ChargePoint operates the world’s largest network of electric vehicle (EV) charging stations, using its platform to connect EV drivers with EV charging station owners.
The EV market is growing rapidly and according to most projections it will continue this trajectory. However, EVs still face significant barriers to growth. One of the most perplexing is the chicken-and-egg problem of EV charging infrastructure; to buy an EV consumers must be confident that they will be able to charge their EV when and where they need to, but to invest in EV charging infrastructure the investors must be confident that there is substantial demand. Luckily, ChargePoint has created a platform, with both hardware and the software components, that powers a comprehensive network of charging stations to help resolve this tension.
The ChargePoint platform has two primary players, charging station owners and drivers.
ChargePoint sells charging station hardware to a wide variety of business types (retailers, workplaces, hospitals, cities, etc) instilling that “EV charging [is] good for any business.” ChargePoint creates value for owners by installing EV charging stations to help companies attract customers, tenants, or employees, increase property value and duration of tenancy, and establish brand around green leadership. ChargePoint creates additional value with the software and network, helping owners manage energy use, encourage efficient use of charging stations, control pricing, and understand energy patterns and greenhouse gas reductions. ChargePoint captures value from the owners in three ways (1) selling the charging station hardware, (2) the cloud-based software services, and (3) other services such as maintenance and repair, and 24/7 system support. Currently most of the revenue is from hardware sales, but ChargePoint estimates that the recurring revenue from the software and services will outpace hardware sales, especially as the hardware is commoditized. In fact, ChargePoint software and services are open to any charging infrastructure, though to date most customers have selected to use ChargePoint’s proprietary hardware.
ChargePoint offers its drivers the largest network of EV charging stations in the world, allowing drivers to charge on-the-go. Drivers can use a mobile app to locate the nearest charging station, determine if it is available for use, and sign up for a wait list, if necessary, get notified when the car is fully charged, pay for charging, and many other user-friendly features. Owners set the charging rates (though ChargePoint provides rate setting consulting services). ChargePoint facilitates the transfer payment from drivers to owners. ChargePoint does not collect any revenue from the drivers.
Currently ChargePoint holds approximately 70% market share in the EV charging infrastructure in the United States. They achieved this position in four ways. First, their unique business model of selling the hardware to businesses (rather than owning it themselves) reduces risks to attract investors. Second, ChargePoint was founded in 2007 in the nascence of the EV industry, achieving a strong first mover advantage. Third, the ChargePoint product, including both the hardware and the software, is superior to its competition. And fourth, the drivers provide a strong network effect. Strong driver demand for ChargePoint charging infrastructure, thanks to the high-quality customer experience, has increased the rate of charging station installation by owners, attracting more drivers and creating a virtuous cycle. However, if competitors can match ChargePoint’s product quality and increase market share, driver multihoming may become an issue, as drivers may charge at the closest available charging station. ChargePoint should experiments with methods to increase the stickiness of their network. However, these strong network effects are primarily local, and certainly do not extend across the Atlantic. ChargePoint has recently expanded to Europe where they have 0% market share and no brand recognition. They are struggling to get traction in a competitive market.
In addition, ChargePoint should consider how it is going to modify its product offerings to adapt to the needs of EV fleets, which have different charging needs. For example, fleets are more price sensitive, and have more complex logistics. ChargePoint has the opportunity to harness the strong network effects of fleets, which will be stronger than individual drivers. An entire national fleet is most likely to use the same platform to streamline operations and logistics, and to collect and analyze data in a unified system. Fleets are the future of transportation, and ChargePoint must continue to evolve create a product that meets unique fleet needs.