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GM-TSLA Pact Jolts EV Charging Stocks: An Overblown Reaction?
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The electric vehicle (EV) charging sector has been thrown into a whirlwind following General Motors’ (GM - Free Report) announcement of plans to embrace Tesla’s (TSLA - Free Report) charging network. The U.S. legacy automaker’s intent to adapt its EVs to make them compatible with Tesla’s vast Supercharger network seems to have shaken the dynamics of the EV charging landscape and resulted in significant stock price declines for various EV charging stocks.
Major charging stocks witnessed double-digit percentage declines on Friday. ChargePoint Holdings (CHPT - Free Report) , Blink Charging (BLNK - Free Report) and EVgo (EVGO - Free Report) tumbled 13.2%, 10.64%, and 11.72%, respectively. Shares of Beam Global, a firm that designs clean energy systems for electric vehicle charging, slid 4.9%. Another EV charging solutions provider, Wallbox declined 10.9%.
Is this an overblown reaction or a legitimate market concern? Do investors have concerns about the potential monopoly that could arise from Tesla's position in the EV charging industry? What’s next on the horizon for EV charging stocks? Before delving into these questions, let's take a closer look at the GM-TSLA deal, which triggered a market shakeup with ripple effects on EV charging stocks.
GM Turns to Tesla's Superchargers
On Jun 8, General Motors announced a collaboration with Tesla to integrate North American Charging Standard (NACS) plugs into its EVs starting in 2025. The collaboration will also provide GM EV users access to 12,000 Tesla Superchargers for charging their vehicles.GM EV drives will get access to the Tesla Supercharger Network starting in 2024 and will initially require an adaptor. Starting in 2025, the first GM EVs will be manufactured with a NACS inlet for direct access to Tesla Superchargers and will not require an adaptor. For NACS-enabled vehicles, GM will manufacture adaptors that will allow the vehicles to charge at CCS-capable stations.
This deal will make the transition to EVs seamless for GM’s customers and will help the industry move toward a single North American Charging Standard.
Lest we forget, GM is not the first automaker to turn to Tesla for charging its EVs. Last month, GM’s cross-town rival, Ford, initiated this new trend by announcing that it would make its charging cords compatible with Tesla's NACS cables, granting Ford EV owners access to Tesla's vast Supercharger network. GM followed suit. Will Stellantis be the next? Possibly.
Well, the move by General Motors and Ford is an indication of a shift in the dynamics of the EV market, as it potentially lowers the barriers for the EV owners of these companies to access a robust charging infrastructure. The decision to utilize Tesla's extensive Supercharger network allows U.S. auto giants to effectively leverage Tesla's substantial investment in charging infrastructure.
Mixed Opinions on the Deal’s Impact
The GM-TSLA deal has indeed stirred the EV charging market as evident from the massive stock plunge for rival charging stocks. However, some market observers suggest that this could be an overreaction. Bank of America’s analyst, for instance, has stated that the market's response might be overstated, especially in the case of ChargePoint. Alex Vrabel of Bank of America suggests that ChargePoint's DC Fast charging business could remain largely unaffected due to its focus on fleet vehicles, which in contrast to Tesla's Superchargers, is designed for individual users. Such a perspective hints at the possibility that these companies, despite the initial shock, may possess the resilience to withstand this market disturbance and bounce back.
On the other hand, Adam Jonas of Morgan Stanley views Ford and GM's moves as "profoundly significant," hinting at a possible trend of automakers outsourcing charging infrastructure to Tesla, potentially favoring Tesla's chargers over those of rival firms.The alliances not only highlight Tesla's growing influence in the EV charging space but also raise questions about the prospects of pure-play charging companies. If Ford, GM, and potentially Stellantis, secure firm ties with Tesla, it could diminish the chances of other charging companies to establish similar, exclusive alliances with major automakers.Such a scenario could be a significant setback for Blink, EVgo, and ChargePoint, which are still striving to reach profitability.
Our Take
While the immediate impact of the TSLA-GM deal has been decidedly negative for EV charging firms, the broader implications of this shift are yet to unfold completely. As the EV market continues to evolve and mature, we think there may be plenty of opportunities for these companies to carve out a profitable niche for themselves. Friday’s price decline for the charging stocks seems a temporary blip.
Investors are seemingly apprehensive about the future profitability of EV charging companies in light of the recent developments. But considering the promising prospects of the U.S. EV charging market, they should refrain from panic selling stocks such as CHPT, EVGO, and BLNK.
Solid Prospects of the EV Charging Space
Given the pace at which the sales of EVs are rising in the United States, there is ample room for the growth of pure-play charging stocks. U.S. EV sales in 2022 shot up 65%. EVs accounted for 5.8% of all new cars sold in the country, marking an increase from 3.1% share in 2021.According to Energy Department data, the United States had 133,000 public charging outlets across 51,537 station locations as of Mar 14, 2023.Mordor Intelligence forecasts the U.S. EV charging systems and equipment market to increase to $7.7 billion by 2027, registering a CAGR of 45% during the 2021-2027 timeframe.
According to S&P Global Mobility, the current charging infrastructure in the United States, including Level 2 AC and Level 3 DC fast chargers, falls short of meeting the demands of a maturing electric vehicle market. Even when accounting for home-charging solutions, the United States will need to quadruple the number of EV chargers between 2022 and 2025 to adequately match the projected sales demand. Furthermore, the infrastructure will need to grow more than eight-fold by 2030, according to S&P Global Mobility's forecasts
Notably, the number of chargers added in 2022 alone surpassed the combined growth from the preceding three years. About 54,000 Level 2 chargers and 10,000 Level 3 chargers were installed in 2022. Despite the progress made, the data presented by S&P Global Mobility underscores the urgency for expanding the charging infrastructure to meet the accelerating demand for EVs. As electric vehicles gain more traction in the market, the number of chargers must rise significantly to ensure convenient and accessible charging options for EV owners. Increasing the charging network is crucial not only to facilitate the widespread adoption of EVs but also to alleviate concerns related to range anxiety, a common barrier to EV ownership.
ChargePoint, Blink Charging and EVgo currently carry a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for current fiscal sales of CHPT, BLNK and EVGO implies year-over-year growth of 48%, 68% and 148%, respectively.
Image: Bigstock
GM-TSLA Pact Jolts EV Charging Stocks: An Overblown Reaction?
The electric vehicle (EV) charging sector has been thrown into a whirlwind following General Motors’ (GM - Free Report) announcement of plans to embrace Tesla’s (TSLA - Free Report) charging network. The U.S. legacy automaker’s intent to adapt its EVs to make them compatible with Tesla’s vast Supercharger network seems to have shaken the dynamics of the EV charging landscape and resulted in significant stock price declines for various EV charging stocks.
Major charging stocks witnessed double-digit percentage declines on Friday. ChargePoint Holdings (CHPT - Free Report) , Blink Charging (BLNK - Free Report) and EVgo (EVGO - Free Report) tumbled 13.2%, 10.64%, and 11.72%, respectively. Shares of Beam Global, a firm that designs clean energy systems for electric vehicle charging, slid 4.9%. Another EV charging solutions provider, Wallbox declined 10.9%.
Is this an overblown reaction or a legitimate market concern? Do investors have concerns about the potential monopoly that could arise from Tesla's position in the EV charging industry? What’s next on the horizon for EV charging stocks? Before delving into these questions, let's take a closer look at the GM-TSLA deal, which triggered a market shakeup with ripple effects on EV charging stocks.
GM Turns to Tesla's Superchargers
On Jun 8, General Motors announced a collaboration with Tesla to integrate North American Charging Standard (NACS) plugs into its EVs starting in 2025. The collaboration will also provide GM EV users access to 12,000 Tesla Superchargers for charging their vehicles.GM EV drives will get access to the Tesla Supercharger Network starting in 2024 and will initially require an adaptor. Starting in 2025, the first GM EVs will be manufactured with a NACS inlet for direct access to Tesla Superchargers and will not require an adaptor. For NACS-enabled vehicles, GM will manufacture adaptors that will allow the vehicles to charge at CCS-capable stations.
This deal will make the transition to EVs seamless for GM’s customers and will help the industry move toward a single North American Charging Standard.
Lest we forget, GM is not the first automaker to turn to Tesla for charging its EVs. Last month, GM’s cross-town rival, Ford, initiated this new trend by announcing that it would make its charging cords compatible with Tesla's NACS cables, granting Ford EV owners access to Tesla's vast Supercharger network. GM followed suit. Will Stellantis be the next? Possibly.
Well, the move by General Motors and Ford is an indication of a shift in the dynamics of the EV market, as it potentially lowers the barriers for the EV owners of these companies to access a robust charging infrastructure. The decision to utilize Tesla's extensive Supercharger network allows U.S. auto giants to effectively leverage Tesla's substantial investment in charging infrastructure.
Mixed Opinions on the Deal’s Impact
The GM-TSLA deal has indeed stirred the EV charging market as evident from the massive stock plunge for rival charging stocks. However, some market observers suggest that this could be an overreaction. Bank of America’s analyst, for instance, has stated that the market's response might be overstated, especially in the case of ChargePoint. Alex Vrabel of Bank of America suggests that ChargePoint's DC Fast charging business could remain largely unaffected due to its focus on fleet vehicles, which in contrast to Tesla's Superchargers, is designed for individual users. Such a perspective hints at the possibility that these companies, despite the initial shock, may possess the resilience to withstand this market disturbance and bounce back.
On the other hand, Adam Jonas of Morgan Stanley views Ford and GM's moves as "profoundly significant," hinting at a possible trend of automakers outsourcing charging infrastructure to Tesla, potentially favoring Tesla's chargers over those of rival firms.The alliances not only highlight Tesla's growing influence in the EV charging space but also raise questions about the prospects of pure-play charging companies. If Ford, GM, and potentially Stellantis, secure firm ties with Tesla, it could diminish the chances of other charging companies to establish similar, exclusive alliances with major automakers.Such a scenario could be a significant setback for Blink, EVgo, and ChargePoint, which are still striving to reach profitability.
Our Take
While the immediate impact of the TSLA-GM deal has been decidedly negative for EV charging firms, the broader implications of this shift are yet to unfold completely. As the EV market continues to evolve and mature, we think there may be plenty of opportunities for these companies to carve out a profitable niche for themselves. Friday’s price decline for the charging stocks seems a temporary blip.
Investors are seemingly apprehensive about the future profitability of EV charging companies in light of the recent developments. But considering the promising prospects of the U.S. EV charging market, they should refrain from panic selling stocks such as CHPT, EVGO, and BLNK.
Solid Prospects of the EV Charging Space
Given the pace at which the sales of EVs are rising in the United States, there is ample room for the growth of pure-play charging stocks. U.S. EV sales in 2022 shot up 65%. EVs accounted for 5.8% of all new cars sold in the country, marking an increase from 3.1% share in 2021.According to Energy Department data, the United States had 133,000 public charging outlets across 51,537 station locations as of Mar 14, 2023.Mordor Intelligence forecasts the U.S. EV charging systems and equipment market to increase to $7.7 billion by 2027, registering a CAGR of 45% during the 2021-2027 timeframe.
According to S&P Global Mobility, the current charging infrastructure in the United States, including Level 2 AC and Level 3 DC fast chargers, falls short of meeting the demands of a maturing electric vehicle market. Even when accounting for home-charging solutions, the United States will need to quadruple the number of EV chargers between 2022 and 2025 to adequately match the projected sales demand. Furthermore, the infrastructure will need to grow more than eight-fold by 2030, according to S&P Global Mobility's forecasts
Notably, the number of chargers added in 2022 alone surpassed the combined growth from the preceding three years. About 54,000 Level 2 chargers and 10,000 Level 3 chargers were installed in 2022. Despite the progress made, the data presented by S&P Global Mobility underscores the urgency for expanding the charging infrastructure to meet the accelerating demand for EVs. As electric vehicles gain more traction in the market, the number of chargers must rise significantly to ensure convenient and accessible charging options for EV owners. Increasing the charging network is crucial not only to facilitate the widespread adoption of EVs but also to alleviate concerns related to range anxiety, a common barrier to EV ownership.
ChargePoint, Blink Charging and EVgo currently carry a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for current fiscal sales of CHPT, BLNK and EVGO implies year-over-year growth of 48%, 68% and 148%, respectively.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.