EV Charging Station Rift Could Be Auto Industry’s Next Big Pothole

Like any large pothole you don’t see until it’s too late, a similarly concealed rut may be hiding from the auto industry in the form of a dormant battle over electric vehicle charging station standardization that’s hiding beneath billions of dollars of SPAC money— those red hot, blank check investment funds that have dominated Wall Street banking for the past year.

While the varying verticals that these well-funded acquisitors target are diverse, a growing number are taking aim at the EV industry via companies that run the gamut from making the vehicles to powering them, and yes, charging them too.

According to Bloomberg, as many as 13 EV-related SPACs have been completed and another 14 more are on the way through the second half of this year, representing a total of roughly $20 billion in fresh capital.  But Bloomberg also notes that even though the charging firms have consolidated into larger energy or infrastructure firms, they’re poised to see an increased slice of the SPAC pie going forward.

Charging Standards

But there’s a larger issue when it comes to the charging companies—namely, standards. We’re in an age now where phones and text messages and payments and all manner of things are interoperable, or if there’s an ecosystem brewing, there’s at least some standardization of process, infrastructure, hardware and software.

Not so with the EV market, where there are three fast-charging standards.  Individual players in the space, such as Tesla, have effectively crafted their own networks, complete with (in that marquee name’s case) superchargers.

The need for some standardization seemingly is getting a nudge from the Biden administration, which is part of the $1.2 trillion push for infrastructure modernization and renewal, including $7.5 billion for EV infrastructure, including charging stations.  As EVs represent only about 2 percent of car sales in the U.S. alone, it’s a significant market opportunity, per Reuters. The more cars that are on the road, the more charges that will be needed.

For the public chargers, which are necessities for those taking trips of any duration and distance, there are two standards in place (beyond level one wall outlets), the slower level 2 and the faster Level 3 DC Fast Chargers.  Different chargers have different connector requirements, and the connectors are made by different firms, which essentially means that some cars can charge at some stations but not all.

A Tesla, for example, may not be used with all connectors.  But a Tesla supercharger may not be usable by other cars.  But in other cases, adaptors are available that allow for at least some switching.  The landscape is decidedly mixed but does not match.  Thus far, not every EV can take the juice from a level 3 charger.

And against that backdrop, it’s akin to driving from stop to stop knowing in advance which charging station will have the requisite connections and connectors available. In the case of hybrid vehicles, those options may not be compatible with, say, a Level 3 station.

The movement toward some commonality might be a headache (everyone thinks their offering is the best, after all, and is loath to give up dedicated revenue streams or IP), but then again, the idea is whoever owns the standard controls the market. Think, for example, of the card networks, where standardization of the plastic card (size, mag strips, identifying information) bred familiarity, ease of use, and adoption.

The market itself is fragmented, given the standards and the hardware. But with only a bit more than 41,000 charging stations on the road in the U.S., and with the Biden administration push to have 500,000 in place, the infrastructure has got to be there before consumers feel that they won’t run out of gas (OK, voltage) before the next station is there, or worse, doesn’t have the equipment they need.  Switching costs are high — in terms of the hardware needed and the risk of getting stranded.