Note: Glen Estill is a good friend and colleague in Ontario, Canada. He was a successful entrepreneur when he changed careers and installed one of the first commercial wind turbines in the province–the first of many to come. Estill is also a savvy observer of the provincial political scene and many an Ontario bureaucrat has felt the sting of his wit. He’s been a longtime advocate of the local ownership of renewables and has invested accordingly. Estill leads by example and that’s why he was an early Model 3 reservation holder. He powers his Tesla with solar PV in the “Great White North” of Ontario’s Bruce Peninsula.
I’ve owned my model 3 (extended range version) for 3 months now, and driven 4,800 km (~3,000 miles). I have been to a Tesla Supercharger only 3 times, picking up about 200 km (~125 miles) of range at a cost of ~$8. The Tesla superchargers are for the most part relatively well located, and easy to get to, and seem to be located in shopping malls. So far, for the few number of extra kilometers I have purchased, it has taken less than 20 minutes in total to charge. The model 3 has been charging at Superchargers at up to 650 km/hour (400 miles/hour)! I haven’t even had time to get a coffee! I haven’t yet been on any major road trips, but that usually only happens once or twice a year. Tesla charges about 24 cents/kWh to charge–roughly double their cost of electricity.
What has Tesla figured out that the others haven’t?
1. Charging stations will have great difficulty finding a revenue model that works. With an ICE (Internal Combustion Engine), 100% of “charging” must be done at a gas station. With electric cars, 95% of charging is done at home. There may be an exception for city dwellers who do street parking, or for condo’s, although it would likely be far more cost effective to ramp up availability of Level 2 chargers in cities, rather than send EV owners to Superchargers.
2. Tesla has 1,332 Superchargers in North America. They have sold 200,000 cars. The model X and S include a certain amount of free charging, whereas there is a fee to charge the Model 3. The estimated cost of building a charging station is $275,000 (max), so they have spent up to $366 million building their charging network so far. This works out to an investment of $1,830 per car sold. The stations likely run at breakeven for Model 3’s. Tesla’s network, though, has been built for the future, and with shipments ramping up, it is reasonable to say the investment per car shipped will drop dramatically in the future, even as the network expands. If Tesla ships 250,000 cars per year for two years, the cost per charging station could drop to ~$500per car sold.
3. Superchargers are not a profit maker. But they are a market enabler. They enable a consumer to buy a pure electric car with confidence that it will fulfill all their needs, including road trips. A Tesla EV is not just an “around town car”. Tesla has figured out that Superchargers are a marketing expense.
4. GM spent $3.1 billion on advertising in the US in 2014, and shipped about 6 million cars in North America. That works out to $500 per car. (Superbowl commercials don’t come cheap.) Tesla spends virtually nothing on advertising.
5. As the number of Tesla’s that have a fee for charging increases, the revenue model for the Supercharger will improve. Someday, it may be a small money maker. Based on local survey’s of the busyness of Tesla Superchargers, the number of vehicles using them can be increased several fold with little expansion required. There is also scope to increase the price per kWh, as the current price drastically undercuts the cost of gasoline. And drivers would not be upset, because they do so little charging on the road.
6. GM, Nissan, BMW and others seem to be waiting for the market to develop the high speed charging network. It won’t happen. The revenue model is simply not there, nor will it be for a long time. The network will be incomplete, subject to out of order stations (no revenue to support maintenance), and hard to find, as there will be multiple vendors.
The Supercharger network is a major and unrecognized strategic advantage that Tesla has over other EV vendors. And it is a smart marketing expense.
