The U.S. Department of Transportation (DOT) announced in 2022 that it will provide a $4.5 Billion fund to states to strategically deploy electric vehicle (EV) charging stations and establish an interconnected network. What’s the catch? The funds can only go towards the installation of ‘equitable’ charging infrastructure, which could reduce Tesla’s dominance as the largest network in the US.
In this insight we analyze how EV charging standards could change in the USA given the government’s injection of funds, and how Tesla is responding.
What is happening?
In North America, there are three different connector types for EV charging. This creates compatibility issues for both consumers and Charging Point Operators (CPOs).
So far Tesla has dominated the charging eco-system, both due to their high market share and their heavy investment into infrastructure.
Tesla is currently opening their American charging infrastructure to non-Tesla vehicles, and is actively courting other OEMs to adopt its EV charger connector.
Aptera, a solar-powered vehicle start-up, recently became the first OEM to adopt the Tesla charging standard, raising questions about whether other OEMs and CPOs would follow too.
The massive investment in charging infrastructure by the US government adds a new dimension, as investment in charging points is tied to multi-brand support.
Why does it matter?
The distribution of $4.5 Billion in charging infrastructure grants could reduce Tesla’s competitive advantage.
The NEVI program allocates a proportional amount of the $4.5B to each state to use for installation of “equitable” charging infrastructure.
Each state will need to allocate funding based on projected car parc and consumer demands within their state, prioritizing charging standards that are widely supported by OEMs.
Tesla’s decision to open-up its charging network and allow Aptera to use the NACS standard, could be a calculated move to become eligible for some of the funding.
Regardless of whether Tesla succeeds, two outcomes are likely: charging infrastructure will become less of a USP for Tesla; and consumers will need to get used to a confusing world of adapters.
Where next?
The most likely outcome in the USA is that multiple standards continue to co-exist, both on the vehicle and CPO side.
Tesla is currently adding adapters to their charging stations to enable CCS compatibility.
The automotive industry may experience similar pressure like the consumer electronics industry to consolidate around a single charging standard (Apple has been forced by the EU to switch away from its proprietary connector and support USB-C from 2024).
The US government has historically had a less aggressive approach to imposing standards, and lobbying may prevent regulators from picking winners and losers in the EV charging standards battle.
Conversely, Tesla may also succeed in its mission to convert more OEMs to NACS, which would alleviate future regulatory pressure to switch.
Who to watch out for?
The government investment announcement is already creating ripples in the market, pushing companies to react. Certain CPOs and OEMs will feel pressure to re-assess their strategies.
Tesla has the advantage of having the largest DC charging infrastructure in the US, both in terms of power and number of stations.
The NEVI government incentives will create opportunities for charging providers with longer outlooks and deeper pockets, potentially helping with the consolidation of the CPO ecosystem.
CPOs frequently state that their largest barrier to market expansion is the paperwork and long lead times when working with public authorities – something government agencies are now working hard to remedy.
How should you react?
Monitor
Understand how state authorities plan to use this new funding for infrastructure and the best way to leverage your company’s position.
Partner
Given the long timescales and complexities of deploying charging infrastructure, the appetite for partnerships across the eco-system is high.
Align
As the industry matures, the business models (and the number of players) will likely consolidate reflecting best practices.
and efficiency.
Interested in finding out more?
Most of our work is helping clients go deeper into new challenges and opportunities through custom projects. If you would like to discuss recent projects we've completed relating to EV charging infrastructure, contact us today!
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