Xinhua Finance, Guangzhou, November 8 (Journalist Lu Guangyi) In the past two years, ownership of new energy vehicles in China has continued to soar, driving up the demand for charging infrastructure and boosting the charging pile market. However, the charging industry, which is flourishing, is also facing problems such as poor regulation, unbalanced layout, limited supply of charging facilities for electric vehicle owners, and difficulty in making profits for enterprises. Xinhua Finance journalist recently interviewed Deng Jun, vice president of Guangdong Wancheng Wanchong Electric Vehicle Operation Co., Ltd., to learn his thoughts on the prospects of the charging industry, industrial layout, and strategies to overcome industry headaches.
Rapid development
According to data from the China Association of Automobile Manufacturers, the new energy vehicle market continues to swell rapidly. In the first three quarters of 2022, 4.717 million new energy vehicles were produced and 4.567 million were sold, representing a year-on-year increase of 1.2 times and 1.1 times respectively. The market share of new energy vehicles reached 23.5%.
With the rapid expansion of the new energy automobile industry, comes the thriving charging pile market, which is a necessary supporting infrastructure. According to the China Charging Alliance, the first nine months of 2022 (i.e., from January to September) saw an increase of 1.871 million charging facilities, representing a year-on-year growth rate of 245%. As of September 2022, the cumulative number of charging facilities nationwide was 4.488 million, representing a year-on-year increase of 101.9%.
Besides, policy support has also played an irreplaceable role in the rapid development of the charging industry. Specifically, in 2015, the General Office of the State Council issued the Guiding Opinions on Accelerating the Construction of Electric Vehicle Charging Infrastructure”, which provided explicit policy support for the charging pile industry. In 2020, the Government Work Report prepared by the State Council included construction of charging piles as one of the seven key areas of China’s “new infrastructure”. In August 25, 2022, the Ministry of Transport and other departments jointly issued the Action Plan to Accelerate the Construction of Charging Infrastructure Along the Domestic Highway System, proposing to provide basic charging services along expressway service areas except for high-altitude areas across the country by the end of 2022.
Local governments have also rolled out plans to promote the construction of charging infrastructure, including Beijing, Shanghai, Hebei, Guangdong, Zhejiang and many other places. For instance, Guangdong proposed to build more than 4,500 centralized charging stations and about 250,000 public charging piles by the end of 2025; Shanghai proposed to meet the charging demand of more than 1.25 million electric vehicles by 2025, and keep vehicle-to-pile ratio below 2:1; Chongqing planed to set up over 240,000 charging piles by 2025.
“To meet practical needs, the development of the new energy vehicle industry is one of the best ways for China to transform its energy structure and achieve the ‘dual carbon' targets, while charging piles are important charging infrastructure for electric vehicles, expecting huge market demand in the future.” Deng Jun said that, “by 2030, China is expected to hold 80 million new energy vehicles. According to the ratio of one charger for 3 electric vehicles, at least 26.66 million charging piles are needed, meaning that the number of charging piles will grow by 8 times in 8 years.”
According to the China Electric Vehicle Charging Infrastructure Promotion Alliance, the charging pile market was worth 7.2 billion yuan in 2017, which grew at a compound annual rate of 42.2% and reached 41.87 billion yuan by 2021. It is estimated that by the end of 2026, the charging pile market in China will reach 287.02 billion yuan, representing a five-year compound annual growth rate of 37.8%.
Cut-throat competition
The huge development potential of the valuable charging pile industry has stirred cut-throat competition among various players, including state-owned enterprises such as State Grid and China Southern Power Grid, traditional automobile companies such as SAIC Motor and BMW, new energy vehicle manufacturers such as Xiaopeng Motors, Weilai Motors and Tesla, as well as corporate giants such as Huawei, Ant Financial, and Ningde Times.
According to Qichacha, up to date, China is home to more than 260,000 charging pile-related companies, among which 37,200 were founded in the first half of 2022, representing a year-on-year increase of 55.61%.
According to Deng Jun, currently three types of providers of charging services are competing in China’s charging pile industry: comprehensive charging operators including Star Charge, TELD, and Wancheng Wanchong; vehicle manufacturers such as Tesla, Xiaopeng Motors and Weilai Motors; third-party charging platforms represented by NaaS, Xiaoju Charging, Xindiantu and YKC. The three business models have jointly promoted the development of charging infrastructure.
Wancheng Wanchong, a representative comprehensive charging operator, was founded in Guangzhou in 2017. “Wancheng Wanchong was founded a year after the new national charging standard was implemented, where changes in technology, market environment and profit model presented both risks and opportunities. Wancheng Wanchong seized the opportunity and emerged as a leader in the charging pile industry.” Deng Jun said that, Wancheng Wanchong has formed a closed-loop industrial chain integrating R&D, production and sales of charging piles, construction and operation of charging networks, as well as platform development and value-added services. It has established a strong presence in Guangdong-Hong Kong-Macao Greater Bay Area, Beijing-Tianjin-Hebei region, Yangtze River Delta, Fujian Haixi Economic Zone and West China.
After years of development, Wancheng Wanchong has provided over 43,000 charging parking spaces for nearly 2 million users across China, boasting a cumulative charging capacity of 600 million kWh, which enjoyed a compound annual growth rate of 40% in the past two years.
“Currently the charging industry is still in its infancy. Unlike Europe and America, the national conditions of China determine that going forward, its charging market will feature public charging and highly dispersed distribution of operators. Moreover, as China holds the largest number of electric vehicles in the world, it will also breed the largest charging market, which leaves enough room for operators to survive, and many business models to flourish.” Deng Jun argued.
A dilemma
In stark contrast to the huge capital inflows, the current charging pile market is caught in a dilemma. To be specific, electric vehicle owners find it difficult to charge their cars, while charging pile operators are struggling to make a profit.
Deng Jun reasoned that the reason why electric vehicle owners are having difficulty in charging their cars and why it takes so long to fully charge their cars are three-fold. First, there are not enough charging piles; second, the current charging network in China is unbalanced, causing supply and demand mismatch in both space and time, and an efficient charging network and a professional service system are yet to be developed. On the other hand, redundancy and oversupply occur in some areas; third, as new energy vehicles become more prevalent, the current volume of charging piles falls short in underpinning the large-scale development of the private car market.
According to data released by the China Electric Vehicle Charging Infrastructure Promotion Alliance, as of June 2022, there were a total of 3.918 million charging facilities in China. According to the Ministry of Public Security, by the end of June 2022, the number of new energy vehicles in China reached 10.01 million. Based on the two sources, the vehicle-to-charger ratio is calculated to be 2.6:1, far lower than the 1:1 target supposed to be met in 2020 as stipulated in the Guidelines for the Development of Electric Vehicle Charging Infrastructure (2015-2020).
In addition to the insufficient overall supply of charging piles, electric vehicle owners may also find it difficult to charge their cars due to the unbalanced supply of public and private charging piles. Deng Jun mentioned that buses, ride-hailing vehicles, and taxis were the predominant patrons of public charging stations, while most private car owners charged their cars at destinations such as communities, workplaces, or shopping malls, which, however, accommodated inadequate charging piles.
The unbalanced supply of private and public charging piles also makes it difficult for charging pile operators to make profits to a certain extent. It is reported that, at present, private ownership of electric vehicles in first-tier cities is on the rise, and presents a large growth potential. However, at the moment, 80-90% of the users of public charging stations are commercial vehicles, and the number of commercial vehicles is limited.
Deng Jun believed that, “the imbalance between supply and demand has not only made it difficult for private car owners to charge their cars, but also intensified the competition among public charging operators, forcing them to lower price to grab market share, and squeezing profit margins.”
In response to the imbalanced supply and demand of public and private charging piles, ten departments including the National Development and Reform Commission and the National Energy Administration jointly issued the Implementation Opinions on Further Improving the Service Guarantee Capability of Electric Vehicle Charging Infrastructure in January 2022. The Opinions proposed to carry out “unified construction and operation” of charging facilities in residential communities, provide paid services such as charging facility construction, operation and maintenance to improve the management of charging facilities and green energy consumption, and encourage sharing of charging piles among nearby parking spaces and multiple vehicles.
Policy support has driven up the number of private charging piles. According to the China Charging Alliance, 489,000 more public charging piles were set up from January to September 2022, representing a year-on-year increase of 106.3%; the number of private charging piles increased by 1.382 million, representing a year-on-year increase of 352.6%.
Deng Jun thinks highly of the unified construction and operation of community-based charging facilities, and intends to invest more in this field. He said that, “in addition to creating new profit channels by operation means, we will also seek growth by increasing investment in product R&D and smart manufacturing.” “Currently Wancheng Wanchong is working on products targeting European and American markets. Going forward, we will work closely with OEMs and take o advantage of the overseas presence of Chinese new energy vehicles to boost the export trade of charging piles.”
