous example is the three major domestic telecommunications operators. Their initial strategy was to "go their own way and build their own base stations." However, the establishment of China Tower Corporation in 2014, which was responsible for the construction and maintenance of telecommunications base stations, broke the "split" situation among the three and prompted them to start sharing and co-building base stations.
Competition is an important variable for enhancing the vitality of companies and industries, but the problem of over-construction caused by competition is perhaps an issue that every industry cannot escape during its rapid development. The charging pile industry has also reached this stage, and change may still take some time.
2. The "Matthew Effect" in Geographic Spatial Distribution
Besides incompatible charging pile interfaces, the uneven geographical distribution of charging piles is also an existing problem. Looking at the regional distribution of public charging piles in my country, they are mainly concentrated in parts of the eastern and central regions, with the top 10 regions accounting for 72.3% of the total public charging infrastructure. The northeastern and western regions have fewer public charging piles.
This geographical distribution is closely related to the development level of new energy vehicles in the local area. Within the top 10 provinces, this gap is also significant, with Guangdong Province, which ranks first, having three times the number of charging stations as Fujian Province, which ranks last.
According to "Intelligent Relativity", this may also send a signal that the new energy vehicle industry, including charging piles, is still in the policy support stage, and it will probably take some time to shift from policy support to market orientation.
One example is Shanghai's recent announcement that it will no longer issue license plates for plug-in hybrid vehicles starting in January 2023, with a plan to achieve a 50% or higher proportion of pure electric vehicles among newly purchased personal vehicles by 2025. Although the sales of new energy vehicles have increased rapidly in the past year or two, it remains to be seen whether this increase is due to the excessively high cost of obtaining license plates for gasoline vehicles or the spontaneous behavior of car owners.
In contrast, the number of charging stations is significantly lower in provinces without license plate restrictions. "Intelligent Relativity" believes that provinces with relatively underdeveloped charging infrastructure may have an advantage over "early adopters" in terms of charging station interface standardization and compatibility, given the local government's continued investment in the development of supporting industries for new energy vehicles.
3. Installation of private charging stations is hindered.
With public charging stations unable to fully meet the needs of new energy vehicle owners, private charging stations seem like a good alternative. However, this may only sound good in theory; in practice, many obstacles remain.
The existence of this obstacle largely stems from the property management of the residential community. Through interviews, "Intelligent Relativity" found that the reasons for the obstruction in installing private charging stations in residential communities can be attributed to the following two points:
One concern is the safety hazards of electric vehicles: due to frequent news reports of electric vehicles spontaneously combusting, the property management of the residential community has reservations about the batteries and, for safety reasons, does not allow new energy vehicles to be charged in the underground garage;
Secondly, there is a lack of corresponding cable support: because some underground garages in residential areas were built a long time ago, there are no existing cables available to supply charging equipment, while most of the underground garages that are suitable for installing private charging piles were built in the last two years.
In summary, incompatible charging pile interfaces and obstacles to the installation of private charging piles have reduced consumers' willingness to purchase new energy vehicles to some extent. Resolving these obstacles as soon as possible is crucial to increasing market demand for new energy vehicles.
How much potential does the charging station have?
Back in 2018, the charging pile industry and the P2P industry were both "deep pits" in the capital market.
Two years later, the trend of car manufacturing has intensified. Any move by emerging car companies such as XPeng, Li Auto, and NIO immediately makes headlines in financial news. Internet companies with "non-automotive genes" such as Baidu, Xiaomi, and Huawei have also entered the fray.
The increasing mass production of new energy vehicles has led to a corresponding rise in demand for supporting charging piles, which has once again propelled the domestic charging pile industry to the forefront of the capital market.
1. The next trillion-dollar market
Currently, the construction of charging networks lags far behind the plan. As of the end of 2020, the number of new energy vehicles in China reached 4.92 million, while the cumulative number of charging infrastructure nationwide was 1.68 million, with a vehicle-to-charging-pile ratio of approximately 3:1.
In December 2020, the Equipment Industry Department of the Ministry of Industry and Information Technology released the "Development Plan for the New Energy Vehicle Industry (2021-2035)" (Draft for Comments), which proposed that by 2025, the sales share of new energy vehicles in new car sales will reach about 25%, and the number of new energy vehicles in my country will reach 16 million in 2025.
Based on this calculation, to achieve a 1:1 vehicle-to-charging-pile ratio, there will be a shortage of 63 million charging piles in the next 10 years, which will be an infrastructure construction market worth trillions of yuan.
Comparing the sales volume of new energy vehicles with the number of charging piles, the domestic charging pile market is still showing enormous growth potential. This huge incremental market has also attracted the attention of the government, and support and subsidies for new energy travel are gradually shifting from new energy vehicles to charging piles, which is a positive factor for the domestic charging pile industry.
2. The "micro-consumer ecosystem" is the starting point.
The disproportionate number of charging stations compared to new energy vehicle sales only represents one aspect of vigorously developing the charging station industry. From an industry chain perspective, building a complete industrial ecosystem based on charging stations may be the ultimate goal, and only then can the maximum economic benefits of charging station construction be realized.
Traditional gas stations, in addition to refueling cars, have formed a micro-consumption ecosystem around the refueling stations. Most gas stations in China today also include convenience stores, restrooms, and rest areas; the consumption generated beyond refueling is also an important source of revenue for gas stations.
In contrast, the current construction of charging piles for new energy vehicles, apart from private home charging piles, mostly involves public charging piles being installed in community (residential) parking lots or charging stations, with a lack of supporting infrastructure and consumer venues in the surrounding area.
It is understandable that although the current charging pile industry has experienced several years of rapid growth, it is still in a relatively early stage. As the charging pile industry enters a trillion-dollar market, building a consumer ecosystem with charging piles as the core may be a development trend.
Why have charging stations been "forgotten"?
The next trillion-dollar market is a "low-key" entity.
As an indispensable part of the development of the new energy vehicle industry, charging piles have always received relatively limited market attention and popularity compared with vehicle manufacturers and the power lithium battery industry chain.
"Intelligent Relativity" argues that although the production and sales of new energy vehicles have experienced a significant increase in the past few years, their share of the total vehicle fleet remains low. According to data from the China Passenger Car Association, domestic retail sales of passenger cars in February 2021 reached 1.177 million units, a year-on-year increase of 371.9%.
According to EVProbe data, my country's new energy vehicle sales reached 98,000 units in February, a year-on-year increase of 807.7%. Combining these two sets of data, it can be seen that new energy vehicle sales accounted for only 8.3% of total vehicle sales in February.
This aligns with the aforementioned argument of "Intelligent Relativity," which states that the current new energy vehicle industry is still primarily policy-driven. Under this policy-driven industrial environment, while overall market demand is increasing, it has not yet reached a "critical point," making investing in charging piles not a highly profitable venture. This may be the key reason why the charging pile industry receives relatively little attention.
However, looking back at history, the charging pile industry has also experienced its "golden moments".
In 2014 and 2015, the release of two documents, the "Notice on Rewards for the Construction of New Energy Vehicle Charging Facilities" and the "Development Guidelines for Electric Vehicle Charging Infrastructure (2015-2020)," attracted a large number of companies to flock to the market, vying for market share and fearing they would miss out on this round of development opportunities. However, due to a considerable degree of blind investment, many practical problems arose.
At the time, most of the companies investing in and building charging stations were AC charging stations, a result of weighing electricity costs and site resources. Compared to DC charging, AC charging is slower. With the explosive growth in the number of new energy vehicles on the road, these early AC charging stations can no longer meet market demand. In addition, the utilization rate of these charging stations is currently low.
Taking Shanghai, a city with a relatively developed new energy vehicle industry, as an example, apart from the public bus charging piles which have a utilization rate of about 14%, the utilization rate of other public charging piles is only about 2%, and the charging piles need to have a utilization rate of more than 5% to achieve profitability.
According to "Intelligent Relativity", this creates a "paradox": new energy vehicle owners urgently need public charging stations outdoors, but existing charging stations cannot meet their needs in terms of charging port compatibility and charging timeliness.
Low utilization rates result in difficulties for related companies to achieve profitability, and the construction cost of charging piles, like car manufacturing, is a "money-burning" industry. According to unofficial data, the complete construction cost of a 150kW charging pile from the State Grid is 130,000 RMB, with capacity expansion costs accounting for 50%.
If we assume that a pure electric vehicle has a battery capacity of approximately 30-50 kWh, and the State Grid DC charging station charges 0.4-0.9 yuan per kilowatt-hour, the cost of a single charge would be approximately 20-90 yuan. Considering that Shanghai's charging pile utilization rate is only 2%, the payback period for construction costs is excessively long.
As a capital-intensive industry, charging piles can be described as a "thankless and arduous" industry in the current market environment. After the "crazy boom" of charging pile companies from 2014 to 2017, the increase in the number of charging piles in China has now become more rational. This may be the real reason why the government included charging piles in the seven new infrastructure projects in 2020.
