Are EV Stations on the Verge of Booming?

One of the main challenges for the transition from fossil fuels to renewable energy in the transportation sector is the infrastructure needed for that transition, which eventually leads us to the chicken-and-egg dilemma: do we first build the infrastructure needed for electric vehicles (EVs) or do we first buy enough of them, so the market signals the need for infrastructure? It seems the US has answered that dilemma by announcing all types of rebates and incentives for anyone who invests in this type of infrastructure.

This plan to boost EV infrastructure envisions 500,000 stations throughout the US by 2030, with an investment of US$15 billion worth of CAPEX. The US now has 41,400 stations, according to the Department of Energy, in comparison to the more than 136,000 gas stations. If this plan is put in place, it would mean that the number of electric stations would surpass the number of gas stations by more than five times its installed capacity in just nine years.

The market has already acknowledged this trend, as demonstrated by the performance of companies that deliver EV stations, such as Blink, which has seen its stock price surge more than 300 percent in the past year, or ChargePoint, whose share price rose by 108 percent in the past 52 weeks. Then there’s the case of TPG Pace Beneficial Finance, which is a SPAC that has raised US$350 million, with another US$100 million previously raised via a private placement. All of these examples clearly indicate that the market views this industry as very attractive.

If we take all the previous data, we can conclude that there’s a major opportunity in the EV market, where a high investment will be poured into CAPEX and R&D in the coming years. This brings us to the question, is Mexico going to take advantage of this market opportunity? The answer is not easy.

Mexico does not have a plan or a strategic investment to develop this industry but the country still has an advantage to deploy resources into this thriving sector. That advantage is our free market and natural resources, specifically renewables. As we saw under the previous long-term auctions, the two main drivers for very competitive LCOEs were high yields because of weather conditions and very competitive CAPEX prices. This latter driver is the result of several free trade agreements. By having them in place, for utility scale projects in Mexico, we can import solar modules from China, solar inverters and wind turbines from Europe and tracking systems from the US, with the wiring systems coming from Mexico.

By having competitive CAPEX and a working Distributed Generation scheme, the EV industry could also thrive in Mexico; not at the same speed as in the US but it could follow the trend. The federal government acknowledges as much in the publication of the PRODESEN forecast for the EV industry that states that the sector is going to slowly grow, from 742 EVs and 3,073 hybrid electric vehicles (HEVs) in circulation in 2018. The National Strategy for Electric Mobility was published in September 2018 but not much has been unveiled regarding the performance of that strategy, although several incentives were illustrated as possible public policy outcomes, such as tariff exceptions for import/export of EVs and HEVs, as well as the exception of the ISAN tax for a vehicle free of emissions and other local taxes and duties. Even the possibility of a 0% VAT and a full depreciation in terms of ISR (corporate tax) was suggested.

Eventually, prices of EVs, HEVs and charging points will drop and as long as the financing continues to flow toward sustainable products, we will see more options to acquire this means of transportation. Soon, we will see special loans from traditional banks or specialized fintechs that loan or lease these vehicles and that, as a result, will attract the necessary investment in infrastructure.