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Aug 31, 2023

2 EV charging networks have less than a year of cash left

Electric vehicle charging network companies know that this is crunch time. Low utilization rates and high operating costs are hamstringing profits. Money is tight. Charging satisfaction is at an

Electric vehicle charging network companies know that this is crunch time.

Low utilization rates and high operating costs are hamstringing profits. Money is tight. Charging satisfaction is at an all-time low. And after waiting years for networks to get it together, automakers are joining with Tesla Inc. in an unexpected alliance.

Two of the largest publicly held charging networks in the U.S., ChargePoint and Blink Charging, have less than a year of cash left, according to their most recent quarterly filings.

They both said their business models, reliant on charger equipment sales more than owning and operating networks themselves, were not as sensitive to cash burn. But company leaders and industry analysts agree that this is a decisive moment for the networks.

"It's kind of a perfect storm" for charging network companies, said Sam Abuelsamid, an analyst at Guidehouse Insights. "They're facing new competition, and their customers are not happy, and they need to spend money, but they can't get the money, so it's kind of the worst of all worlds for them."

Some of the largest charging companies, such as Electrify America, are privately held and do not publish information about their financial performance.

But others are running through cash reserves.

ChargePoint's net cash used in operating activities ballooned to about $104 million in its fiscal first quarter from about $71 million during the same period a year earlier.

Meanwhile, its cash at the end of the quarter shrunk to roughly $314 million from about $541 million the year prior, leaving about nine months of cash on hand.

Operating losses are the "primary driver" of increased cash burn, ChargePoint CFO Rex Jackson said in June during the first fiscal quarter conference call with analysts.

Spokesperson AJ Gosselin said that the company was committed to reducing losses before interest, taxes, depreciation and amortization — a common financial adjustment — by two-thirds by the fiscal fourth quarter, which ends Jan 31, and generating earnings by that same measure a year later.

"The cash burn will slow materially," he said in an email.

ChargePoint moved to shore up its finances via a credit agreement in July with J.P. Morgan, HSBC, Goldman Sachs and Citi. It also raised $67 million through at-the-market offerings, when companies sell shares into the market at the current market price instead of a fixed price.

Blink Charging also is going through cash fast. It spent $65 million on operating activities during the first half of the year, more than double the roughly $31 million during the same six-month period last year. (The company reported cash flow data for a six-month rather than quarterly period.)

Its cash at the end of the period shrunk to about $75 million from $89 million during the same time last year, leaving it with roughly seven months of cash on hand.

The company also relies more heavily on equipment sales than on owning and operating chargers, though there are costs associated with replacing legacy chargers that have become a "burden" because of outdated technology and reliability issues, Blink CEO Brendan Jones told Automotive News.

Jones also acknowledged that the industry "made mistakes" early on, installing chargers without paying close attention to their locations and making the wrong investments, the result of a "technology curve" that appears to be flattening. Jones previously worked at charging networks Electrify America and EVgo.

"It's a point of reflection to, 'Now let's work on the quality,' " he said. Analysts "want to see station economics improved, cost improved and profitability, and we have a path to get there."

He said Blink is expecting more revenue as EV adoption grows, and the company expects to generate earnings before interest, taxes, depreciation and amortization by December 2024. Blink's most recent filing also reflects costs associated with acquisitions and a payout to the former CEO.

One large publicly held charging network, EVgo, has found a safe harbor for now by raising more than $123 million in net proceeds from an equity offering in the second quarter. That company has burned through nearly $23 million in the first half of the year, down from about $38 million for the same six-month period last year. EVgo's cash at the end of the period declined to about $257 million from $345 million the year prior, leaving it with about six years of cash left.

But even the networks that have dodged financial distress are facing a mutiny. Automakers, frustrated with the impact that unreliable and unavailable charging has had on sales and EV perception, are creating their own networks.

"They need to do what they need to do to sell cars," said EVgo CEO Cathy Zoi during an August investor conference call outlining the company's quarterly financial performance.

To be sure, legacy charging networks have partnered with automakers for years. ChargePoint has teamed up with Mercedes-Benz, Toyota, Lexus and others. Blink has contracted with automakers such as Mitsubishi, Subaru and General Motors. EVgo has partnered with GM, Nissan, BMW and more.

But the lackluster customer experience is clearly on automakers' minds. J.D. Power's 2023 Electric Vehicle Consideration study found that nearly half of shoppers who would not purchase an EV cited a lack of charging station availability.

Another survey from J.D. Power released in August found that satisfaction with public charging has reached its lowest point on record, and as of the first half of the year, 1 in 5 charging attempts fails.

Poor reliability is one of the reasons why Ford Motor Co. and GM both entered into agreements with Tesla in May and June that will allow the legacy automakers' EVs to use Tesla's Superchargers.

GM said it will build Tesla's North American Charging Standard connectors into its EVs starting in 2025. Ford said drivers will be able to connect to Tesla chargers using adapters next spring and later using Tesla ports built into vehicles.

Until this summer, Tesla rivals pushed a different technology called the Combined Charging System. Rivian, Polestar, Volvo and Mercedes also are committing to North American Charging Standard ports.

Charging companies "were not able to provide a very reliable network," said Akshay Singh, an automotive partner at PwC's Strategy&. "Charging is a big part of customer experience, and so that's why OEMs have decided to take this into their own hands."

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