What Tesla’s Charging Network Deal with Ford and GM Really Means
By opening its Supercharger charging network to other EV manufacturers, Tesla gives up its key competitive advantage...for the good of the EV movement.
Image: Getty Images
I have always considered the charging experience as a core market driver of EV adoption. Poor accessibility to charging, range anxiety, and the occasional inability to use the vehicle beyond a limited route is a very real determinant of which EV brand a customer chooses. This pretty much explains Tesla’s market share dominance in the U.S.
Anyone wanting an EV can get one cheaper than a Tesla Model 3, they can get a more luxurious EV than the Model S, and while they can’t get the Cybertruck just yet, there are those consumers who will wait for the Tesla electric truck even though many well-equipped models are on the market today.
Why does Tesla command such a large share of the EV market when there are so many attractive options available?
It’s the Tesla charging network.
The consumer perception in the U.S. was that the ease of using Tesla’s own network of roughly 12,000 chargers was one of the main reasons to buy a Tesla over any other EV brand. Tesla has the best uptime reliability as well as many of the best locations for charging. On those two factors I have yet to see any disagreement.
Tesla was the only EV brand with a car capable of over 250 miles of range from 2012 to 2016, an eternity in the car business that led to a commanding share of the EV market. In 2023, the market is now saturated with EVs capable of decent range, and this landscape gets hairier each year.
Even with so many options available, Tesla remains very popular in the U.S. market due to the consumer perception that it has the best and most accessible charging network. Now, Tesla has surrendered this priceless competitive advantage, beginning with the Ford and GM agreements allowing their usage of the North American Charging Standard (NACS) plug design.
And this truly is only the beginning if Europe is to be taken as an example. Tesla has already opened its charging network to all automakers throughout Europe. And unlike the U.S. where Tesla’s EV market share regularly hovers around 60%, Tesla’s EV market share in Europe is a mere 12.6%.
Is this market share differential solely due to having access to a reliable and accessible charging network? Absolutely, without a doubt.
With a key competitive advantage now gone, buyers are likely to measure Tesla against all other brands based on the value of the vehicle itself, and not weighed against charging network availability which all brands will soon have.
So, was this move worth it?
Tesla will offset part of this market share loss by increased usage fees from competitive brands accessing the charging network. But there is nothing in the agreements that will lead to Tesla having a monopoly on public charging – the NACS plug design is available for use by rival charging network operators, and I’m pretty sure they’ll adopt it as well.
When charging becomes ubiquitous, reliable, and convenient (as it stands with today’s network of gas stations), the market adoption of EVs will have overcome an important barrier that is top-of-mind with potential customers of EVs and might accelerate market adoption. And maybe that is the primary motivation of Tesla.
Electric vehicle development and its supporting charging infrastructure promises to be a big business in coming years. Hundreds of billions of dollars are being allocated to push this mobility transition, and a ubiquitous and reliable charging network is absolutely necessary. In this context, the Tesla move was very savvy and could be more lucrative than the rest of its automotive business.
Making “standards peace” among automakers and charging networks is clearly good for the EV market in its entirety, assuming that all other automakers will follow the example of Ford and GM and make their systems compatible with the NACS plug as well. Niche EV automaker Rivian has followed suit with Ford and GM, announcing their adoption of the NACS plug.
It’s hard to estimate the impact of Tesla giving up its key competitive advantage in the U.S., but if I were in the market for an EV would I consider a Tesla if the charging network was not an issue? If the network is no longer a purchase factor, I can now consider other brands based on vehicle value alone. That has not been the case with Tesla…until now.
Analysts are already predicting Tesla U.S. market share to drop to under 20% in the next three years (down from around 60% today). This might happen regardless of the charging network agreements, but I think it will be a major factor.
And the competing charging networks?
Pressure to bring their network reliability up to Tesla standards will surely increase, as the public charging experience among non-Tesla EV owners has been – to put it mildly – kind of shitty. Electrify America, EVgo, ChargePoint and others will need to substantially improve their services if they can expect to survive.
One can easily argue the merits of EV ownership versus that of gas-powered cars, as well as the insistence that this ought to be the choice of the market rather than the mandate of government. However, the NACS agreements among two major automakers and inevitable following of others is positive movement forward for the electric car “transition.”
Shall we now discuss how we can possibly charge a few hundred thousand battery-powered vehicles in the coming years when we cannot power them today? Nah, I didn’t think so.