As we enter 2023, Tesla's 10000th super charging pile in Chinese Mainland is located at the foot of Oriental Pearl TV Tower in Shanghai, marking a new stage for its own charging network.

In the past two years, the number of charging stations in China has shown explosive growth. Public data shows that as of September 2022, the total number of charging stations in China has reached 4.488 million, a year-on-year increase of 101.9%.

In the bustling construction of charging stations, we have seen Tesla supercharging stations that can charge for 10 minutes and run for half a day; I also saw the NIO battery swapping station, which is as fast as refueling. But outside of the increasingly positive user experience, we seem to pay little attention to issues related to the charging pile industry chain and future development direction.

We have had exchanges with domestic experts in the charging pile industry, and have studied and interpreted the current development of the domestic charging pile industry chain and representative companies in its upstream and downstream. Finally, based on industry reality and future potential analysis, we predict new growth opportunities for the domestic pile industry globally.

Charging stations are difficult to make money from, Huawei has not cooperated with State Grid Corporation of China

At a charging station industry conference the day before yesterday, we discussed with an expert in the charging station industry the current profit model, charging station operator model, and the development status of charging station modules in key areas of the charging station industry.

Q1: What is the current profit model of charging station operators?

A1: In fact, it is quite difficult for domestic charging station operators to make profits, but there are also reasonable operating models that everyone thinks are: like gas station service areas, providing food and entertainment projects around charging stations, and providing targeted services according to the preferences of charging users. It can also communicate with merchants to earn advertising costs.

However, providing services like gas station service areas requires supporting facilities and relevant personnel, which is also a significant support for operators, making it relatively difficult to implement. So currently, the main profit methods are still charging service fees and subsidies, which are two direct sources of income, and some operators are also exploring new profit points.

Q2: Will companies like PetroChina and Sinopec, which already have many gas stations, have certain operational location advantages in the charging pile industry?

A2: There is no doubt about this. In fact, PetroChina and Sinopec have clearly participated in the construction of charging piles and stations, and their biggest advantage is having sufficient land resources in cities.

Taking Shenzhen as an example, because there are many pure electric vehicles in Shenzhen, the profit quality of local operators is still very high. However, in the later stage of development, a problem will arise, which is the serious shortage of cheap outdoor land resources, and the high price of indoor land, which hinders the continued landing of charging piles.

In fact, in the future, all cities will have a development situation like Shenzhen, where profits were good in the early stage but were later discouraged due to land prices. But PetroChina and Sinopec have natural advantages, so for operators, they will be competitors with natural advantages in the future.

Q3: What is the development status of mainstream charging station modules in China?

A3: There are currently tens of thousands of enterprises in China that are producing charging piles, but there are fewer and fewer manufacturers producing charging pile modules, and the competitive situation is becoming more and more obvious. The reason is that the charging pile module, as the most important upstream component, has a high technical threshold and is gradually monopolized by several leading companies in its development.

In terms of reputation, influence, and technology, Huawei is the best among all charging station module manufacturers. But Huawei's charging station module is different from the standards of State Grid, so there is currently no cooperation with State Grid.

Apart from Huawei, Infineon, Yingfeiyuan, and Tonghe Technology are the main suppliers in China. Among them, Yingfeiyuan has the largest market share, with its main market outside the network and a certain price advantage, while Tonghe Technology has a very high market share within the network and is increasingly showing an oligopoly competition trend.

Looking at the upstream of the charging pile industry chain and the midstream of the charging module, looking at the operators

Currently, the upstream of the new energy vehicle charging pile industry chain is a manufacturer of components and equipment required for the construction and operation of charging piles. In the middle of the industry, it is charging operators. The participants in various charging scenarios downstream of the industrial chain are mainly users of various new energy vehicles.

In the upstream of the automotive charging pile industry chain, the charging module is the core link with a high technical threshold.

According to Zhiyan Information, the cost of charging station hardware equipment is the main cost of charging stations, accounting for more than 90%. Among them, the charging module is the core of charging station hardware equipment, accounting for 50% of the cost of charging station hardware equipment.

The charging module not only provides energy and electricity, but also performs tasks such as AC/DC conversion, DC amplification and isolation, which determines the performance and efficiency of the charging pile. It can be said to be the "heart" of the charging pile, with a high technical threshold, and important technologies are only mastered by a few enterprises in the industry.

At present, the mainstream charging module manufacturers in the market are leading companies such as Yingfeiyuan, Yingkerui, Huawei, Weidi Technology, Youyou Green Energy, Shenghong, etc., which account for more than 90% of domestic charging module shipments.

In the midstream of the automotive charging pile industry chain, there are three business models: operator led model, vehicle enterprise led model, and third-party charging service platform led model.

The operator led model is an operational management model in which the operator independently completes the investment, construction, operation and maintenance of the charging station business, and provides charging services to users.

The charging operator of this model highly integrates upstream and downstream resources in the industry chain, cooperatively participates in charging technology research and equipment manufacturing, and requires a large amount of investment in infrastructure such as venues and charging piles in the early stage. It belongs to heavy asset operation and requires high financial and comprehensive operational strength of the enterprise. Representative companies include Special Power, Star Charging, State Grid Electric, etc.

The leading model of car companies is an operational management model in which new energy vehicle companies use charging stations as after-sales services to provide targeted brand owners with a better charging experience.

This mode is only aimed at fixed car owners of car companies, and the utilization rate of charging stations is relatively low. In the self built pile model, car companies also need to spend a high cost to build charging piles and maintain them later, which is suitable for car companies with a large number of customers and stable core business. Representative companies include Tesla, NIO, Xiaopeng, etc.

The third-party charging service platform model is an operational management model in which a third party integrates and resells the charging piles of major operators through its own resource integration capabilities.

The third-party charging service platform in this model does not participate in the investment and construction of charging stations, but instead integrates the charging stations of different charging operators into their own platform through resource integration capabilities. Using technologies such as big data and resource integration and allocation to connect charging stations of different operators and provide charging services for C-end users. Representative enterprises include Xiaoju Fast Charging, Cloud Fast Charging, etc.

After nearly five years of full competition, the charging station operation industry has initially fixed its pattern, with most markets controlled by operators, forming a tripartite situation of Special Power, Star Charging, and State Grid. But to this day, the improvement of charging networks still relies on policy subsidies and capital market financing support, and has not yet achieved a profitable cycle.

Upstream Infineon, midstream Tetsu calling

In the charging pile industry, there are different competitive trends and market characteristics between the upstream supplier market and the midstream operator market. This article will analyze the industry situation by taking advantage of the leading upstream charging module enterprise, Inquiry, and the midstream charging operator.

Among them, the upstream competition pattern of charging piles has been established, and Inquiry occupies a place.

After years of development, the upstream market pattern of charging piles has basically formed. Downstream customers not only focus on product performance and price, but also pay more attention to industry application cases and product stability. It is difficult for new entrants to gain industry recognition in the short term.

During its twenty years of development, Infineon has also developed a mature and stable technology research and development team, a full range of cost-effective products, and a diverse and wide-ranging marketing network. Currently, the company's products have been stably applied to various projects and have a good reputation in the industry.

According to an announcement from Inquiry, in the direction of charging pile products, we will continue to implement product upgrades on the basis of our current products, optimize performance indicators such as environmental requirements and output power range, and accelerate the research and development of DC fast charging products to meet market demand.

At the same time, we will also launch "one pile multi charging" and improve flexible charging system solutions, providing better construction solutions and products for the construction of high-power DC charging stations. Continue to improve the software construction of the charging station operation management platform, strengthen the integrated business model of "management platform+construction plan+product", and focus on building a diversified innovation driven brand of leading suppliers and solution providers in the power electronics industry.

Although Infineon has strong capabilities, it has shown a buyer's market trend in recent years, and there are still market competition risks in the future.

From the demand side, in recent years, the upstream market of domestic charging piles has shown a buyer's market trend, with fierce competition. At the same time, the development direction of charging piles has also shifted from the initial construction end to the higher quality operation end, and the electric vehicle charging power industry has entered a stage of intensified industry reshuffle.

In addition, with the basic formation of the market pattern, players in the industry currently have deep technical strength. If the company's new product research and development cannot be successfully developed as scheduled, and the development of new products does not meet market demand, it will be quickly replaced by peer companies.

In summary, Yingkerui has been deeply cultivating the market for many years and has strong competitiveness. It is also striving to create a distinctive business model. However, if future research and development cannot be followed up in a timely manner, there is still a risk of being eliminated, which is also a microcosm of the upstream enterprises in the entire charging pile industry.

And the main focus of TEDA is to redefine the "charging network", release virtual power plant platform products, and focus on the middle reaches of the charging pile industry chain, with a deep moat.

After several years of market competition, the midstream market has formed a tripartite situation of Special Power, Star Charging, and State Grid, with Special Power ranking first. As of H1 2022, in the field of public charging, the market share of DC charging piles is about 26%, with a charging capacity of over 2.6 billion kilowatt hours and a market share of about 31%, both ranking first in the country.

The reason why TEDA has remained at the top of the list is because it has formed a huge scale advantage in the layout of the charging network. Due to the limitations of the site and regional power grid capacity in the construction of charging assets, the number of charging piles landing in specific areas is limited; At the same time, the layout of charging stations requires huge and sustained capital investment, and the cost of entering the industry is extremely high. The two together determine the unshakable position of TEDA in the midstream operation end.

At present, the operating costs of charging stations are relatively high, and relying on charging service fees and government subsidies is far from enough to support the profitability of operators. In the past few years, relevant enterprises have also been exploring new profit methods, but TEDA has taken a new path and found a new path.

Yu Dexiang, Chairman of Terui De&Terui Dian, said, "By using electric vehicle charging and discharging, distributed new energy, energy storage systems, adjustable loads and other resources as carriers, energy consumption can be coordinated and optimized. The 'charging grid+microgrid+energy storage grid' is becoming the new mainstay of virtual power plants and the best path to achieve carbon neutrality."

Based on this judgment, TEDA's business model is also undergoing profound changes: the main source of revenue for operating enterprises - charging costs - will be replaced by the scheduling costs of integrated virtual power plants in the future.

In H1 2022, TEDA connected a large number of distributed photovoltaics and distributed energy storage, connecting power dispatch centers in many cities. Based on rich application scenarios such as orderly charging, low valley charging, peak electricity sales, microgrid photovoltaics, cascading energy storage, and vehicle network interaction, multiple types of virtual power plants were constructed, achieving energy value-added services.

The financial report shows that the revenue achieved in the first half of this year was 1.581 billion yuan, an increase of 44.40% compared to the same period last year, and the gross profit increased by 114.93% compared to the same period last year, indicating that this model not only works, but also can achieve good revenue growth.

It can be seen that as the leader of the operation end, TEDA has a deep moat. At the same time, it relies on complete charging network facilities and connects to power generation and energy storage systems in various regions, leading the way in finding a better business model. Although limited by the initial investment and not yet profitable, TEDA will successfully break through the profit cycle in the foreseeable future.

Can the charging pile industry still see new growth?

In the context of the gradually fixed competitive landscape in the upstream and midstream markets of domestic charging stations, various charging station enterprises are still expanding their markets through technological iteration and upgrading, as well as seeking incremental opportunities overseas.

Domestic charging stations mainly rely on slow charging, and the demand for high-voltage fast charging from users brings new opportunities for growth.

According to charging technology classification, it can be divided into AC charging piles and DC charging piles, also known as slow charging piles and fast charging piles. As of October 2022, in the total number of public charging stations in China, AC stations account for 58% and DC stations account for 42%.

In the past, people seemed to be able to tolerate the process of spending several hours charging, but with the increase in the range of new energy vehicles, the charging time became longer and longer, and charging anxiety began to surface. The rapid increase in demand for high-voltage, high-power, and fast charging by users greatly promoted the updating and iteration of high-voltage DC charging piles.

Outside of the user end, car manufacturers are also promoting the exploration and popularization of fast charging technology. Multiple car companies have entered the mass production stage of 800V high-voltage technology platform models, actively building their own charging network support, and driving the acceleration of high-voltage DC charging pile construction.

According to the prediction of Guohai Securities, assuming that in 2025, the proportion of newly added public charging piles in China is 45%, the proportion of newly added private charging piles is 55%, the proportion of DC piles in public charging piles is 65%, and the proportion of AC piles is 35%. The average prices of DC piles and AC piles are 50000 yuan and 3000 yuan respectively, the market size of charging piles will reach 75.5 billion yuan in 2025. Compared with 11.3 billion yuan in 2021, the CAGR in four years is as high as 60.7%, indicating a huge market space.

In the process of replacing and upgrading high-voltage fast charging piles in China, the overseas charging pile market has also entered a new cycle of accelerated construction.

The main reasons for accelerating the construction of overseas charging stations and domestic pile companies going abroad are as follows:

1. The ownership rate of electric cars in Europe and America has rapidly increased, and the demand for charging stations as supporting facilities has also increased.

Before the second quarter of 2021, hybrid vehicle sales in Europe accounted for over 50% of total sales, but since the third quarter of 2021, the growth rate of pure electric vehicle sales in Europe has increased rapidly. The proportion of pure electric vehicles has increased from less than 50% in the first half of 2021 to nearly 60% in the third quarter of 2022. The increase in the proportion of pure electric vehicles has put forward a rigid demand for charging stations.

The penetration rate of new energy vehicles in the United States is currently relatively low, only 4.44%. With the acceleration of the penetration rate of new energy vehicles in the United States, the growth rate of electric vehicle ownership is expected to exceed 60% in 2023. It is expected that the sales of new energy vehicles will reach 4.73 million in 2025, with huge potential for future growth. Such a high growth rate is also driving the development of charging piles.

2. The European and American car pile ratio is too high, with more cars and fewer piles, and there is a demand for supporting rigidity.

As of 2021, the number of new energy vehicles in Europe is 5.5 million, with 356000 public charging stations and a ratio of 15:1 for public charging stations; The number of new energy vehicles in the United States is 2 million, with 114000 public charging stations and a ratio of 17:1 for public charging stations.

Behind such a high vehicle to pile ratio, there is a serious shortage of charging pile infrastructure in Europe and America, a gap in rigid supporting demand, and a huge market space.

3. The proportion of public DC piles in Europe and America is low, which cannot meet the needs of users for fast charging.

The European market is the second largest charging pile market in the world after China, but the construction of DC charging piles in Europe is still in its early stages. As of 2021, among the 334000 public charging stations in the European Union, slow charging stations accounted for 86.83% and fast charging stations accounted for 13.17%.

Compared to Europe, the construction of DC charging stations in the United States is relatively advanced, but it still cannot meet the fast charging needs of users. As of 2021, among the 114000 charging stations in the United States, slow charging stations account for 80.70% and fast charging stations account for 19.30%.

The overseas markets represented by Europe and America have a strong demand for charging stations due to the rapid increase in the number of electric cars and objectively speaking, the high ratio of charging stations; At the same time, the proportion of DC piles in the current number of charging piles is too low, leading to the iterative demand of users for fast charging piles.

For enterprises, due to the stricter automotive testing standards and regulations in Europe and America compared to the Chinese market, the key to going global in the short term is whether to obtain standard certification; In the long run, if a complete after-sales and service network can be established, one can fully enjoy the growth dividends of the overseas charging pile market.

Write at the end

As a necessary equipment for supporting new energy vehicles, the market size and growth potential of the industry are beyond doubt.

However, from the perspective of users, charging stations have grown rapidly since 2015 and still face difficulties in finding and slow charging; And enterprises are also struggling on the edge of losses due to various reasons such as high initial investment and high maintenance costs.

We believe that although the development of the charging pile industry still faces many difficulties, with the reduction of upstream manufacturing costs, the midstream business model is gradually maturing, and once the road for pile companies to go overseas is opened up, the industry will also enjoy dividends that are visible.

At that time, the problems of finding a solution and slow charging would no longer be a problem for tram owners, and the new energy vehicle industry would also embark on a healthier path of development.