The news didn’t come out of nowhere nor was the amount of money involved a big headline-grabber. Even so, the announcement in late January that global energy giant Shell USA Inc. had decided to acquire Volta Inc. for about $169 million was noteworthy for what it suggests lies ahead for companies making and marketing electric vehicle chargers as well as the entities partnering with them.
Shell’s deal for San Francisco-based Volta, which operates more than 3,000 charging stalls, was announced about nine months after Volta executives raised a going-concern notice and about three months after they said they had trimmed their workforce, which had topped 350 at the end of 2021, by more than half.
The acquisition closed on March 31, making Shell the owner of one of the largest EV charging networks in the country.
Volta’s situation was extreme—the company would have needed to raise another $300 million to pursue its growth goals—but its situation speaks to many of the business realities of EV charging as it ramps up to meet today’s and future demand. In 2022, three of the industry’s largest players—Blink Charging Co., ChargePoint Holdings Inc. and WallBox N.V.—posted a combined operating loss of nearly $580 million on revenues of roughly $690 million.
There’s little doubt that the demand is there to over time grow the top lines of those companies (who collectively doubled in size in 2022) and their peers, enabling them to operate more efficiently and give them a better chance to reward their shareholders. But they, too, are facing difficulties and how they resolve those (or don’t) will send signals about the next phase for the EV charging industry. For instance:
Wallbox in early March announced a cost-cutting program despite a year of record sales that still saw it end with higher-than-expected losses. The company expects to save $52 million by laying off 15% of workers. CEO Enric Asunción said that his team will be “deliberate” about where the reductions will occur and that near-term revenue won’t be affected.
Blink shares took a hit in February after its leaders said they would sell more than 8 million shares to help finance their investments and acquisitions. Executives have in recent quarters integrated Electric Blue, SemaConnect and Blue Corner as they have expanded into and across Europe. Blink had smaller-than-expected (but still large) losses last year: Thanks to increasing revenue, product sales and network fees, the company’s top line nearly tripled to about $61 million—and gross profits climbed to $14.8 million—while its net loss grew to $91.6 million from about $55 million.
ChargePoint, which operates the nation’s largest independently-owned charging network, also took growing losses in 2022 even as it nearly doubled sales to $468 million. In addition, its Q4 results missed the company’s and executives’ forecast weaker-than-expected sales for the first fiscal quarter.
Big questions, big deals
The companies’ performance and outlook leads to two questions: Why are they (still) struggling and what can accelerate their progress? To Automotive Ventures CEO Steve Greenfield, the answer is two-fold: One part is that these ventures went public too early, many of them via special-purpose acquisition companies, thus subjecting themselves to more scrutiny when Greenfield says they “were just too immature.”
The other part is where companies are getting most of their financial backing before considering going public—namely, venture capital.
“It’s a slippery slope when a company takes money from venture capital, because you aren’t necessarily aligned,” Greenfield said. “The founder may say, ‘We’re trying to build a big business with a wide market share,’ whereas venture says, ‘I’m putting money in,’ and typically wants to see a return on the investment within five years. So there’s a lot of pressure to grow very aggressively.”
And while some companies thrive under that pressure, others don’t. That, Greenfield said, leads to a vicious cycle: Wall Street punishes disappointing performers who then can’t raise more capital to try to ramp up growth.
“And they kind of get stuck and forced to make a decision: Liquidate and shut down or sell off for pennies on the dollar to companies that are better capitalized,” he added.
As was the case with Volta and Shell. And as has been part of Blink’s strategy, which CEO Michael Farkas discussed during a recent conference hosted by investment bank Roth MKM. The company’s margins, Farkas said, have improved due to the “vertical integration component” of its work, such as by bringing more manufacturing in house by purchasing SemaConnect in 2022.
Farkas also noted some early land grabs and acquisitions by Blink, some of which were driven by an understanding of how the market would change.
“[Our competitors] were deploying charging infrastructure left and right and we frowned upon deploying the chargers because we knew they were going to change and they did,” he said. “We were fortunate enough to be able to buy a lot of our competitors, the first phase of competitors, because they were more, I would say, environmental in nature. We were more understanding of the automotive markets and how long it took […] to develop a car. [We] realized that a lot of the initial infrastructure wouldn't be good.”
Wallbox also seems to be following Blink’s lead by bringing more costs in-house, having acquired circuit board manufacturer ARES Electronics and charging installer COIL. Alternatively, ChargePoint is going the opposite way, focused on growing its client base.
“The way we look at M&A opportunity is customer acquisition capabilities,” Pasquale Romano, CEO said on his team’s quarterly earnings conference call in early March. “If there's a good customer base with low liabilities on the installed base and it's a practical integration, we would certainly consider it. But that's really the lens that we're looking at from. It is not a technology lens.”
The bigger picture
But with the stocks of these companies all having at least 35% of their value over the past six months, making acquisitions seems less likely than becoming a target. A lot more consolidation lies ahead, Greenfield said, with big names getting rolling with their own electrification theses “picking off good companies […] and buying them for pennies on the dollar compared to what they were a year or two ago.”
The leaders of big energy companies such as Shell, Greenfield added, may not be ready just yet to give up on fossil fuels but they also know they need hedges in the energy transition space. And they have the cash flows to place a bet or two on charging firms: Shell’s Volta acquisition amounted to less than half a percent of its 2022 profits.
“They’re printing record profitability,” he said. “Buying these companies is like a rounding error for them.”
Eventually there will be EV charging companies turning out large numbers. Consumers are switching to EVs and the federal government is also giving the industry a big hand. The Biden-Harris Administration this month announced the Charging and Fueling Infrastructure Discretionary Grant Program, $2.5 billion initiative aimed at bringing EV charging to communities and neighborhoods, particularly to underserved and disadvantaged ones.
Earlier this week, the White House announced it was quadrupling EV adoption during this fiscal year compared with 2022. The administration also will work in conjunction with the $5 billion National Electric Vehicle Infrastructure Formula Program to push the country toward a goal of 500,000 EV chargers nationwide by 2030.
“It’s an exciting space; there still will be billion-dollar companies built,” Greenfield said. “We don’t have to be pessimistic on the entire space because we know we don’t have enough charging infrastructure to satisfy demand. There’s going to still be plenty of opportunity for big, healthy companies to be built in the space.”
About the author: Jennifer Ramsay serves as the Editor-At-Large for Endeavor Business Media’s Market Moves newsletter. A Georgia native, she holds a communications degree from the University of North Georgia and has been a journalist since 2019, reporting on a variety of topics.