The announcement of plans to stop selling fuel cars has been issued successively by major automotive companies worldwide, highlighting the shift from oil to electric power as an irreversible trajectory for the industry. However, in Europe and the US, the infrastructure of charging stations, considered as part of the essential development, seems to be lagging behind. According to a survey conducted by the OECD last year, one-third of respondents in various European countries stated that there were no charging stations within 3 kilometers of their residences.
The imbalance between the increasing number of electric vehicles and the insufficient number of charging stations is good news for businesses that focus on charging technology and solutions. This ranges from selling related components and hardware to building and operating charging stations, and even developing third-party platforms for station wayfinding, amongst other complementary use cases.
This is particularly the case for Chinese businesses venturing overseas.
Compared to traditional fuel cars, EVs are still relatively new, with the industry landscape in constant flux. The prospects for success in the international EV market remain uncertain, though finding the right balance between challenges and opportunities for charging station deployment abroad remains nonetheless a critical task.
Electric cars and charging stations: A chicken and egg problem
As the number of electric cars increases, the availability of charging stations becomes a crucial factor. For the transition from traditional cars to EVs to take place, a significant number of charging stations is needed. The increasing adoption of electric cars leads to a rise in the demand for charging, making it more convenient and encouraging consumers to consider EVs.
The Alternative Fuel Infrastructure Directive (AFID) recommended that each public charging station serves 10 electric cars, a ratio of 10:1. However, most European countries do not meet this standard, and the situation is even more challenging in the US, where the ratio is 16 cars per charging station.
To expedite the transition to EVs, policies were introduced in Europe and the US as early as 2019 to facilitate the construction of charging stations. For example, the European Union plans to deploy one million public charging stations by 2025.
However, the European and American markets have stringent requirements for charging stations, and the certification process is typically lengthy. Moreover, the policies introduced early on were primarily quantity-oriented. Therefore, the construction and operation of charging stations did not receive significant response until 2022, when economic subsidies for charging stations were finally implemented.
For instance, in Germany, high-power charging stations exceeding 100 kilowatts can receive a subsidy of up to EUR 30,000 (USD 33,000). Subsidies for public AC charging stations can go up to EUR 2,500 (USD 2,750), and up to EUR 900 (USD 1,000) for private charging stations. In the US, the core policy involves a USD 7.5 billion federal subsidy for public charging station construction and corresponding tax credits for charging stations under the Infrastructure Investment and Jobs Act (IIJA).
Influenced by subsidy policies, major domestic charging station companies have expedited their pursuit of international standard certifications to seize the initiative. Wang Yang, founder and CEO of Newlink Naas, said that “many overseas charging station companies focused on obtaining safety certifications such as the CE marking in Europe, UL certification in the US, and charging standards CSS1 and CSS2 last year. After the preparations done last year, we witnessed a surge in the international expansion of China’s charging stations this year.”
Channel distributions the core to surge
In the entire charging station industry chain, most of the enterprises venturing abroad are currently involved in the upstream and midstream manufacturing sectors, with a small portion also having a presence in the downstream operating sector.
In the manufacturing sector, the product lines for charging stations abroad are almost identical to those in China, focusing mainly on AC slow-charging stations and DC fast-charging stations. AC stations are primarily oriented toward end users, and a similar business model exists in overseas markets with household energy storage, which depend more on branding and distribution channels.
“Breaking the stereotype that charging stations are purely electrical industrial products in appearance and providing a smooth human-machine interaction experience are key factors in building brand awareness for AC charging stations abroad,” said Li Ming from Ant International, in an interview with 36Kr Chuhai.
Winning major design awards in Europe has become a shortcut for charging station companies to showcase their product strength. For example, the “Interstellar AC Charger” developed by Sinexcel won the German iF Design Award in 2022, and the Caro series home charging station under EN+ Technology received the 2023 German Red Dot Product Design Award.
Creating avant-garde and high-quality products is also a threshold for entering the B2B customer supplier ranks for AC charging stations. Sinexcel became one of the first Chinese suppliers to BP, a British oil company, with its Interstellar product.
Additionally, compact AC charging stations can be directly sold to end users through both online (e-commerce platforms, websites) and offline (supermarkets, retailers) channels.
In contrast, the core competition for DC fast-charging stations, mainly targeting B2B customers, lies in cost-effectiveness. According to a research report by TF Securities, under the premise of similar or comparable quality, the average price of domestically produced DC charging stations is below RMB 1 (USD 0.14) per watt, while international brands like ABB have prices around RMB 2 (USD 0.28) per watt. Moreover, the profit margin of Chinese manufacturers is superior to that of overseas competitors.
Working with original equipment manufacturers (OEMs) offers international brands a basic but effective method of establishing DC charging stations. Some charging station companies also expand horizontally by leveraging existing business channels and customer resources. For example, Sinexcel utilized its energy storage business channels to develop relationships with major European operators.
Operating charging stations to drive equipment sales is also one way to enter the market. The business model is similar to that of integrated companies such as Newlink NaaS, but there are differences in revenue structure. Wang said that the main source of income for European and American charging operators is not charging fees for electricity or services, but the sale of charging stations. This is similar to the revenue structure of Newlink NaaS. In the first three quarters of 2023, the revenue from engineering, procurement, and construction (EPC) accounted for 62% of the total revenue in Newlink NaaS’ energy solutions business.
Newlink NaaS is the first publicly traded charging service company in China, and it has already established its European headquarters in the Netherlands. The company has also set up offices and teams in Southeast Asia in Singapore while expanding into Middle Eastern markets such as the UAE, Oman, and Saudi Arabia.
In the downstream operations segment, although the US and some European countries provide subsidies for the construction of charging stations, operating charging stations may not be a lucrative business—just like in China. This is because charging stations cost rent to operate. There are significant upfront costs, electricity fees to account for, and a long return on investment period to manage. In China, it takes 4–5 years for a well-planned electric vehicle charging station to become profitable when the utilization rate reaches around 15%.
For higher-cost markets like Europe and the US, the time required for profitability may be even longer. According to Li, “if an operator invests in multiple charging stations simultaneously, the profitability period will be even longer. Only operators with strong financial strength have the possibility of obtaining the best land while bearing the sunk cost.”
“European and American charging operators have not yet entered the phase of scaling for profits. In 2023, the growth of EV sales in Europe slowed down, and although the sales volume increased significantly in the US, overall EV ownership rates remained at a relatively low level. This also limits the market space for charging operators,” Wang added.
Moreover, operating charging stations involves coordination among government departments, power supply agencies, automakers, and charging service providers. Constructing new stations on a large scale and at a rapid pace is not realistic. Various issues are associated with common revenue charging models, such as charging by volume, charging by time, monthly rental fees, and service fees, which need to be addressed in communication, payment, and fault reporting.
Therefore, Wang believes that entering the overseas charging service market at this stage not only presents a high threshold but is also an immature market. Short-term entry is not suitable for overseas companies, and a feasible approach is to seek local partners or explore opportunities at the capital level in the long term.
The possibilities of fast-charging
Fast-charging technology has always been a demand of EV owners, whether in China or abroad. In addition to residences and workplaces, locations such as highways and shopping mall parking lots also require fast-charging solutions.
However, there is a significant disparity in the number of AC and DC charging stations in the European and American markets. In the US, only 25% of public charging stations are fast-charging DC stations, and in Europe, the percentage is even lower at 10%.
With significant demand and ample policy-based subsidies, the market growth for fast-charging DC stations is promising. According to TF Securities, the potential growth of DC stations could reach RMB 18.7 billion (USD 2.6 billion) in the European market by 2025, with a compound annual growth rate (CAGR) of 76% from 2022–2025. The US market for DC stations is expected to be RMB 7.9 billion (USD 1.1 billion), with a CAGR of 112% from 2022–2025. Meanwhile, with the increase in high-power DC stations and the coverage of supercharging stations in the European and the US markets, there is an opportunity for charging module and liquid-cooled charging cable manufacturers to go global. The export of charging station components is expected to be minimally affected by local policies in the short term.
Charging modules are the most crucial components in DC charging equipment, often referred to as the “heart” of DC charging equipment, accounting for 40–50% of the production cost.
Currently, the companies leading in the domestic charging module market include Infypower, Huawei, UU Green Power, and TELD, among others. In 2021, the industry’s CR5 (the market share of the top five companies based on business scale) exceeded 70%. Core modules developed by UU Green Power are commonly deployed in charging stations worldwide. The company is the exclusive partner of Infineon Technologies in Germany, and ABB and Chaevi are also among its major customers. According to UU Green Energy’s prospectus, its export gross profit margin can be maintained at above 40%.
Although the concentration of the charging module market is high, Gan Chunming, the product director of EN+, believes that there is still ample space for companies and manufacturers to develop internationally due to localization requirements in various countries. EN+ is a global charging equipment provider that serves AC stations, DC stations, and charging operation platforms, with business operations covering over 40 countries and regions overseas.
“After-sales service for charging stations abroad is a huge challenge. This requires charging station enterprises to make products more stable, with lower maintenance costs. Maintenance-free operation is a major competitive point for overseas charging station enterprises at present, and this largely depends on the functional indicators of charging modules, so charging modules need to evolve,” Gan said.
The varying power requirements, communication standards, and climate conditions of countries also need to be matched by charging station manufacturers. “Most module manufacturers can provide standard products. However, in various European countries, there are different functional requirements such as high power, intelligence, and network platformization. Some functions need to be supported by more specialized charging modules, and self-development or customization can offer higher flexibility,” Gan added.
In addition, charging cables, which account for 20% of the cost of DC stations, is also an opportunity for component exports, especially high-power liquid-cooled charging cables that are compatible with supercharging stations. Currently, there are multiple participants in the domestic liquid-cooled charging cable market, including Woer Heat, Yonggui Electric, and Jonhon (China Aviation Optical), all of which have made technological breakthroughs. Coupled with the improvement of the domestic supply chain, the export of liquid-cooled charging gun lines has both technological barriers and cost advantages. For example, Woer Heat has mastered the core technology of high-power liquid-cooled charging guns and has multiple independent IP rights, which have translated into small-scale sales.
The impact of Europe and the US shutting doors
Despite the urgent desire of European and American countries to expand their markets and build charging stations, their attitude toward foreign companies is not as open.
In February this year, the US required that all subsidized charging stations must be manufactured domestically, and starting from July 2024, at least 55% of the cost of all components must be produced domestically. Various policies in a similar vein are also being promoted in Europe.
What impact might these policies have on Chinese charging station enterprises eager to go abroad?
“In the short term, many policies are still in a transitional period and have not yet been fully implemented, so they have not directly affected the export of charging stations. However, once formally implemented, Chinese companies entering the corresponding markets will need to comply. For those planning for long-term development, risks associated with restrictive policies can be mitigated by investing in and building factories,” Wang said.
Establishing factories overseas is a major trend in the new energy sector. Currently, the charging station market in Europe and the US is still in a high-growth period. Even if finding an OEM factory or setting up a factory locally increases costs to some extent, the potential advantages may still outweigh these downsides.
“The overseas deployment of charging stations involves installation, debugging, maintenance, and after-sales service, requiring localized partners or the establishment of local service teams. Establishing factories overseas or finding local partners can be advantageous for addressing weaknesses,” Wang added.
Fundamentally, sensitivity to local markets and their policies is one of the essential skills for companies going abroad. “Maintaining sensitivity to policy trends and communication with industry associations, local organizations, and government departments is an integral part of business operations. Adjusting business and product layouts in advance based on changes in market demand and rule trends is a prediction of overseas risks and opportunities,” Gan said.
The Chinese article was originally written by Chang Weiqian and published on 36Kr Chuhai.
