Charging Infrastructure: The Bottleneck for New Energy Vehicles

This article is republished from the Miaotou app, by Eastland.

Header image | Visual China Group

From January to October 2022, cumulative NEV sales in China reached 5.28 million units, with full-year sales projected at 6.5 million and 2023 expected to exceed 10 million.

Given consumers' strong endorsement, NEV adoption increasingly depends less on policy support such as subsidies and license plates — BYD and Tesla alone hold a combined order backlog of more than 1 million units.

The claim that "once NEV penetration passes 30%, growth will slow, or even 'peak' for a period," is sheer nonsense. When automobile penetration passed 30%, did growth slow down to wait for horse carriages? When electric lamps passed 30% penetration, did they patiently wait for kerosene lamps to exit the stage of history? When smartphones passed 30% penetration, did feature phones hold on to 70% of the market?

That said, one should not be blindly optimistic about the NEV market in 2023 and beyond.

First, the global scramble for lithium resources has only just begun. China needs lithium, and so do Europe, the US, Japan and South Korea; traction batteries need lithium, and so does chemical energy storage — expecting lithium carbonate to return to 50,000 yuan per ton is wishful thinking.

Second, charging difficulties will keep getting harder, degrading the ownership experience and constraining NEV sales growth.

Charging pile stock growing at an impressive rate

In 2015, China's NEV sales reached 330,000 units and the stock was no less than 400,000, while the total number of charging piles was a mere 66,000 (58,000 of them public) — each pile had to provide charging for more than six NEVs.

In 2019, the charging pile stock reached 1.22 million, including 520,000 public and 700,000 private piles.

In 2021, the stock reached 2.62 million, including 1.15 million public and 1.47 million private piles.

In H1 2022, 1.3 million piles were added, bringing the stock to 3.92 million by the end of June — 1.53 million public and 2.39 million private.

By the end of October 2022, the stock had reached 4.7 million piles, with 1.68 million public and 3.02 million private respectively.

After years of effort, China had 2.617 million charging piles by the end of 2021, while the stock of battery electric vehicles (BEVs) reached 6.4 million (2021 sales were 2.92 million) — a vehicle-to-pile ratio of 2.4:1.

BEVs do not need to charge every day, and even slow charging usually completes within 8 hours; two or three cars sharing one pile seems unproblematic, which is why the optimists conclude that "charging piles basically meet the needs of rapid NEV growth."

Pile construction lags far behind vehicle sales

Talking only about the rapid growth of charging pile stock, without comparing it against NEV sales, is misleading.

From 2018 to 2020, annual NEV sales hovered below 1.4 million units, and fewer than 500,000 piles were added each year. Over those three years, cumulative NEV sales were 3.83 million while the charging pile stock grew by 1.24 million — roughly one pile built for every three NEVs sold.

In 2021, NEV sales reached 3.52 million, up 158% year over year, and charging piles also grew 103%, yet fell 2.58 million short of NEV sales.

In H1 2022, charging piles showed signs of catching up: 2.6 million new vehicles were sold in the first half and 1.3 million piles added — the pile-to-vehicle increment ratio rarely reached 50%.

In Q3 2022, NEV sales were 1.97 million and 570,000 piles were added, dropping the ratio back below 30%.

In the first ten months of 2022, NEV sales reached 5.28 million — an average of 530,000 per month; in the same period, 2.08 million piles were added, an average of 210,000 per month — the gap between charging pile stock and NEV stock widens by 320,000 every month!

The proper way to calculate the "vehicle-to-pile ratio"

The ratio of NEV stock to charging piles is called the "vehicle-to-pile ratio." For example, at the end of 2018 the NEV stock was 2.61 million against 780,000 piles, for a ratio of 3.36.

By the end of 2020 the NEV stock had grown to 4.92 million against 1.68 million piles, and the ratio fell to 2.93.

Calculated this way, the "vehicle-to-pile ratio" diverges wildly from the real experience of NEV owners and has almost no reference value.

For example, at the end of 2021 the NEV stock was 7.84 million, and of the 2.62 million charging piles, 1.47 million were private. As many as 6.37 million NEVs without home piles had to be served by just 1.15 million public piles. For these 6.37 million NEV users, the vehicle-to-pile ratio is not 3.0 but 5.5.

Although the number of charging piles has grown quickly in recent years, for NEVs without home piles the ratio has stayed above 5 — as of the end of September 2022 it stood at 5.28.

There is another problem: NEVs with home piles occasionally use public ones — when driving to other provinces and cities, for instance, or when the car is needed before there is time to charge at home.

By the end of October 2022 there were 3.02 million private piles; if they use public piles 10% of the time, that is equivalent to adding 300,000 "pile-less vehicles," pushing the ratio up to 5.45.

By the end of October 2022, the public pile stock reached 1.68 million while pile-less NEVs grew to 9.18 million.

Worse still, of the 1.68 million public piles installed over more than a decade, models, parameters and connectors are all over the map; some are poorly sited and underutilized, and others are out of service due to poor maintenance or improper use.

The year-over-year decline of the "vehicle-to-pile ratio" gives us nothing but an illusion — for "pile-less vehicles," charging difficulty has not eased at all.

Private piles become the dominant force

In 2020, public and private pile increments were 290,000 and 170,000 respectively. The year-end stock reached 1.68 million, a net increase of 460,000 over the start of the year, with public and private piles contributing 63% and 37% respectively.

In 2021, public and private pile increments were 340,000 and 600,000. The year-end stock reached 2.62 million, a net increase of 940,000, with public and private contributing 37% and 63%.

In Q1 2022, only 80,000 public piles were added, a contribution rate of 17%; in Q2 public piles picked up, adding 300,000 and jumping the contribution rate to 37%; in Q3 they faltered again, and the rate fell back to 19%.

In the first three quarters of 2022, public and private pile additions were 486,000 and 1.382 million respectively — private piles contributed 74%, becoming the absolute main driver of charging pile stock growth.

Public piles are invested in and deployed by operators based on demand forecasts, constrained by capital, land, power capacity and other factors.

Private piles are usually installed when the user buys the car. The vast majority of NEV buyers would love to have a home pile — nobody wants to "run naked." Automakers offer this or that discount or convenience, too.

But from 2017 to 2021, the share of NEV owners who installed a home pile with their purchase stayed below 20%. In the first three quarters of 2022, NEV sales were 4.57 million and 1.38 million home piles were installed — an installation rate of 30%.

More than 70% of NEV buyers want a home pile but reluctantly give up, which is very unfavorable for the growth of charging pile stock.

Many problems in the charging pile industry remain unresolved

Because many issues remain untangled, charging pile construction lags far behind NEV sales.

According to data released by the China Electric Vehicle Charging Infrastructure Promotion Alliance, in October 2022 TELD operated 324,000 charging piles, Star Charge 321,000, YKC Cloud 229,000, and State Grid 196,000.

TELD's 2021 annual report shows that by the end of 2021 it operated 252,000 piles (up from 207,000 at the start of the year) with 4.2 billion kWh of charging volume (versus 2.7 billion kWh in 2020), a 38.3% market share, ranked first nationwide.

In 2021, charging business revenue accounted for 32.9% of total revenue. Each pile delivered about 50 kWh of charging per day, generating 37 yuan in revenue and 8.2 yuan in gross profit daily. Spraying a white rectangle on the ground with paint and collecting parking fees would earn more than 8 yuan a day (using the average of beginning- and end-of-year pile counts as the denominator).

BYD is the NEV leader, selling 1.41 million NEVs from January to October 2022. TELD is the charging pile leader, adding 72,000 piles in the first ten months of 2022.

Leader versus leader, the intuitive takeaway is: deploying one charging pile is "twenty times harder" than producing and selling one NEV!

Charging difficulty is plain for all to see, yet capital's enthusiasm remains muted: 486,000 public piles were added from January to October 2022, while NEVs sold in October alone reached 714,000 units.

The slow growth of public charging pile stock is attributable in equal parts to objective constraints and disappointing investment returns. The main constraints on private charging piles are objective conditions — uncooperative property management, insufficient power capacity in residential compounds, no fixed parking space of one's own, and so on. These constraints are hard to remove in the short term and will only get more severe. Without adding parking spaces and power capacity in residential compounds, installing private piles will inevitably get harder and harder.

If 10 million NEVs are sold in 2023, including 8 million BEVs, then based on historical data only 2.4 million of those BEVs could install home piles, and "pile-less" BEVs would increase by as many as 5.6 million.

With neither public nor private piles able to keep up, "charging difficulty" will get even harder in 2023, and its constraint on NEV sales will become increasingly prominent.

Plug-in hybrids may yet save the day

1) Both BEVs and plug-in hybrids are transitional solutions

"New energy vehicles do not equal battery electric vehicles" should be common knowledge. The "uninformed masses" believe that replacing every gasoline car with a BEV completes the mission, without understanding that chemical batteries are merely a transition.

First, resource constraints. Forget the lithium in the ocean: concentrating 10 million tons of seawater and processing it through complex procedures yields roughly 6 tons of lithium carbonate. Commercially minable lithium can equip approximately 1 billion BEVs. At 60 million BEVs produced per year, lithium resources would last 15 years — clearly not the ultimate solution.

Second, no matter how much chemical batteries (lithium batteries, sodium batteries) improve, their energy density cannot increase by an order of magnitude. The energy density of gasoline is tens of times higher than that of chemical batteries, and hydrogen's is over a hundred times higher.

The transition from fossil energy to clean energy will take decades, even generations, of effort and exploration. Every approach, path and model should be actively explored and tested; a single leap to the finish line is impossible — hence the need for transitional solutions.

Both BEVs and plug-in hybrids are transitional solutions; the plug-in hybrid is not a transition toward the BEV; and the BEV holds no "moral superiority" whatsoever.

Do not underestimate the plug-in hybrid's contribution to energy conservation and emission reduction. At current fuel prices, a 50 km daily commute costs over 50 yuan in gasoline but less than 5 yuan in electricity. Every time fuel prices go up, gas stations see long queues — owners merely want to save a few dozen yuan. Once they own a plug-in hybrid, they will naturally use more electricity and burn less fuel — no propaganda, no subsidies, and no supervision required.

BEV owners have range anxiety — they dare to head out on a long trip only on a full charge, feel uneasy once the battery drops below 50%, and want to "top up" at every pile they see, fearing that "past this pile, there is no more charge"... This mentality can easily create localized "bank-run" style rushes.

Plug-in hybrids also need charging, but they have absolutely no range anxiety. With plug-in hybrids as the mainstay, promoting NEVs would be far less constrained by the pace of charging pile construction.

During toll-free long holidays, 100 charging piles at a highway service area may not be enough, while at other times most sit idle. Once BEVs complete their transitional mission, large numbers of charging piles will be abandoned. With the plug-in hybrid as the main transitional solution, piles need not be built in such numbers, in such a hurry.

Both BEVs and plug-in hybrids are transitional solutions; the criterion should be what best promotes NEV adoption and maximizes emission reduction.

2) Plug-in hybrids conserve lithium resources

A plug-in hybrid consumes only 1/5 to 1/3 of the lithium used by a BEV.

Take the BYD Tang: the version with 112 km of electric range carries a 21.5 kWh battery. The NIO ES6 has 610 km of range and a 100 kWh battery. The Tesla Model Y has 545 km of range and a 60 kWh battery.

Since 2016, more than 80% of NEV sales have been BEVs. In H1 2022, BEV penetration in the NEV market was 80.9%.

If that ratio were flipped — plug-in hybrids accounting for 80% — half of the lithium would be saved, the lithium crunch would ease, and prices would fall sharply.

China currently has about 30 million units of gasoline vehicle production capacity. Gasoline cars are in their twilight, and redundant capacity means wasted resources. Rather than abandoning it outright, it is better to convert it to plug-in hybrid production.

Lithium depletion is a distant worry; charging difficulty is an immediate one. The combined drag of the two on NEV promotion must not be overlooked.

The plug-in hybrid may yet "save the day single-handedly."