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Last Updated: June 14, 2024 – EVBox

This article highlights the growing potential of the DC fast charging industry and the importance of effective business strategies to achieve a sustainable return on investment. We will focus on the following four investment strategies to explore the DC fast charging market in greater detail:

Direct Ownership: With this strategy, you purchase the DC charging stations outright and are responsible for everything, including installation and (preventive) maintenance.

Leasing: By opting for leasing your DC charging equipment, you reduce initial costs and enter a long-term rental agreement with a Charge Point Operator (CPO) or an Electric Mobility Service Provider (EMSP) with monthly or annual payments.

CaaS (Charging as a Service): CaaS is a subscription model where you pay a monthly fee to a CaaS provider to use a DC fast charging facility tailored to your needs.

Co-Ownership: This strategy shares many similarities with direct ownership, with a key difference: ownership is split among multiple parties, and the revenue from the fast-charging site is distributed proportionally to the shares held.

Need for Investment Strategies in DC Fast Charging Infrastructure

You may have noticed the exponential growth in the number of electric vehicles (EVs) on the road in recent years. So have we. The industry has experienced an average growth rate of 35% between 2020 and 2022, and this trend is expected to continue through the end of the decade, in line with the global transition to a carbon-neutral economy.

Naturally, this growth comes with a need for investment in reliable fast-charging solutions, namely DC fast charging stations or Level 3 chargers. As investment groups, entrepreneurs, and private companies recognize the value of investing in e-mobility, questions arise about the challenges and benefits of investing in DC fast charging infrastructure, as well as where to begin.

In essence, investing in DC fast charging infrastructure lays the foundation for an industry poised for exponential growth in the coming years. However, the high initial capital required to purchase DC charging stations or invest in this sector necessitates a comprehensive investment strategy to ensure the business’s viability.

This article explores the advantages and disadvantages of investing in DC fast charging infrastructure before detailing the four most common investment strategies to help you determine which one might be right for you.

Why Invest in DC Fast Charging Stations?

A few years ago, a 50 kW output was impressive for EV drivers. Times have changed. Today, Level 3 charging stations can deliver significantly higher outputs, with some enabling 100 km of range in just three minutes. This reduction in charging times significantly alleviates “range anxiety,” one of the main barriers to widespread EV adoption. Additionally, businesses investing in fast-charging equipment can offer a highly sought-after service in a rapidly expanding market.

Before diving into the investment strategies, let’s briefly examine some advantages and disadvantages of investing in DC fast charging infrastructure and clarify key terms.

Advantages of Investing

  • Level 3 charging represents the future of public EV charging.
  • The DC fast charging market is young and still consolidating, offering early investors a competitive edge.
  • Opportunities to generate and grow additional revenue streams through fast charging are plentiful, such as placing DC chargers in restaurant parking lots, near cafes, or shops.
  • The speed of DC chargers is more attractive to users than slower AC chargers, potentially increasing brand loyalty and attracting new customers.
  • Closely tied to the global transition to a greener society, the growth of the e-mobility industry (and thus Level 3 charging) is unlikely to slow down anytime soon.

Disadvantages of Investing

  • DC charging stations are more expensive than slower AC chargers.
  • The return on investment for DC chargers is longer than for AC chargers due to their higher purchase cost.
  • Recovering the investment for a standard EV charging station can take up to 10 years.

Understanding the Jargon

Before delving into the four key investment strategies for Level 3 charging stations, it’s worth clarifying the terms CPO, EMSP, and charging station owner, as these are the most common types of investors in the fast-charging market.

What is a Charge Point Operator (CPO)?

A CPO can be a manufacturer or reseller of charging stations responsible for planning, installing, connecting to the grid, and operating the chargers you invest in. They may also handle hardware maintenance and software management.

What is an Electric Mobility Service Provider (EMSP)?

An EMSP is a company established to provide a wide range of support services for EVs, including functions typically handled by a CPO. An EMSP also tends to offer user-focused services (e.g., payment or subscription services) and network solutions.

What is a Charging Station Owner?

Unlike an operator, a charging station owner is the investor whose capital funds the purchase and installation of DC fast charging stations. Their responsibilities include owning and overseeing the charging infrastructure, though they may choose to outsource practical management to a CPO or EMSP.

Four Main Investment Strategies for Entering the DC Fast Charging Marke

Strategy #1: Direct Ownership

The simplest of the four strategies (at least in its definition) is direct ownership. This involves purchasing DC charging stations outright, buying or leasing the land for your infrastructure, preparing the site, and financing the installation and maintenance of the chargers. However, you can opt to hire a CPO or EMSP to manage your fast chargers on a technical (but not financial) level.

Exploring the Advantages and Challenges of Direct Ownership for Investors

Direct ownership requires the highest initial capital investment, making it the model with the greatest long-term potential for growth and return on investment. Here are some additional benefits for direct ownership investors:

  • Full control over the project, with the ability to customize the charging infrastructure to meet specific investor and customer needs.
  • Revenue generated from users charging their EVs at your stations, which should grow alongside the rising demand for electric vehicles.
  • Establishing a unique brand presence early on, using the charging infrastructure as a marketing tool to build long-term customer loyalty.

However, direct ownership also presents challenges:

  • A significant initial investment is required to cover equipment, installation, and operational costs.
  • Profit margins may shrink as the market grows due to increased competition and market saturation.
  • Owning DC fast charging stations entails additional responsibilities, such as technical expertise, maintenance, obtaining appropriate construction permits, and complying with local regulations.

Understandably, these risks may deter potential investors. Fortunately, risk mitigation measures exist. Several levers related to costs, branding, and revenue can minimize the required investment and maximize returns. Examples include:

Cost Levers

  • Leveraging government or municipal grants and subsidies, which are becoming increasingly common worldwide.

Branding Levers

  • Differentiation is key to offering customers a unique fast-charging experience, increasing retention and loyalty, and mitigating the impact of reduced profit margins as the market grows.

Revenue Levers

  • Introducing advertisements at charging sites to generate additional revenue streams.
  • Partnering with existing or planned shops, bars, or restaurants.
  • Collaborating with local EV fleets (e.g., taxis, trucking companies, delivery services, or ridesharing services) by offering incentives for exclusive use.
Operational Aspects of Direct Ownership of DC Fast Charging Stations

As a direct owner, your responsibilities and operational considerations are significantly heavier than those of a co-owner, lessee, or CaaS client. As the architect of your site, you must independently evaluate and make decisions about factors such as site selection, software, permits, calibration laws, maintenance, and customer service.

Strategy #2: Leasing

Leasing offers a welcome alternative to direct ownership for investors with limited funds. It works similarly to leasing electric vehicles: investors reduce initial costs and enter a long-term rental agreement with a CPO or EMSP, making monthly or annual payments.

The CPO/EMSP oversees the assessment of your site, specific needs, and installation requirements for your charging stations. They also handle the installation of the chosen DC chargers at no additional cost to the investor. At the end of the leasing contract (typically one to seven years), you can renew the contract or pay the remaining cost of the infrastructure to become a direct owner. Depending on your CPO and contract, you may or may not be responsible for charger maintenance, operation, and customer support.

Exploring the Advantages and Challenges of Leasing for Investors

The primary and most obvious advantage of the leasing model is the absence of a large initial capital requirement. Costs are spread over several years, making DC charging stations more accessible and attracting a wider range of investors. Key advantages include:

  • A potentially higher and faster return on investment compared to direct ownership, as the lower initial investment requires less customer loyalty to generate profits.
  • Investors receive revenue (fully or partially, depending on the contract) generated by each of their DC charging stations.
  • The commitment period is more flexible and potentially shorter than with direct ownership.

Leasing DC fast charging stations has two notable drawbacks:

  • As leasing fees accumulate over time, the total cost (depending on the contract duration) may exceed the initial investment required for direct ownership. This is similar to the difference between renting and buying a house: monthly lease payments are typically higher than loan payments, but obtaining a loan requires significant upfront capital, unlike leasing.
  • Lessees have little to no control over the infrastructure’s placement, customization, or operation, as these decisions are generally made by the CPO or EMSP issuing the lease.

Strategy #3: Charging as a Service (CaaS)

Like leasing, our penultimate investment strategy is designed for investors lacking the capital for direct ownership. CaaS, or Charging as a Service, is a subscription model where investors pay a monthly fee to a CaaS provider to use a DC fast charging facility tailored to their needs. The CaaS provider covers all costs associated with setting up DC chargers at the investor’s chosen site.

Exploring the Advantages and Challenges of the CaaS Model for Investors

The CaaS model is ideal for investors looking to provide their customers, employees, or EV fleet with an on-demand, fast, and comprehensive charging solution. Investors do not earn direct profits from charging sessions, and users typically do not pay to charge at a CaaS station (unless the investor offsets some subscription costs onto users). The main advantage of the CaaS strategy is that it provides turnkey access to a highly sought-after service without any operational concerns. Examples include:

  • Companies can subscribe to CaaS to offer employees free, fast-charging stations at office parking lots or registered CaaS stations along their commute. This can improve employee retention, loyalty, and attract talent during recruitment.
  • EV fleets (e.g., delivery or taxi companies) can use CaaS to provide drivers with fast, accessible, and free charging solutions.
  • Independent businesses and chains (e.g., fast food, hotels, or retail) can use CaaS to attract customers with a fast-charging DC offer.

Other advantages:

  • The CaaS provider handles all financial and logistical responsibilities, from purchasing and installing equipment to managing software, maintenance, payment processes, and customer service.

The major drawback for those drawn to the CaaS model is the lack of control over how DC fast charging stations are operated and maintained. There is also no option to become an owner in the future. Additionally, while currently an affordable investment strategy, CaaS contract costs are likely to remain high, so the potential return on investment should be carefully evaluated.

Strategy #4: Co-Ownership

Co-ownership (or the revenue-sharing model) is the final investment strategy on our list. It shares many similarities with direct ownership, with one major difference: ownership is split among multiple parties, and revenue from the fast-charging site is distributed proportionally to the shares held.

Exploring the Advantages and Challenges of Co-Ownership for Investors

Co-ownership offers advantages for investors interested in direct ownership but unwilling to bear the full fiscal and logistical responsibility of a DC charging project:

  • Project responsibility can be shared among multiple stakeholders who bring their own networks and expertise, such as CPOs with charger installation expertise, site hosts, utility providers, or automakers.
  • EV drivers may be more attracted to a collaboratively built site, as it ensures a reliable, safe, and efficient charging station.
  • The significant upfront investment required for direct ownership is distributed among multiple investors, significantly reducing the amount each party must contribute.
  • Collaboration fosters innovation, a critical factor in this rapidly evolving industry.

The disadvantages of co-ownership are less obvious but may mirror those of leasing or CaaS. For instance, one partner may be granted full authority over the site’s architecture and administration by the others in exchange for reduced costs.

In Summary: Choosing the Right Investment Strategy

Investing in the e-mobility industry through the DC fast charging sector can yield significant long-term returns. However, the high initial cost to enter this market will remain substantial, and the return on investment is delayed until EV adoption reaches a threshold that makes fast charging more financially viable. It is therefore clear that investors need a precise investment strategy.

We hope this article has helped you better understand the investment opportunities in this young and promising market. We’ve highlighted the four most popular investment strategies for DC fast charging: direct ownership, leasing, CaaS, and co-ownership (or revenue-sharing). Choosing the right one for you requires time and careful consideration.

Investment strategies for DC fast charging infrastructure are just the tip of the iceberg in understanding the dynamics of the e-mobility industry. For more information and to make an informed decision as a potential investor, check out other articles on the EVBox blog, such as those on emerging laws and regulations in the EV fast-charging market, the current state of the DC fast charging market (in English), or how to make money with EV charging stations.