Electric vehicles face the same problem that traditional combustion vehicles faced roughly a century ago: how to lure people into buying cars that don’t have any infrastructure to fuel them. For much of the history of electric cars, the driving range hasn’t been far enough to avoid having to fuel up between trips. A lack of charging infrastructure all but ensured adoption would be slow.
To solve this classic "chicken or the egg" problem, electric vehicles needed help from government, early adopters and the traditional industry itself. Over the past few years, numerous countries began introducing incentives for private companies to create charging stations. In 2013 in the U.K. for example, the government announced that it will cover up to 75% of the cost of installing charging points for electric vehicles in garages and driveways.
At the time, many people viewed building out a massive network of charging points as a waste of funds; why build charging stations when there are few cars to charge? A classic chicken-or-the-egg problem indeed. Fortunately that issue is ready to be put to rest.
Industry to the rescue
While it may have taken government and public funds to start the process, many companies (car manufacturers and tech firms alike) are starting to build momentum in electric vehicle charging.
There are several reasons for mounting optimism. First is the rapidly rising demand for electric vehicles themselves. A new report forecasts that "sales of electric vehicles will hit 41 million by 2040, representing 35% of new light duty vehicle sales. This would be almost 90 times the equivalent figure for 2015, when EV sales are estimated to have been 462,000, some 60% up on 2014.” Already, over 90% of electric vehicle owners report that their next car will also be electric.
A big reason for rising demand is from one company: Tesla (TSLA, Financial). Tesla already has more than 400,000 preorders for its Model 3, a more affordable option at $35,000 than the rest of its fleet, which ranges in price from $70,000 to $105,000. Preorders alone already amount to more than three times Tesla’s current output.
Tesla itself has a private network of "Superchargers," rapid stations that Tesla owners can use on the road. Elon Musk aims to nearly double the number of its Superchargers worldwide from around 3,600 to more than 7,000 by 2018. Tesla isn’t the only heavyweight involved. According to Reuters, “Apple (AAPL, Financial) is now asking charging station companies about their underlying technology,” likely to help service its covert Titan car project. Even traditional firms like Nissan (NSANY, Financial), which just made all of its charging stations free, are getting involved.
All this electric vehicle demand is stoking growth for the charging industry. According to the National Renewable Energy Laboratory, California alone will need about 13 to 25 times the roughly 8,000 work and public chargers it currently has to support a projected 1 million zero-emission vehicles on the road by 2020. That’s leading to some massive growth predictions.
A new report by Allied Market Research forecasts that the world electric vehicle charging system market would generate revenue of $8.02 billion by 2022, registering a CAGR of 30.7% during the forecast period of 2016-2022. Estimates for China are for annual growth of 115% during the period of 2016-2020.
The future of electric vehicles still has plenty of hurdles ahead, but it looks like the chicken/egg dilemma is finally over.
Disclosure: Author does not own any shares of the stocks mentioned in this article.
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