Where are you going to Fuel your Electric Car? EVGO

As electric vehicle (EV) adoption surges, the need for reliable and widespread EV charging infrastructure has become crucial. EVgo, a leading provider of fast charging stations in the U.S., is playing a crucial role in this evolution. Just as gas stations have historically driven the growth of internal combustion engine (ICE) vehicles, companies like EVgo are setting up the essential infrastructure for EVs to thrive, meeting the growing need for convenient and fast charging. EV charging isn’t just a service—it’s the backbone of a new era in transportation.

Their Core Offerings

EVgo provides an array of solutions tailored for EV owners and businesses:

• EVgo Network - Public fast-charging network accessible to all EV owners.

• Home Charging Solutions - Chargers installed for residential use.

• Work Charging Solutions - On-site chargers for companies adopting EV fleets.

• Freedom Station Plans - Flexible pricing plans for subscription-based or pay-as-you-go users.

Here’s our report on the company from July. In yesterday’s Q3 financial report, they showed continuing strong growth.

The Future of the Industry

The EV charging sector, driven by the rapid increase in EV adoption, is expected to surge as demand for accessible charging becomes essential. According to PwC, U.S. charge points are projected to increase from 4 million today to about 35 million by 2030.

One of the best industry surveys and reports we read on this was by McKinsey & Company: A new EV survey: What consumers want in charging | McKinsey

The Charge Point Operator (CPO) market, where EVgo resides, is forecasted to make up 65% of the market’s value by 2040—a potential $65 billion in revenue. This growth, paired with greater EV adoption across rideshare and delivery services, is expected to drive demand for Direct Current Fast Charging (DCFC), EVgo’s specialty.

While traditional fuel stations relied on gasoline and diesel sales, EVgo’s revenue stems from electricity. Their business model capitalizes on the fact that EVs must be regularly recharged, a continuous and necessary service. As such, companies like EVgo are becoming integral players in a new era of transportation.

Will EVgo capture the industry growth?

EVgo is set to capture substantial revenue growth, increasing from $248.5 million in 2024 to $469.3 million by 2026, a strong indication of the rising demand for charging infrastructure. Despite high projected revenue growth, EVgo is not yet profitable, with losses expected to narrow by 2025 as management aims to reach EBITDA breakeven. However, with market participants willing to pay more based on EVgo’s revenue potential, its Price-to-Revenue (P/R) ratio remains above industry averages, signaling optimism for future profitability.

Competitive Landscape

EVgo faces notable competitors, including:

• ChargePoint Holdings (CHPT): Market cap of $882.5 million

• Blink Charging Co. (BLNK): Market cap of $344.6 million

• Beam Global (BEEM) and others, including legacy energy giants like Shell and Tesla

However, EVgo positions itself as a first mover, betting on the differentiation of its network and solutions. While early in sector development, the company believes its head start in establishing fast-charging stations will foster strong brand loyalty and customer base growth.

EVgo’s Core KPIs

Key Performance Indicators (KPIs) underscore EVgo’s significant growth in its customer base, charging network throughput, and operational stalls:

Network Throughput:

Increased from 8 GWh in Q1 2022 to 78 GWh by Q3 2024, a sign of growing customer usage.

Customer Accounts:

Rising steadily, with nearly 1.2 million accounts projected at the end of Q3 2024.

Operational Stalls:

Expanded from 1,600 in early 2022 to 3,680 by Q3 2024.

The increase in EVgo’s daily throughput per stall and the percentage of stalls with over 200 KWh daily throughput reflects a clear demand for fast charging, an essential service for busy EV drivers seeking quick, convenient power-ups.

Risks to Consider

While the EV sector holds exciting growth potential, EVgo’s success hinges on several factors:

EV Adoption:

As an early-stage growth company, EVgo’s performance is closely tied to ongoing EV demand. Any slowdown in EV adoption could impact revenue.

Dependence on Key Partners:

EVgo outsources 70% of its charging equipment manufacturing to Delta. A breakdown in this partnership could disrupt its operations.

Electricity Costs:

Rising electricity costs or limited availability could impact EVgo’s operating expenses and customer satisfaction.

Policy Shifts:

EVgo and the broader EV market benefit from current government incentives. A shift in government or policy could reduce these benefits, impacting EVgo’s financial outlook.

Final Thoughts:

EVgo is at the intersection of green energy, technology, and automotive trends, providing essential infrastructure as EV adoption grows. However, potential investors should weigh the current lack of profitability, partnership dependencies, and policy risks. Still, with increasing throughput, customer base growth, and industry tailwinds, EVgo holds promise for long-term investors looking to capitalize on the transition to electric mobility.