Elon Musk’s decision to lay off much of Tesla’s Supercharger team this week came as a shock. The move poses a particular threat to U.S. charging and the region’s transition to electric vehicles.
Rising competition, potentially unattractive profit margins, and Musk’s focus on robotaxis all likely play a role in this confusing story.
Tesla’s approximately 58,000 Superchargers have set the standard for electric vehicle drivers around the world. Musk’s decision to slow deployment will be most noticeable in North America, where the network accounts for 74% of all ultra-fast chargers tracked by BloombergNEF.
The company has consistently installed more ultra-fast chargers in North America than all other networks combined. The first quarter of the year was no exception: Tesla installed a record 3,680 Superchargers, while its competitors combined installed less than half that number.
Tesla’s impending slowdown could put a damper on the region’s electric ambitions. BNEF predicts in its Long-Term Electric Vehicle Outlook that there will need to be around 400,000 ultra-fast chargers in North America by 2030 to power a fleet of 40 million battery-electric vehicles, laying the foundation for over 90 million electric vehicles later in just five years.
The situation is different with charging in Europe, where Tesla’s slowdown will not be felt as strongly. A total of 390 companies added more than 13,000 ultra-fast chargers in the first quarter, which was 11 times more than Tesla’s installations. Perhaps Musk assumes that the North American charging industry will become more like Europe’s in the coming years and is not inclined to commit the capital necessary to continue rapidly expanding the network in an increasingly crowded market.
The CEO said two years ago that Tesla was targeting a 10% profit margin from its network. BNEF estimated just last month that the company may be on track to generate $740 million in annual fee profits by 2030, about 8% of last year’s companywide profit.
Our analysis found that most publicly traded charging companies have not yet achieved profitability. Another theory as to why Musk is slowing down supercharger installations could be that his previously communicated profitability target was either unattainable or no longer sufficient. Tesla’s slowdown in launch is likely to increase utilization across the network, and we could even see a change in pricing strategy that has historically undercut the competition.
Musk’s decision could also demonstrate his commitment to making robotaxis a reality. Last weekend he said Tesla would spend money around 10 billion US dollars this year on the topic “combined training and inference AI”. Assuming you can take that number at face value — Musk’s social media posts aren’t always reliable — it means Musk intends the company to devote nearly all of this year’s capital spending to artificial intelligence. In a securities filing last month, Tesla said it expected more than $10 billion in capital spending this year.
“Tesla is almost entirely about solving autonomy and the ability to deliver that autonomy to a gigantic fleet,” Musk said during the company’s April 23 earnings call. He later added: “If someone doesn’t believe Tesla will solve autonomy, I don’t think they should be an investor in the company.”
For all the praise that Tesla’s Supercharger network deserves, the amount of money required to keep the extensive charging network up to date should not be underestimated.
Making its stations suitable for non-Tesla electric vehicles will likely require the installation of longer cables for larger pickups and SUVs. And with nearly every automaker set to produce 800-volt electric vehicles, more gas stations will need Tesla’s latest Version 4 hardware, which currently only makes up about 7% of the network. If Musk can realize his robotaxi vision, the stations may also need to integrate wireless or robotic technology.
Regardless of what prompted Musk’s moves, the rollback of Tesla’s Supercharger ambitions adds to the already negative sentiment toward electric vehicles in the US
Automakers don’t have time to feel sorry for themselves as they were left in the lurch shortly after switching to Tesla’s charging port. The Ionna joint venture, which seven car manufacturers founded to build at least 30,000 chargers, needs to get off the ground quickly.
And there are some reasons for optimism that new entrants can help close the gap: more than 50 companies are joining the sector after receiving funding from the National Electric Vehicle Infrastructure (NEVI) formulary program.
While streamlining may make sense given increasing competition and a focus on robotaxis, the chaos surrounding Tesla’s Supercharger operation will continue to spread throughout the industry in the coming months.