Tesla Inc (NASDAQ:TSLA) has already run into issues with congestion at Supercharger locations. There are also areas of the country where charge stations are few and far between. With the affordable Model 3 on track to go into mass production in September, what is now an annoyance to customers could quickly become a real problem.
Tesla is getting ahead of the issue by accelerating the growth of its Supercharger network, with plans to double the number of North American Supercharger locations in 2017.
Tesla’s Supercharger Network Is Critical to EVs’ Success
Transitioning from gasoline-fueled automobiles to electric cars isn’t just a matter of convincing consumers to spend a little more on the initial purchase price. The technology, green cred and especially the potential long-term fuel savings go a long way toward overcoming any initial sticker shock.
The big problem is range anxiety.
Regular drivers don’t worry about running out of gas because there is a vast network of gas stations across the country. With an estimated 150,000 gas stations in the U.S. (in 2015), you are seldom more than a few minutes away from being able to refuel. Once there, it’s typically five or 10 minutes to gas up, pay and be back on the road.
Electric cars like those made by TSLA have the advantage of being able to be charged at home, but that takes a long time. According to Tesla’s figures, half an hour on a home charger gets about 27 miles of driving range. And that doesn’t help when you’re traveling.
The company has been building up a Supercharger network that takes on the role of gas stations. A Supercharger is capable of adding 270 miles of driving range in 30 minutes, and can fully charge a Tesla Model S with 90 kWh battery in roughly 75 minutes.
Each Supercharger location is estimated to cost TSLA between $100k and $175k to build, taking 12-20 weeks to complete.
TSLA Will Double Its North American Locations in 2017
Tesla’s Supercharger network has two challenges.
First, it is much, much thinner than the nation’s network of gas stations. In all of the U.S. Canada and Mexico, Tesla currently has just 373 Supercharger locations, with 2,636 connections. Many of those Supercharger locations are concentrated on the east and west coasts.
Then there is the charging time. While filling your car with enough gas to go 500 miles might take five or 10 minutes, fully charging a base Model S takes 75 minutes.
With Tesla ownership limited to early adopters with relatively deep pockets, the sparse Supercharger network has mostly been an annoyance — something Tesla owners learn to work around. With the Model 3 slated to go into production in September and kick off a wave of mass market Tesla ownership, those annoyances risk becoming a serious problem.
Early adopters may be willing to work around challenges, but average consumers quickly turn against a product that requires them to jump through hoops.
In its full-year 2016 update letter to investors, TSLA announced that is tackling the issue:
“We plan to accelerate expansion of the Supercharger network this year, starting with doubling our number of North American Supercharger locations in 2017.”
Expansion and New Charging Policies
Doubling the number of North American Supercharger locations helps to address range anxiety by filling in some of those areas on the map that are currently blank. Since each location has multiple Superchargers, it also significantly expands the number of Tesla cars that can be charging at any given time.
Tesla can’t do much about the time needed to charge one of its cars — at least with current technology — but it has implemented several policies in the past few months to help deal with congestion at its Supercharger network.
In December, TSLA announced an idle fee (billed by the minute) would be charged to Tesla owners who parked their vehicles at Superchargers and left them connected. Then in January it announced the end of unlimited free Supercharger access for new Tesla buyers going forward.
With close to 400,000 of the $35k Model 3s pre-ordered — and a goal of producing 500k electric vehicles a year by 2018 — the pressure is on TSLA to ensure its Supercharger network can meet the coming flood of demand. The policy changes will help, but ultimately Tesla needs to expand its network of chargers to provide the coverage and availability drivers expect.
Doubling the number of North American Supercharger locations this year will be costly, but is a necessary move for Tesla to go mass market.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.