Investor appetite for EV charging set to grow
Capital is keen to get into what is seen as a growth area, but key uncertainties linger
A vast majority of 106 EV industry executives anticipate increased appetite for investments in EV charging infrastructure in the next 12 months, with a third expecting significant growth, according to a poll carried about by law firm DLA Piper for its Powering the Future of Electric Vehicles report.
Investor activity has withstood the general downturn in M&A activity in 2023 with 83 EV infrastructure deals announced globally, worth more than US $21.1bn in aggregate.
Private investment in public EV charging has now increased from less than $200mn in 2017 to nearly $13bn by early 2023. And 92pc of survey respondents expect investment appetite to grow further in 2024.
“We have seen mega growth in the industry and whilst most of that activity has been in terms of M&A and equity investment, we are starting to see project financed deals, which is the sign of a maturing market and greater appreciation of the associated revenue flows,” says Rubayet Choudhury, partner in DLA Piper’s London office.
“That said, with a diverse set of business models out there, players will need to understand the different revenue streams available and target the correct opportunities with credible operating plans,” he continues.
The ability to capitalise on new business models, as well as access to a rapidly growing market, are the main reasons that investors currently find the market attractive, according to survey respondents.
The DLA Piper report notes that the uptake of EVs promises a large customer base that can provide long-term, stable revenue opportunities. And growing energy storage capabilities and ancillary services tied to EV charging infrastructure could enable investors to develop multiple income streams.
More than half of respondents (53pc) identified battery technology, energy storage capabilities, fast-charging technologies and ultra-fast charging networks as the most attractive areas of the sector for investment.
Proving the model
But the headline level of appetite may not always translate into concrete, or indeed successful, investment, warns Asif Ghafoor, CEO of charging infrastructure provider Be.EV.
"The challenge is that, while there is increased investor appetite, I am not sure there is increased investor understanding of the industry,” he tells DLA Piper.
“If you couple that with increased financing costs, which is evident across all economies, there may not be as much investor activity as the headline level of appetite implies," Ghafoor continues.
Furthermore the sector still contains some risks for investors — principally the operational and maintenance costs of charging stations (identified by 46pc of respondents) and the high upfront costs and financial investments required (identified by 44 per cent of respondents).
“There is a lot of uncertainty regarding EV charging stations,” explains the head of strategy at an EV manufacturer in Japan. “Fleet customers have not been able to define a good business model for managing longer journey transport with EVs."