The NEV penetration rate continues to climb, driving the development of the charging industry; however, there is still a large gap between domestic supply and the increasing demand.
Rising sales of electric vehicles worldwide, especially in China, along with the mainstream trend for energy saving and emission reduction, will boost the demand in the electric vehicle charging station market.
Compared to the overall automotive market where growth has been constrained by the ongoing semiconductor shortage and effects of the pandemic, sales of NEVs remained relatively strong globally. Of particular note, NEV sales in China are rocketing, leading to a rise in NEV penetration rate and compound annual growth rate (CAGR).
For the sales figures, according to EqualOcean’s latest statistics, the total global sales volume of NEV in 2021 was 6.51 million, up 100% YoY, with the sales figure in China reaching 3.52 million units, a 160% YoY growth, accounting for 54% of the global market. NEV sales volume in China is expected to reach 5 million by the end of 2022. The global NEV market will continue to flourish, with total sales volume expected to exceed 10 million vehicles, and the sales will reach 20 million by the year of 2025, with a penetration rate of around 20%. China’s NEV penetration rate reached 13.4% in 2021, and sales are expected to exceed 6 million units in 2022, which means the penetration rate would be over 20%. China’s NEV penetration rate was 26% in June 2022, which exceeds the previous expectation. Sales volume is estimated to rise to 12 million in 2025, making the penetration rate reach over 30%.
The surge in NEV sales relies on improved charging infrastructure. There are over 75,000 charging stations, more than 2.6 million charging piles, and over 1,300 charging stations in China.
However, as the penetration rate of NEVs climbs, the mismatch between the supply and demand of electric vehicle charging facilities is gradually coming to the fore. By the end of 2021, China had 7.84 million NEVs and 2.6 million charging piles, with a vehicle-pile ratio of 3:1. The vehicle-pile ratio remained at around 3.0 from 2017 to 2021, and there is still a large shortage in supply. As more charging facilities are installed, the vehicle-pile ratio will gradually decrease. By 2022, the ratio is expected to be 2.4:1, and by 2025, the figure will drop further to 2.2:1 with the number of charging piles reaching 14.66 million units.
The market size is estimated to exceed CNY 200 billion (USD 29 billion) in 2025, which means there is a huge market prospect for mainstream charging equipment such as AC charging piles and DC charging piles. Referring to the national grid charging pile bidding price and charging equipment ratio, the domestic charging pile market size in 2022 will reach CNY124.1 billion and CNY 204.5 billion in 2025, and poised to grow at a compound annual growth rate (CAGR) of 31.5% during the forecast period 2022 to 2025.
Drivers for the fast-growing charging market in China
Regarding the economic environment, policy support from national and local governments should be one of the main factors. On the national roadmap side, charging and switching construction is defined as a national strategic emerging industry with the goal of "stable growth" of China's economy in 2022, as a work priority of China's new infrastructure. Moreover, according to NDRC's requirements, China's vehicle-pile ratio should be reduced from the current 3:1 to 2:1 by 2030. While for specific policies, the electricity subsidy and new energy investment prioritize boosting the scale production of projects. In addition, compared to other countries, China's subsidy policies can significantly stimulate customer demand by shifting from policy driving to market-oriented development.
Ms. Penny Fenn, International BD manager from the leading new energy technology solution provider KBVIP (Chinese:快卜新能源), talked about the impact of the government’s financial subsidies on industry development in an exclusive EqualOcean interview. She introduced different types of government financial subsidies concerning charging station infrastructure construction, new energy applications, technological innovation, and patents. These financial subsidies provide substantial support for product development and operation and simultaneously accelerate the roll-out process of charging stations across the country, especially in areas with fewer charging stations. These all would accelerate the influx of capital and activate market vitality.
Regarding the society environment factor, climate issues are in the global spotlight, with greener ways to travel and the application of clean, sustainable renewable energy recognized widely worldwide. According to the WMO's report: four key climate change indicators, including greenhouse gas concentration, sea level rise, ocean heat, and ocean acidification, set new records in 2021. While with China's goals announced to achieve the peaking of CO2 emissions before 2030 and carbon neutrality by 2060, the nation to enterprises jointly explores more energy-efficient and emission-reducing green travel methods.
Mr. Ethan Zhu, CEO and founder of PowerShare (Chinese:电享科技), is also an expert in energy digital technology. He told EqualOcean that, one of their core business priorities is virtual plant solutions that could integrate energy storage, solar, microgrid and utility-scale power plants. Because these solutions can help ESG companies and funds realize their low-carbon and economic goals. In terms of energy use, the load-leveling by the energy storage can not only achieve cost advantages by improving the electricity efficiency but also reliving global environmental and ecological pressures to some extent by energy saving and carbon reduction.
Regarding the technology factor, the technology innovation capacity (i.e.battery technology, material innovation, Battery-as-a-Service(BAAS)) should rely on a competitive manufacturing environment, complete supply chain, abundant R&D funding, and specialized talents in China to realize.
Dr.Wenfeng Mao, head scientist of Grater Bay Technology(Chinese:巨湾技研), hereinafter referred to as “GBT,” an expert in chemical materials and power batteries, introduced GBT’s charging technologies in an exclusive EqualOcean interview. He said their self-developed XFC (eXtreme Fast Charging) technology could greatly reduce the charging time, customers’ main concern now, through innovative battery design. With the know-how in new technology, products with XFC technologies perform significantly better, which means the energy density of batteries and the EVs range have also improved. The R&D of the material should match the whole battery design, which can adapt to mass production with low-cost advantages.
Restraints and opportunities of the current charging market in China
First, the unsolved consumer pain points of charging service would affect the charging market development. One important factor that affects users’ choice of whether to buy a NEV is the charging pile network. The more densely distributed the charging piles, the more convenient the charging would be. The distribution of charging piles and charging efficiency determine the convenience and mileage of charging for vehicle owners to a certain extent.
Mr.Jiliang An, marketing director of GBT, told EqualOcean that with the fast development of battery technology, the range of EVs can generally meet the needs of consumers. Thus the energy replenishment anxiety of NEVs will gradually replace the mileage anxiety among NEV owners. He is confident that in the future charging will be as easy as refueling.
Second, as the technology threshold lowers, the market competition is gradually turning white-hot, and there are problems of roughness and exclusivity in the market. The core competitiveness of enterprises will change from the ability to integrate resources in the early stage to the comprehensive operation and maintenance ability.
Ms. Fenn told EqualOcean that some charging piles with low efficiency or quality problems might be hard to satisfy customers’ needs in the present market. In some developed cities in China, such as Shanghai, many clients prefer charging stations that can provide fast charging service and differentiated charging services. They are even willing to wait in queue for such charging services. Therefore, it is believed that a reasonable layout, product stability, and personalized services will be able to attract more users and investment capital.
Third, the long investment recovery cycle is also a key problem. Battery costs account for a large proportion of the charging pile establishment costs. And the income realization form of the charging industry, especially the electric energy storage market profit model, is still being explored. Therefore, cost reduction is important. In the future, it is believed that electric energy storage and charging companies can generate revenue from transmission and distribution fees, power spot and other forms, which have long-term profit potential. Mr. Zhu believes that the hardware cost is the core problem in the energy investment field. When the hardware cost is lowered, there would be a larger profit margin that EV market players could devote to solving the safety and service problems. Moreover, the high cost of energy storage investment and the long capital return cycle make it hard for investors to profit in NEV businesses in the short term. Therefore, for the client side to achieve economic investment value, applying a microgrid to accomplish electricity scheduling and adjustment can better achieve this goal.
Value chain analysis of prominent representative players in the competitive landscape: by vendors
China’s charging market share is highly concentrated, with state-owned companies to domestic and foreign investors entering the charging industry in the form of joint companies, acquisitions, or investments. While for new players, once they use their advantages properly to enter the market, is believed to bring advances to the charging market. Three prominent representative vendors focusing on different perspectives in China’s charging industry will be introduced in the article.
CATL-backed KBVIP has already launched environmental-friendly power stations in over 80 cities in China up to now. These high-tech charging stations, or PBCD stations, featuring an integrated system of renewable energy power generation, battery storage, and high power EV charging piles and battery diagnosis technology with AI microgrid control, have been popular among users and contributed to realizing the optimized energy allocation.
GBT, an XFC battery technology leader, has self-developed technologies from the material and design to manufacturing that make their products more consistent and cheaper. As for battery technology, the main cost is the material. Therefore innovation in materials is vital. Moreover, the team has rich automotive mass production experience and core technology patents, which help them gain a strong advantage in product prices and better suitability for NEVs demands.
PowerShare, a Chinese company invested by bp Ventures and Alliance Ventures (Renault-Nissan-Mitsubishi), has built global cooperation relations with local partners worldwide to provide power AI solutions and assist with project implementation.
Future trends: technological progress and global expansion of Chinese vendors
First, it is a consensus that the industry development prospect will be broader, especially when a better profit model emerges.
Ms. Fenn said that KBVIP is exploring ways to increase profit margins and accelerate the return-generating process on the investment cycle. On the revenue side, they are exploring more forms of revenue realization, not limited to the charging fees. In the future, selling excess electricity will also be a form of revenue realization. While on the cost side, the continuous broadening of the types of power supply from new energy sources and the utilization of the gaps in electricity prices between idle and peak hours will reduce dependence on the national grid and reduce the cost of electricity consumption to a certain extent.
Second, the global expansion of charging technology or equipment is another core direction for these Chinese vendors.
Mr. Zhu said that based on the mature power system abroad and Shareholders’ brand awareness, PowerShare had made considerable achievements in overseas expansion. At the same time, they hope to apply their practical implementation experience to the Chinese market in the future as China’s power system gradually opens up.