Investors ‘Pile’ into China’s Public EV Charging Industry Despite Lack of Profitability

China’s electric vehicle (EV) industry has been growing for years, but construction of the necessary EV charging piles to keep the cars moving has lagged behind. As a result, the development of the EV market has been constrained. As of the end of 2014, China had built 778 battery swapping and charging stations encompassing 30,914 charging piles, according to data released by the Society of Automotive Engineers of China (SAE-China). At that time, 120,000 new energy vehicles had valid registrations in place, of which 64 percent were pure electrics, resulting in a ratio of pure electrics to the charging devices needed to keep them rolling of more than 2.5:1, rather than the recommended ratio of 1:1.

“Many carmakers lacked adequate awareness of the importance of and the systematic need for charging facilities, but rather just treated them as an auxiliary component to an EV or as a separate set of electrical equipment,” Hou Fushen, deputy secretary general of SAE-China, said. “Some of the makers even thought that the vehicle could be charged through an ordinary power socket.”

Hou added that the general lack of awareness among the EV car makers led to many cities in China not attaching enough importance to the construction of a public charging infrastructure nor having yet formulated any kind of viable development plan.

On Oct. 9, 2015, the General Office of the State Council issued guidelines to speed up the construction of electric car-charging infrastructure, in which it proposes that by 2020 a comprehensive, smart and cost-efficient nationwide charging system be completed, meeting the charging demand from the more than 5 million anticipated EVs. As a result, forecasts quickly circulated that saw the number of battery swapping and charging stations reaching 12,000 units by that date, and which, in turn, would translate into 4.5 million charging piles.  

In May 2014, State Grid Corporation of China announced that two of its distributed power grid projects and its electric vehicle battery swapping and charging station business would be open to social capital, which, in Chinese parlance, is a suggestion that the state-owned electric utility is open to government help in terms of subsidies and other favorable policies in order to grow the network.

Yet, State Grid Corporation of China remains the largest builder and operator of charging piles in China. Hundreds of large state-backed companies, local state-owned companies and privately run companies have now begun to invest in the area, including China Southern Power Grid, PetroChina, Sinopec and CNOOC.

Last September, Denso, a provider of integrated charging pile services, announced that it received tens of millions of yuan in investment from LETV in its A-round of funding. The two parties said they would work on smart charging piles for EVs.

Just one month later, SAIC Motor announced that it would invest 300 million yuan ($46.3 million) in setting up a charging technology company, which will build 50,000 public charging piles by 2020.

Nevertheless, public charging pile operators face a wide range of challenges, the most overarching of which is that the market has simply not yet been profitable. The cost for a slow charging pile is about 20,000 yuan ($3,000), while, for a fast one, the cost runs between 100,000 yuan ($15,000) and 200,000 yuan ($30,000). In addition, the investor must add in expenses for land, power distribution facilities and management.

It will take a long time for a charging station to recover the investment cost and begin to show a profit, if the fee per single charge, which is priced at 0.5-0.8 yuan ($0.075-0.12) per kWh, is the only source of revenue.

Lead image: EV charging station sign. Credit: Shutterstock.

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Nanjing Shanglong Communications Liu Yuanyuan is Director of Operations and Co-Founder of Nanjing Shanglong Communications. Liu Yuanyuan previously held the position of office manager at the London Financial Times' China translation and editorial bureau in Nanjing overseeing 33 translators, editors and IT support personnel. Ms. Liu brought her many years experience of delivering, under deadline, more than 200 English-language news summaries of articles selected from Chinese-language newspapers and newswires daily as well as supervising the timely completion of 500,000+ word English-to-Chinese translation and localization projects to her role as co-founder and general manager at Shanglong. Ms. Liu joined Shanglong in 2002. In 2006, she added China Business News Service to the product suite – the service provides a continuous flow of well-researched and documented news articles to trade publishers and industry-specific websites looking to supplement their content with the latest news from China in their sector. She manages Shanglong's staff of translators, editors, desktop publishing specialists and support staff, selected from the top universities across China and well versed in the art of translation and in the technology of DTP. Ms. Liu graduated from the People’s Liberation Army Institute of International Relations - China’s elite military academy responsible for the training of the country’s foreign language specialists.

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