While it is crystal clear that several commercial EV OEMs face difficulties getting financing options for end consumers, is the situation similar in the charge point operator space? More importantly, is the finance problem for EV OEMs also affecting the CPO business? Kartikey Hariyani, CEO of Charge Point & TecSo Energy, in a conversation with the MOVES team, shed light on the evolving EV charger ecosystem in India.
He highlights that most CPOs, not just in India but globally, have yet to report profits. “In conclusion, while the ‘chicken or egg’ dilemma is often debated in the context of infrastructure and EV adoption, infrastructure must precede adoption. However, the speed at which this infrastructure is developed is paramount,” he says.
Q: Please share your perspective on the country’s current state of EV charger infrastructure.
A: With almost every major automotive OEM introducing electric cars, buses, and even commercial vehicles, the EV charging network in India is evolving. Yet, the critical aspect to consider is the pace of this development relative to the rate of EV adoption. The pace of infrastructure development must match the rate of EV adoption.
For instance, only about 1% of monthly four-wheeler sales are currently electric vehicles. A significant shift will likely occur once this number reaches a threshold, say 5% or 7%. This inflection point will likely spur charge point operators (CPOs) to accelerate the deployment of more charging stations, further supporting the EV transition.
Q: What are the various business models currently employed by charge point operators (CPOs) in India? How do you see these models evolving or transforming in the future?
A: CPOs in India primarily operate with two business models: B2B (business-to-business) and B2C (business-to-consumer) retail charging. The B2B model presents a clear business opportunity that positively impacts profit and loss statements. In contrast, the B2C model involves demand risk, as it entails setting up chargers in various locations, including highways and urban areas, with the expectation of growing utilisation.
It’s important to note that these models are interdependent. The top CPOs in the country, including the top five or seven, have adopted this dual approach for growth and sustainability. Globally, CPOs are generally yet to be profitable. At ChargeZone, we only recently achieved a positive EBITDA. The business model for CPOs is clear-cut, focusing on delivering energy or EV charging as a service.
This requires substantial capital investment—by my estimates, around $10 billion for both slow AC and fast DC chargers—to facilitate a 30% EV adoption rate in India by 2030. The critical factor here is the pace of infrastructure expansion and the strategic placement of charging stations. In conclusion, while the ‘chicken or egg’ dilemma is often debated in the context of infrastructure and EV adoption, infrastructure must precede adoption. However, the speed at which this infrastructure is developed is paramount.
Q: Is capex the most significant challenge, or is there a bigger challenge than that?
A: Multiple challenges are inevitable in any business, especially one as capital-intensive as the EV charging network. Capital is indeed a significant barrier, not because of CPOs but due to the inherent nature of the industry. However, capital is one of many hurdles. A crucial aspect beyond capital is ensuring customers a reliable and seamless charging experience. This is where ‘reliability anxiety’ comes into play, perhaps more so than ‘range anxiety’.
Charging stations are becoming more visible across various locations like highways, gas stations, and hotels. Yet, the critical issue is their operational reliability. Since most charging stations are uncrewed, maintaining consistent uptime is a significant challenge for CPOs. Other challenges, though seemingly routine, are also vital. One such aspect is the quality of the location.
Given that charging can take 15 to 30 minutes, providing customers with additional facilities is essential to utilise their time effectively. Catering to the needs and comfort of individual EV owners and fleet drivers is as critical as our charging stations’ capital investment and reliability.
Q: What options are available for individuals interested in capitalising on the business opportunity of setting up EV chargers, particularly DC fast chargers?
A: If you possess a strategic piece of land or an ideal location, we offer partnership models like the DOCO (dealer own and charger operated) or COCO (charger own and charger operated) models. We can work with you in these arrangements, investing in your location to set up the charging infrastructure.
However, if you, as an individual, are considering setting up a charging station independently, I suggest caution at this stage. It is best if you are ready to take on the demand and even the right-of-way risks. The feasibility of such an investment depends significantly on the amenities available at the location. For instance, if you don’t own a restaurant, dhaba, or a facility along the highway, investing in a charging station might be premature.
In such cases, the predictability of utilisation and return on investment is still being determined. That said, CPOs like ours constantly seek valuable partnerships based on location. We are open to engaging with individuals who have suitable sites for setting up charging stations.
Q: In the context of charge point operators (CPOs), do you encounter similar financing challenges in your business as faced by the EV OEMs, or is this issue not prevalent in the CPO sector?
A: Indeed, access to capital is a significant barrier for any charge point operator (CPO) looking to expand, enter new territories, or explore new markets. The financing of EVs is crucial, affecting the utilisation of EV charging stations that CPOs invest in. There is an expectation that the EV sector may soon be designated as a priority lending sector.
Such a development, quickly announced, will likely boost EV adoption in the country. As for CPOs, we have a range of options for raising capital. Equity is typically the most favourable starting point. In specific business models, like the B2B free charging model, there is growing interest in equity and debt financing and asset financing. So, the financial landscape for EV financing and the charging infrastructure business is evolving and offering more opportunities.
Q: Will more EVs on the road translate to having CPOs like you enable the deployment of more chargers?
A: Indeed, the increasing number of EVs on the roads directly influences our deployment of more chargers. At ChargeZone, we’ve already electrified over 20,000 kilometres of highway in India. Notable projects include the Jamnagar to Chennai stretch, approximately 2,000 km, and routes like Delhi to Jaipur, Jaipur to Ahmedabad, and Delhi to Agra. This expansion reflects the growing demand for highway travel among EV owners, keen on using their vehicles for longer trips, such as from Mumbai to Pune or Chennai to Bangalore.
Our goal is to electrify around 50,000 kilometres by December 2024. Our charging stations are on major routes like Hyderabad to Vijayawada and Hyderabad to Bangalore. We are also forming new partnerships with various OEMs, including Hyundai, Mercedes, MG, Mahindra, and Tata Motors.
These collaborations involve creating information and roaming platforms under the Open Charge Point Protocol (OCPP), allowing users to discover and transact EV charging sessions through their respective OEM apps. These initiatives indicate that the growth we anticipated for 2025 is happening now. The rapid pace at which almost all OEMs launch or announce new EV models has surpassed our expectations. Moreover, the CPO business is expanding beyond personal mobility to commercial vehicles. Several OEMs are on the brink of launching electric trucks, ranging from 12 to 55 tons. This will significantly increase the use of our charging network, making the CPO business more dynamic and financially viable.
Q: Will partnerships between battery makers, CPOs, and EV OEMs provide financial institutions with the necessary data and confidence to increase their support for financing more EVs?
A: Indeed, the hesitation among financial services companies, including NBFCs and traditional banks, to finance EVs stemmed mainly from a need for more data. In contrast, the internal combustion (IC) industry has a century’s worth of data, contributing to a typically higher resale value for IC vehicles.
However, this perception is shifting due to the nature of EVs as connected vehicles, which generate extensive data for every kilometre travelled. Startups and advanced technology companies are playing a crucial role in this transformation. They are assisting banks in developing analytical tools and dashboards that monitor an EV’s historical data and provide predictive analytics.
These tools can forecast the potential residual value of an EV after three to five years. The financial services industry is actively exploring innovative financing methods for EVs, especially at the balance sheet level. This approach marks a significant change in how EVs are financed, leveraging the unique data capabilities of these vehicles.
Q: Do you think CPOs will eventually move towards establishing battery swap stations alongside their existing charging infrastructure?
A: It is essential to recognise that battery swapping differs fundamentally from the plug-in charging business. Battery swapping targets specific vehicle segments, such as two-wheelers and three-wheelers, where distinct strategies emerge. For instance, if smaller batteries, like those with 2- or 3-kilowatt capacity, can be quickly charged, they could directly compete with the concept of battery swapping.
Meanwhile, battery swap companies are introducing integrated models into the market. These models encompass vehicles, battery packs, swap stations, and the necessary infrastructure. Moreover, they often involve backward integration, extending into manufacturing. This evolution of new-age models in battery swap technology is noteworthy. Ultimately, battery swap stations coexist with plug-in charging stations. Both have unique applications and cater to different needs within the EV ecosystem.
Q: Are you satisfied with the quality of chargers being supplied by Indian OEMs and ODMs at present?
A: Let’s approach this from a different angle. An electric vehicle charger, whether DC or AC, comprises power electronics and embedded software. These capabilities have been present in India for quite some time. Moreover, EV chargers are IoT devices connected to the cloud, adding another layer of complexity and functionality.
I’m pleased to report that many Indian OEMs are meeting and sometimes surpassing global benchmarks for EV chargers. We have yet to face any significant challenges in this regard.