Should Tesla Spin Off Its Supercharger & Destination Charging Networks?

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December 27th, 2020 by Loren McDonald 


As someone who has driven a Tesla since December 2016 (we are on our second Model S), I am a huge fan of the seamless charging experience I’ve had with both the Supercharger (DC fast charger) and Destination Charging (Level 2) networks. In fact I’ve been spoiled in those four years, as I’ve never once had to charge at a non-Tesla charging network during several long road trips and weekend jaunts.

But with a combination of many exciting new electric vehicles coming to market, the fast growth of charging networks like Electrify America and EVgo, and the rollout of the Plug & Charge protocol, there is a great chance my next EV will not be a Tesla. For me — and I assume many others — access to its charging networks was a key reason to buy or lease a Tesla.

Locations & Connections-L1-L2-DCFC-Tesla-Dec 23, 2020

But I believe it is now, or in the near future, time for Tesla to spin off its charging networks into a separate (and likely public) company.

I’ve been thinking about this idea for a few years, but only started drafting this article about two weeks ago. And shortly after I did, two things happened that make spinning off Tesla’s two charging networks even more intriguing (at least to me).

The first was a Twitter exchange between  Marques Brownlee and Elon Musk in which the Tesla CEO shared that “Tesla Superchargers are being made accessible to other electric cars.” Musk may have been referring to Europe, as outlined in CleanTechnica editor Zachary Shahan’s September article “Non-Tesla Electric Cars Can Now Charge For Free On Some European Tesla Superchargers.”

Marques Brownlee - Elon Musk Tweets opening up Supercharger network

We were reminded in the coverage of Musk’s tweet (and in Zachary’s earlier article) that Tesla is still hypothetically open to other automakers making cars that can use the Tesla Supercharger network as long as they help pay for part of the infrastructure. The specifics aren’t clear, though, and now that Tesla charges its own drivers for Supercharging, the cost can simply be put on drivers, not automakers.

The second development was news about the Plug & Charge protocol, which will in the future allow a driver of any electric vehicle to simply plug the cable from a public charging station into their EV’s charging port and the charging network will recognize the vehicle, start charging, and authorize the payment process. (This assumes the connector is compatible and the car has the necessary tech.) John Voelcker, EV journalist and friend of CleanTechnica, shared his Plug & Charge experience in Car and Driver based on a recent test drive of the new Ford Mustang Mach-E.

“On one trip, I stopped at an Electrify America DC fast-charging station. The machine told me to plug in first, so I inserted its 150-kW–capable connector into the charge port on the Mach-E’s left front fender,” Voelcker wrote.

“Lo and behold: I watched the machine quickly identify the car, validate the charge, and start the current flowing. No fob, no app, no toll-free number to call.”

In essence, it is a charging experience that Tesla owners have experienced since 2012. Currently, only the new Ford Mustang Mach-E and 2021 Porsche Taycan are Plug & Charge capable. Initially, this is primarily possible with Electrify America stations, but also some EVgo and Greenlots locations, according to Matt Teske of Chargeway.

But, presumably, within the next year or so, all new EVs and the majority of major EV charging network locations will be Plug & Charge capable. The implications of this cannot be diminished. Tesla Superchargers might (for now) have greater uptime, faster speeds, and more connections than many of the other networks, but the simple charging experience will no longer be a significant advantage.

“Opening up Supercharger access to more drivers could definitely help accelerate the transition to zero-emissions electric vehicles and sustainable energy use,” Zachary Shahan noted.

I don’t know if Zachary agrees with my view that Tesla should spin off its charging networks, but we are clearly in sync that opening up the networks to EV drivers other than those in a Tesla would be a benefit overall for increasing EV adoption in the US.

10 Reasons Tesla Should Spin Off The Supercharger & Destination Charging Networks

The following are 10 reasons why Tesla should consider spinning off the Supercharger and Destination Charging networks into a separate company (followed by 2 reasons the company should keep the networks within Tesla):


1. As a separate company (let’s call it “SuperCharge” for the purpose of this article) with its own mission and revenue goals, it would have much greater innovation and growth. By becoming a standalone network open to drivers of any and all EV brands, “SuperCharge” executives would have greater motivation to lead the industry with the fastest chargers and best customer experience.

Elon Musk tweet 1.6.18 drive-in restaurant at LA Supercharger

Almost 3 years after his January 2018 post, there is little to report (that I am aware of) on the drive-in restaurant to be co-located at a Los Angeles Supercharger. And in the grand scheme of Tesla’s priorities, this type of innovative charging location is probably at or very near the bottom of a long list. And that is exactly the point. We aren’t seeing much real innovation from the charging networks — other than locations like the recently opened forecourt from Gridserve in the UK.

GRIDSERVE charging location

As a separate company, “SuperCharge” would be free to innovate on both business models, services, amenities, and partnerships that would make it the most preferred charging network in North America, and potentially Europe and China. It is also clear that by 2030 the leading EV charging networks will look very different than today. I expect companies such as Shell Recharge, BP, Extra Mile (Chevron), Speedway, Walmart, and others to have among the largest EV charging networks in the US. In that competitive environment, charging networks will compete on price, rewards programs, and proximity to amenities, food, services and shopping.


2. The Supercharger name (less so with the Destination Charging network) has strong brand recognition and equity and can easily be translated into a standalone charging network. While Tesla is the most dominant brand when it comes to electric vehicles, a separate and new “SuperCharge” brand could and likely would become the most recognized and trusted EV charging network brand among consumers. 

Tesla-Supercharger


3. It would force Tesla to move to an open charging network and standard using CCS in North America, and therefore reduce confusion and complexity in the marketplace. With Nissan moving away from CHAdeMO in North America, it would mean that a driver of most every electric vehicle in the future could charge at any charging network location, including Superchargers. Overnight, DC fast charging stations (connections) available to all US EV drivers would more than double in number. (Well, not overnight, but as quickly as they could modify the plugs, include adapters, or add charging stalls.)

DCFC connections-Tesla vs Others-12.20.20-PPT

And while not as impressive as the share of connections, a spinoff of the Supercharger network would add nearly 950 more prime fast-charging locations in the US.

DCFC locations-Tesla vs Others-12.20.20-PPT


4. Tesla would no longer incur the costs required to expand and support the Supercharger and Destination Charging networks, in theory enabling the company to become more profitable. Tesla has several billion dollars in cash on hand from which it could invest in the charging networks, but the company is expected to put the majority of that money toward “new factories and expansion, including battery cell manufacturing.” While Tesla will continue to invest in and expand its charging networks due to customer demand and new vehicle sales, the company isn’t motivated to add more charging locations than it needs to. And this expansion only benefits customers of a single brand, when what the US needs is more EV charging infrastructure for all EV drivers.


5. As a separate business, “SuperCharge” would be much more motivated and able to attract strong partners — including automakers, restaurant companies, real estate developers, and hotel chains — to help build out the network more quickly and benefit more EV drivers. Tesla has often installed a few non-Tesla Level 2 chargers next to its charging stations to sweeten the deal for property owners and retailers. This was done presumably because the site hosts were concerned about providing charging only to customers who drive Tesla models. As an open and separate entity, “SuperCharge” would increase its value proposition to site owners by simply focusing on the right mix based on EV ownership data for each local market.

Top 5 US L2 EV Charging Networks-Dec 27 2020-V2


6. A spinoff would better support Tesla’s mission to move the planet toward zero missions by expanding the networks’ footprint and enabling drivers of any and all brands of autos to charge at its networks’ locations. Tesla’s website states: “Tesla believes the faster the world stops relying on fossil fuels and moves towards a zero-emission future, the better.” Especially in the US, where range and access to charging is critical, who better to scale access to EV charging than Tesla?

Tesla Mission Statement

Source: Tesla website


7. As a spinoff, “SuperCharge” could tap the public markets for capital separately from Tesla, and use the funds to rapidly expand both networks and help drive EV adoption in North America.

Tesla itself of course is seemingly able to access the capital markets at will and could more easily raise any capital needed to accelerate its charging networks than would a spinoff company. However, the Supercharger and Destination Charging networks have to compete with factory and service center expansion, battery R&D, and other needs for this capital. A spinoff would control its own destiny and could raise and use funds to create the largest, fastest, most reliable charging network with the best customer experience. Tesla would also likely still retain a significant ownership stake in the company and could benefit from its growth and success and ultimately an even greater number of charging locations and connections for its own customers.


8. One benefit to Tesla could also be for “SuperCharge” to become a significant customer of Tesla’s energy division. With DC fast charging locations getting larger and larger and charging at 250 kW or more, they basically will require a microgrid comprised of battery storage, reliable grid connectivity and controls, and solar panels. The spinoff company could also innovate with vehicle-to-grid and vehicle-to-building solutions by focusing on solar and bi-directional charging at workplace locations.


9. Currently, the market for Tesla’s Supercharger and Wall Connector EVSE is limited to its customer base. By moving to a non-proprietary standard, “SuperCharge” would have a significantly larger market opportunity for its DC fast chargers and Level 2 Wall Connectors. In other words, “SuperCharge” could not only become the dominant charging network company, but it could also be one of the largest providers of DC and Level 2 charging equipment to businesses and other networks.

We’ve also seen recently that Tesla is evolving its Destination Charging network, including targeting multi-family property owners. A separate entity combined with using a non-proprietary charging standard would mean that “SuperCharge” could aggressively pursue the overall charging equipment market opportunity.


10. Tesla has the largest network of DC fast chargers in the US. But despite its size and reach, as a proprietary network, it doesn’t really compete with the other networks like Electrify America and EVgo. As an open network and separate company, EV drivers would benefit from a more competitive EV charging landscape.

All the networks would have to step up their game to better compete on:

  • Price/Pricing models
  • Convenient, innovative locations
  • Restrooms
  • Amenities, food service, and car services
  • Number of charging stations per location
  • Charging speed
  • Uptime and reliability
  • Cleanliness
  • Customer experience


There are, of course, a few negatives that could result from Tesla spinning off its charging networks. These include:


1. Tesla would at least for the near term lose a key competitive advantage it has with the Supercharger and Destination Charging networks. These networks have been one of the keys to Tesla’s success, especially in markets like California, where both of the Tesla networks are widely available. However, by expanding the “SuperCharge” network more aggressively and moving to the CCS standard, potential Tesla buyers would have even more charging options — opening up an even larger market of customers to the company. And as mentioned earlier in this article, with Plug and Charge on the way, the seamless experience that Tesla offers will soon no longer a differentiator.

Some people believe that separating the charging networks from Tesla would destroy the company’s share price and undermine why people buy Tesla vehicles. While I understand the sentiment, like the response I got on Twitter below, if people would stop buying Teslas if the charging networks were spun off, then Tesla has much bigger issues ahead as other automakers bring compelling EVs to market.

Martin Stillman Jones - spin off would destroy value in Tesla


2. For Tesla drivers, an open “SuperCharge” network would mean they would be competing with all EV drivers, not just those driving a Tesla, for access to Superchargers and Destination Charging Wall Connectors. However, as a separate entity, “SuperCharge” would be motivated to expand the network to keep up with overall demand and provide an exceptional customer experience. And to appease existing Tesla owners, “SuperCharge” could maintain the Tesla proprietary connector and charging equipment for a few years so that they would not have to compete for those stations with non-Tesla drivers.


Closing Thoughts

One of the smartest things Tesla has done in its history is launch, invest in, and continue to expand the Supercharger and Destination Charging networks. Building out these networks was critical to sales, critical to removing the concerns buyers had about where they would charge, especially on road trips. When I interviewed Peter Rawlinson, CEO of Lucid Motors, back in August, he said that Tesla had to launch its own charging network to help create consumer demand for its EVs, but that today, with a number of networks investing significantly and growing rapidly, it no longer makes sense for a single OEM to launch its own charging network.

It is impossible to say how much of an impact on sales the Tesla charging networks have had, but I believe the company might have sold as many as 25% to 50% fewer units if it did not have both charging networks. So the potential impact of spinning off the networks can’t be ignored.

So, if your main concern is keeping the current charging experience as a Tesla driver as it is –- then Tesla should not spin off its charging networks. But, if you believe we need to deploy various strategies that help increase adoption and sales of EVs overall in the US — then spinning off the networks could be the right answer.

EV charging needs to get to the point where drivers choose which charging network to stop and charge at based on network brand loyalty, speed, reliability, customer experience, price/value, location, amenities, and other factors — NOT the brand of electric vehicle that they drive.

What do you think? Should Tesla hold onto its charging networks forever, or is it about time for the company to focus exclusively on its core auto and energy businesses and spin off its “refueling” networks?

Disclosure: Of the companies referenced in this article, I own a grand total of 1 share of TSLA and 18 shares of SBE (ChargePoint). 
 

 


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Tags: DC fast charging, Electrify America, Level 2 Charging, Plug & Charge, Tesla, Tesla Destination Charging, tesla superchargers, Tesla Supercharging


About the Author

Loren McDonald writes about the factors driving adoption of electric vehicles and the opportunities and challenges the transition to EVs presents companies and entrepreneurs in the auto, utility, energy, retail and other industries. His research and content are published on CleanTechnica, his own blog/site, www.EVAdoption.com, and in his upcoming book “Gas Station Zero” about the huge shifts and changes in multiple industries driven by the transition to battery electric, autonomous and shared vehicles.





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