Why is the $100 billion charging pile market not making money

According to the China Association of Automobile Manufacturers, China's new-energy vehicle sales exceeded 3.5 million units in 2021, up 1.6 times year-on-year. By the end of 2021, the number of public and private charging piles in China totaled 2.617 million, up 70.1 percent year on year, according to the China Electric Vehicle Charging Infrastructure Promotion Alliance. According to the analysis of Guoyuan Securities, under the constraint of the target of 1:1 pile ratio in 2030, the cumulative market space of charging piles is expected to exceed 100 billion yuan from 2020 to 2025.

These data further show that the market scale of new energy vehicles continues to expand, and the market of charging pile will also grow rapidly. And from the increasing reports of "charging anxiety" in the past two years, the stock of charging piles should be unable to meet the demand. According to this judgment, charging pile management enterprises face a market of hundreds billions , when it is a steady profit. However, this is not the case.

Industry insiders pointed out that in 2014, the country liberalized the charging pile market, and a large number of private capital poured in. By 2017, there were more than 300 domestic charging pile manufacturers and operators. However, in 2018, the industry began to reshuffle, and some enterprises withdrew due to the break of the capital chain. By the end of 2019, there were only more than 100 enterprises, most of which were struggling at the break-even line. Take the largest enterprise in this market as an example. According to its financial report for 2020, the company achieved a revenue of 1.52 billion yuan, but no profit, but a net loss of 77.7 million . This is also true of leading enterprises in the industry, not to mention small enterprises.

Charging piles are not profitable, which is directly related to the asset-heavy nature of the industry. The total cost of charging station consists of operation cost and construction investment cost. The former item mainly includes site rent and operation and maintenance cost, while the latter item includes charging pile, charging terminal, charging module, power access, charging cable and other costs. It is estimated that millions of yuan is needed to build a small and medium-sized charging station with 10-20 charging piles. The initial investment is large, but the operating income comes from a single source. In addition to certain government subsidies, the main income is charging fees and service fees. These two charges are generally subject to local government price control, the profit margin is limited. Some enterprises admit that it is good to build a charging station to recoup the cost within three or four years, but if the operation is poor, it may not be able to recoup the cost in 10 or 20 years.

In fact, "poor performance" is not the exception, but the industry phenomenon, many companies in trouble because of it. The main performance of poor operation is low utilization rate of charging pile. Some research institutions estimate that the charge utilization rate of typical 60kW DC pile and 7kW AC pile needs to reach 8.29% and 8.12% in order to achieve break-even. However, data from China Association of Automobile Manufacturers show that the overall utilization rate of domestic charging and energy replenishment industry is only 3%-5%, far from reaching the threshold of equilibrium point. Analysts point out that the low utilization rate of charging piles is mainly due to the low cost performance of public charging piles, which is difficult to form an advantage over private piles. In Shanghai, for example, the charging price of private piles for household use is generally 0.3 yuan per hour, with no parking fee, while for public charging piles it is 2 yuan per hour, and the parking fee in urban areas is about 20 yuan per hour.

Moreover, public charging piles still have the problem of insufficient operation efficiency, which affects users' charging experience. On the one hand, in the early stage of public charging pile enterprises, in order to compete for market and subsidies, the site selection was rushed and the layout of stations was unreasonable (many charging stations were located in places with cheap rent but far away from residential areas and office areas), which was difficult to match the needs of customers. On the other hand, the technology of charging piles has been upgraded rapidly. Many early charging piles have been abandoned because they cannot be used, and the operators have reduced special operation and maintenance personnel in order to reduce costs, resulting in accelerated aging and damage of charging piles.

Many industries appear to be very prosperous but enterprises do not make money, behind the market competition disorder, frequent price war reasons. The same is true of the charging pile industry. The charging pile market is an open market. Although it has been developed for many years, it is still in the early stage. A lot of capital is jumping in, betting on the future of the market. More and more players, everyone you fight for me to grab, horse enclosure, price war will rise. People can see that charging pile platforms in many cities compete for users with low prices, and promotional activities such as "big price reduction", "free service fee" and "large discounts" continue. Facing the increasingly fierce price war in the charging market, some operators cannot bear it. In August 2021, more than 40 charging pile enterprises in Shenzhen jointly wrote a letter to the competent authorities and relevant industry organizations to complain, hoping that the government could regulate the industry market, end the current chaotic price war, and create a long-term sustainable development environment for the charging pile industry.

Although few charging pile companies have yet made money, the industry is still full of expectations for the industry. The era of new energy vehicles is speeding up, the penetration rate of new energy vehicles is constantly increasing, the number and density of charging piles will continue to grow, and the utilization rate of charging piles will inevitably increase. In the next two or three years, the charging pile industry will be further reshuffled, or will usher in an inflection point to achieve profit. However, there is a reminder in the industry, the whole industry is still in the tuyere, the dividend will come one day, but the dividend is not evenly spread. In this asset-heavy industry, we need to have both strength and determination, and more importantly, we need to work hard. Otherwise, we will not be able to continue to play, and we will not be able to play well.