The rise of battery-powered electric vehicles (EVs) in India will entail the development of a vast amount of new infrastructure, particularly charging stations. Although the deployment of this infrastructure undoubtedly represents a market opportunity, the size of it is still difficult to estimate. Despite initial scale advantages, small players who have what turns out to be the right solution may displace.
In this document, I hope to shed some limelight on the charging infrastructure’s evolving value chain — its shape, its potential risk, and possibilities for value-creation.
How does it look through the Fish-eye lens?
The charging infrastructure necessary to stimulate the widespread adoption of increasingly available EVs in the marketplace remains to be built. As the mainstream OEMs begin to roll out EVs, the role of charging infrastructure evolves from being an awareness tool to becoming a commercially viable business venture.
The billion-dollar question today is:
How can companies package a commercially viable proposition and differentiate themselves in a non-existent, yet crowded and complex marketplace like India?
Before getting a sneak-peek on India, let us analyze the bigger picture here.
Worldwide, I have identified 140+ companies that have staked a claim to the emerging EV charging infrastructure, but despite all their procedures, the shape of the value chain is vague. To try to decode this chain, I closely analyzed some of these companies and chose distinct business activities that were categorized together to develop five potential business strategy variants. These business strategies are at different levels of complexity within the value chain and consequently, bring different risks and rewards to the participants.
The five business strategies will evolve to maturity following different timetables as they face different barriers to entry and barriers to survival.
The growth of the EV charging infrastructure is set to be an exciting chapter in the vehicle electrification process. The purpose of this analysis is to help read the market as it evolves.
The current state of the charging industry
At the moment, stakeholders continue to wrangle over standards, each championing a favorite and self-centered solution. Behind the scenes, some governments are trying to decide how involved they want to be in the rollout and whether they need to intervene. Well, that's how it is.
As described in our section on regional development, market strategies differ significantly between Asia, North America, and Europe, and those differences may harden into different regional standards, slowing growth for all.
The most common charging configuration is likely to be chargers at both home and work. However, it can be evidently identified several other potential customers such as hotels and restaurants, car rental/sharing, fleet managers and gas stations. One emerging obstacle: an unarticulated value proposition for potential hosts of charging stations, such as parking lot owners.
The barrier to entry is low. New entrants may emerge from multiple industries. The market also faces several possible substitutes that could jeopardize several business strategies. However, the barriers exponentially rise with the market maturity of a particular concept.
At this stage, suppliers are strong players in the value chain. Some have already moved up the value chain and become manufacturers of charging infrastructure through strategic partnering. In India, the Suppliers are highly dependent on imported OEMs, so most of the value of the supply chain is consumed in initial stages only.
Introducing the EV charging value chain
The basic elements of the emerging EV charging value chain are clear. It must transfer energy from an outlet to a vehicle. It must track information about the energy provider and the energy recipient. It must include a payment system easy for the consumer to understand and easy for the energy distributor to integrate within pre-existing billing systems — and of course, it must meet government regulations and carmaker requirements.
However, a number of important elements remain fuzzy.
• How soon will EVs become a mass-market phenomenon - or should we ask: How far away is this from happening?
• What will the plug sizes be?
• Some charging standards are not yet globally approved.
• Whether EV charging should connect to a smart grid is an open debate.
• Some possible service offerings are contingent on the development of the smart grid, but should the initial network be built with this compatibility in mind?
• Where are the boundaries between the different stakeholders in the charging infrastructure?
• What are the commercial risks and rewards of building, owning or operating various products and services in the charging infrastructure?
• What are the potential revenue streams and the associated risks, and what business strategy is best placed to capture them?
• What are the capital and operating costs associated with the charging
For the purpose of this analysis, we envision the EV charging value chain as a combination of four spheres inter-connected by over 18 activities.
1. The charging infrastructure sphere comprises all services ranging from manufacturing the charging stations to setting up the physical infrastructure and managing the delivery of energy through the network of charging stations.
2. The utility sphere involves activities ranging from generating and distributing energy to billing the end-user for consumption.
3. The OEM sphere comprises all activities associated with the vehicle, ranging from selling to maintenance, operating and up to the end of its life cycle.
4. These three spheres revolve around the customer sphere, which is the private or business user of EVs, and encompasses the services they need over their ownership cycle of the vehicle.
A further dimension of analysis is that the 18 distinct activities critical to the EV charging value chain have been differentiated based on being a product (hardware or software) or a service.
Below are some analysis charts by Ernst and Young’s Automotive center for the value chain and market impact of 18 business activities categorized into 5 given business strategies.
Stay tuned with us to know about the market complexity of charging Infrastructure in India.