Electric vehicle (EV) charging stocks have gained major interest lately. Why? There is a strong demand for large capital expenditures and investments in the infrastructure to support EVs and EV charging, as electrification in mobility is the future. And becomes slowly the present too.
But before rushing to buy any electric vehicle charging stocks, there is one thing to remember. Any change in technology and its mass adoption comes with problems, opportunities and risks. So this EV charging business model is not by all means immune to business risks.
Moreover, President Joe Biden’s administration has set an ambitious plan to zero out carbon emissions and address climate change. The $2 trillion infrastructure plan has several key points according to CNBC.
- “President Joe Biden’s infrastructure plan includes $174 billion in spending to boost the electric vehicle market and shift away from gas-powered cars.”
- “The plan also proposes $100 billion in funding to update the country’s electric grid and make it more resilient to climate disasters, such as the recent winter storm that disrupted Texas’ power grid.”
And this is not a transition to clean energy just in the U.S. In fact, according to the European Union (EU), it aims to be climate-neutral by 2050 – an economy with net-zero greenhouse gas emissions.”
But with these radical innovations, there are considerable risks to consider too for the EV charging industry. And some of the most important challenges and risks for the EV charging companies and their stocks related to the infrastructure investments are the following:
- Charging times and charger compatibility
- Availability of charging infrastructure
- Grid capacity
- Charging behavior and charging station financing and ownership
Overall, there are several and very important factors to consider about the business model of EV charging. That said, what about these specific electric vehicle charging stocks? All of these stocks are special purpose acquisition companies (SPACs), and they will bring private companies Wall Street soon. However, they are all in danger of falling behind the competition.
- TPG Pace Beneficial Finance Corp. (NYSE:TPGY)
- Tortoise Acquisition Corp. II (NYSE:SNPR)
- Climate Change Crisis Real Impact I Acquisition Corporation (NYSE:CLII)
Now, let’s dive in and take a closer look at each one.
Electric Vehicle Charging Stocks: TPG Pace Beneficial Finance Corp (TPGY)
TPG Pace Beneficial Finance Corp. is a SPAC that back in December 2020 announced it would acquire EVBox Group, a leading provider of smart charging solutions for electric vehicles for a combination of cash and equity.
EVBox Group was founded in 2010, and it offers integrated, flexible and scalable EV charging solutions. But when a private company is going public, things change significantly. There is access to capital expansion and growth, but now the scrutiny on the fundamentals and financials of the company is much more thorough and due diligence is now even more important. The company offers commercial chargers and residential chargers.
The journey toward sustainable mobility seems interesting, but risky too as competition on a global basis for EV infrastructure is expected to be very intense. The company has facilities both in Europe and in the U.S. This seems promising for business operations, but a clear lack of which market will the focus of the global expansion may also bring financial concerns in terms of profitability, market share and total growth.
Tortoise Acquisition Corp. II (SNPR)
In February 2021 Tortoise Acquisition Corp. II announced that it entered into a business combination agreement with Volta a private company that claims it has “built the most utilized EV charging network in the US – offering free charging to drivers wherever they like to be.”
Volta has been building a nationwide electric vehicle charging network for over a decade. And this is a bit strange, as 10 years ago no one knew that the future of mobility could have been electric vehicles.
This is a great business risk that now may seem to pay off as a vision, but what about the extra capital expenditures that will be needed to provide new charging stations that are replacing old ones? And while the company is palling to use its EV recharging network also as an ad network by incorporating ads in large digital displays on its charging stations, I am not sure if the incremental revenue will be significant.
Electric Vehicle Charging Stocks: Climate Change Crisis Real Impact I Acquisition Corporation (CLII)
Climate Change Crisis Real Impact I Acquisition Corporation will bring EVgo, “the nation’s largest public fast-charging network for electric vehicles, and the first to be powered by 100% renewable energy,” to market.
The company was founded in 2010 and is expanding fast its charging network for electric vehicles. Now, I am skeptical about this growth and the decision to focus on 100% renewable electricity. If it is a commitment by the management for a cleaner environment that is fine. But businesses need to be able to adapt to challenges in the business arena.
I am not sure what the profit margin may be with this dedication to renewable energy. It could be higher, but also lower compared to other key EV charging network competitors. Access to capital via stock exchanges does not come free. The cost is that shareholders will demand results and not just promises, and implementing a massive infrastructure cost to build further charging stations without having some decent profitability is too risky, or to simply put its cash burn.
Collectively, all these three electric vehicle charging stocks have promising prospects. But at the same time, the risks are too high to ignore too. EV charging business has already many participants, and the pie for profitability is getting smaller. I suggest a wait and see mode for now.
On the date of publication, Stavros Georgiadis, CFA, did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He h/as written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.