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Speculative Race for Charging Stations

From the series The World Car Battle

If at the beginning of the 21st century electrification had technological limits in batteries, both in terms of cost and range, these are now partly overcome, because electric cars have a range of 240-450 km, more than enough for 95% of journeys of less than 50 km. The major obstacle remains the construction of a network of charging stations and their integration with the electricity grid.

The race between China, Europe, and USA

UBS Evidence Lab, a team of UBS bank experts working in 55 specialised labs to provide data on investment decisions, predicts that cost parity between electric and internal combustion cars will be achieved in 2024 [Inside EVs, October 20th 2020]. By then, the development of car electrification will be self-sustaining without government subsidies.

Bloomberg New Energy Finance (BNEF), in its report Electric Vehicle Outlook 2020, estimates that by 2022 carmakers will have 500 different models of electric cars available and that sales will rise from 2.1 million in 2019 to 26 million in 2030. The share of electric cars in total car sales will rise from 2.7% in 2020 to 28% 1n 2030. For the International Energy Agency (IEA), in the Stated Policies scenario, which considers evolution of the situation according to the policies already in place, the circulation of electric cars worldwide will reach 145 million by 2030, 7% of total circulation, and sales will be 35% of the total in China, 35% in Europe and 15% in the USA [LEA, Global EV Outlook 2021, April 2021].

According to these forecasts, China is leading the process of automotive electrification, the EU is racing hard to catch up, and the USA is lagging behind, although the Biden’s administration is attempting to make up lost ground with its electrification plan.

The charging network

In 2019, there were 6.5 million private and 800,000 public charging points (aka charging stations) worldwide [IEA, Global EV Outlook 2020, June 2020]. Private charging points are those owned by households, while public charging points are owned by companies and are freely accessible to all motorists, just like any petrol station.

Another BNEF analysis [Bloomberg, March 23rd, 2021] shows China’s dynamism in building an infrastructure network: its 300,000 available public columns in 2018 have risen to 516,000 in 2019 and 800,000 in 2020.

According to McKinsey January 5th], by 2030 the USA will have between IT and 30 million private and 400,000 to 600,000 public charging points, the EU together with the UK between 28 and 35 million private and 500,000 to 900,000 public charging points, and China between 15 and 17 million private and 1.5 and 2.2 million public charging points. This large difference between the public and private charging points in China, the USA and Europe lies in the different distribution of the population in the territories.

In the USA and Europe, as people move to the suburbs, half to twothirds of the population now live in single dwellings with garages. This is why McKinsey predicts that by 2030 there will be twice as many private charging points as in China, where urbanisation is leading to a concentration of the population in cities with large apartment blocks and therefore twice as many public charging points. According to the McKinsey report, by 2030 there could be 54 to 82 million private and 2.4 to 3.7 million public charging stations in the world. A worldwide market has opened up, triggering a race to invest in this sector, and with it speculation.

Financial mobilisation

According to McKinsey, the construction of a charging network will require a global investment in the period 2020-2030 of $110 to $180 billion, both for public stations and private homes. Alix Partners estimates $300 billion, of which $50 billion in the USA, that is, one-sixth of the total [CNBC, March 31st].

In Biden’s plan, of the $174 billion for electrification that would be allocated by 2030, if approved by Congress, $15 billion would go to building 500,000 charging stations [Bloomberg News, April 22nd]. If we compare this figure with the $50 billion estimated by AlixPartners, $35 billion would have to come from the private sector.

The market creates itself, and it is a mutual upward spiral — electric cars need charging stations, and these will promote the sale of electric cars.

In the next decade there will be a coexistence of internal combustion and electric cars. The current world market iS $1,771 billion for internal combustion cars and $182 billion for electric cars, for a total of $1,953 billion. In 2030, according to UBS estimates, it will be $1,073 billion for internal combustion cars and $1,158 billion for electric cars, for a total of $2,231 billion [Market Watch, March 20th].

On February 13th, 2020, Seeking Alpha, a financial consultancy, reported a partial list of the leading companies in the electric charging sector. They include Tesla Motors, Ionity (a Daimler, Volkswagen and BMW joint venture), Electrify America (Volkswagen), Qingdao TGOOD (China), EVgo (USA), Charge Point (USA — whose investors include Chevron, Daimler AG, BMW and Siemens), Blink Charging (USA), Tritium Pty (Australia), EV-Box (the Netherlands — recently acquired by France’s Engie) and ENEL X e-Mobility (Italy — ENEL).

The number of companies entering the sector is growing rapidly and changes from month to month. The business is also of interest to oil companies, which can exploit their established network of petrol stations. Shell has acquired NewMotion in Europe, while BP has invested in FreeWire in the USA.

New wave of speculation?

In the capitalist economy there is a mismatch between a company’s fixed and working capital and its market capitalisation (the total share price or market value of the company). This imbalance gives rise to the inevitable speculation fulled by financial capital. The ups and downs of the market are sensationalised by the media, which promote investing as a sport for the common man — according to Bruce Wasserstein [1947-2009] investment banker at Lazard bank [Big Deal: 2000 and Beyond, London, Hachette, 2009].

Bloomberg, a newspaper strongly in favour of electric mobility, writes on April 30th that speculators are rushing to invest in charging stations, convinced that a boom is just around the corner. There is a risk that early investors will be burnt out before the profits come in. One criterion used by the financial markets to compare the dynamics of economic sectors is the TSR (Total Shareholder Return): this is obtained by adding up the share price increase and dividends over a given period, then dividing it by the share price at the beginning of the period. If in one year the share price of a company rises from 100 to 120 and the dividends distributed are 10, the TSR would be: (20+10) divided by 100 = 30%.

In 2020, the TSR calculated on 2019 was 16% for oil and gas companies, +11% for insurance companies, +18% for traditional car manufacturers, +51% for high-tech companies, +63% for semiconductors and +187% for the electric mobility sector [McKinsey, April 6th]. Financial markets are betting on the electrification of the car.

Tesla Motors in 2020 had 48,000 employees, sales of $26 billion and losses of $144 million; Volkswagen had 671,000 employees, $252 billion in sales and profits of $12 billion [Forbes, May 13th, 2020]. On April 28th, 2021 Tesla had a market capitalisation of $672 billion against Volkswagen’s $136 billion [YCharts, Chicago]. Volkswagen, with 9.6 times Tesla’s sales and 14 times its employees, was worth five times less to the stock market: this sharp gap between physical production processes and their monetary representation is forcing car companies to electrify if they want to defend their market value and satisfy their shareholders. Financial capital is setting the pace for industrial capital, to the rhythm of energy transition. The strong revaluation of shares on the market has been used by Elon Musk to finance Tesla Motors; in his wake follow the companies that are building the network of electric charging stations.

One example is Blink Charging: its shares have risen 3,000% in 8 months [Bloomberg, February 8th]. Despite never having made a profit in 11 years since its inception, its market capitalisation reached $2.17 billion, 481 times sales of just $4.5 million, compared to an average ratio of less than I for car companies. Also in the charging station sector, ChargePoint had $144 million in sales and a market capitalisation of $2.1 billion; EVgo Services, with $14 million, had a market capitalisation of $2.4 billion. A speculative bubble is forming in the market for charging stations because it will take years of investment before one makes a profit [Bloomberg, April 30th].

Darwinian selection

Speculation is in the nature of the capitalist economy and has already taken its toll with the dot-com (telecommunications and Internet) financial bubble, when the Nasdaq stock index rose 400% between 1995 fall 78% by and March 2000, only to October 2002. With the bursting of the bubble, the Dow Jones lost $7 trillion, 500,000 people lost their jobs and 23 telecommunication companies went bankrupt [The American Prospect, September 2002].

The boom in new companies in the electric car charging sector will be followed by Darwinian selection. Erik Gordon of the University of Michigan warns that if the electrification of the car is real, the companies’ stocks are not. The dot-com boom produced some real companies, but most of the overpriced dot-com companies were lousy investments. The electric boom will be the same story. Some great companies will be built, but most of the investors who chase insanely-priced companies will be crying (Bloomberg, February 8th].

New technologies, new social productive forces and developments in science and technology abound, but the capitalist mode of production remains with all its contradictions.

Lotta Comunista, May 2021