ChargePoint Raises $500 Million; Profit Pressure Starts.
”Daimler has thrown a lot of money into ChargePoint. It needs it to succeed”
ChargePoint of Campbell, California, which says it is the world’s leading electric vehicle (EV) charging network, announced Wednesday its latest round of funding raised more than $200 million, bringing the total to over $500 million.
Investors ranged from power generators to automotive manufacturers like Daimler and BMW with a clear interest in protecting their businesses as electric cars replace fossil-fuel propelled ones.
The race to provide a reliable and ubiquitous network to power the new fleets of electric cars is led in Europe by Chargepoint, which competes against companies like French electric utility Engie, RWE of Germany’s Innogy, Britain’s E.ON, and FastNed of Holland.
The trouble is, the move to embrace electric cars is only gathering pace slowly, despite some persuasive efforts by governments. Consumers still reckon most electric cars are too expensive and less practical than traditionally powered vehicles.
Privately held ChargePoint plans 2.5 million charging points globally by 2025. It currently has around 60,000 independently owned public and semi-public charging spots. Around 1,000 are in Europe and the rest in the U.S. ChargePoint has said its expansion plans are likely to be evenly split between the U.S. and Europe.
ChargePoint will be hoping sales of electric cars will soon accelerate away. Manufacturers like Volkswagen say sales of battery-only vehicles will spurt to 25% of global sales by 2025, but that looks a bit rose-tinted. IHS Markit forecasts annual production of 7.23 million battery-only, and 6.1 million plug-in hybrid vehicles globally by the same year. That combination would be a total of less than 15% of the global market, so forecasts vary widely.
There is danger for the likes of ChargePoint that they overestimate demand. Any perceived shortage of charging spaces and worries about range will undermine demand for electric cars in the marketplace.
According to IHS Markit analyst Graham Evans, this explains why carmakers like Daimler are investing in ChargePoint.
”Daimler has thrown a lot of money into ChargePoint. It needs it to succeed. Daimler has invested heavily in electric cars and they will need somewhere to charge. The car manufacturers are reliant on private companies to drive this forward,” Evans said.
ChargePoint said new investors in the latest round include American Electric Power, Chevron Technology Ventures, Canada Pension Plan Investment Board, Daimler Trucks & Buses, and Quantum Energy Partners. Existing investors include BMW i Ventures, Braemar Energy Ventures, Linse Capital, and Siemens.
“The broader energy and mobility ecosystem has recognized that we are at a tipping point in the generational shift to transportation electrification. Leading investors from automotive, utilities, oil and gas, and financial institutions are coming together to enable ChargePoint’s vision of an all-electric future as the mass adoption of electric mobility and the transition to electric fleets accelerate,” said Pasquale Romano, ChargePoint President and CEO in a statement.
ChargePoint said it will use the latest funding in part to further expand its network, continue to build its footprint in Europe and North America, improve the experience for EV drivers, and expand solutions for fleets as the market quickly approaches the mass adoption of electrified transportation.
Investors will soon be looking for some return on their investment, according to IHS Markit’s Evans.
“”ChargePoint is well placed to build this network out. How profitable will it be? It’s very difficult to make a profit on all of these stations and repay the capital expenditure. In a way they might become too big to fail. Daimler has invested a lot to bring all those electric vehicles to market and it is very much reliant on ChargePoint being a success. The company has to find a way to deliver and make it profitable; that’s a long way off, in my opinion,” Evans said.
Daimler’s Mercedes launched the EQC SUV at the Paris Auto Show in October, its first purely electric model, which goes on sale in 2020.
“FastNed is doing well in the Netherlands though and the first few stations are starting to turn a profit. It will be interesting to see if ChargePoint can do this on a larger scale,” Evans said.