Sign for EV charging point. Photo by Z Tanuki, via Wikimedia Commons, licensed under Creative Commons Attribution 3.0 Unported.
River otters tend to set up separate pecking orders, with the highest ranking occupying the most favourable ranges. This got me thinking about my last post on Pod Point and the electric vehicle charging market. As discussed, Pod Point is somewhat dominate in both the market for public charge points and home charge points, according to statistics from Zap Map and details from the company prospectus.
After publishing the last post, I spent some time reflecting on the different segments in the charging market, and although public charge points are important, as outlined by a recent government report, I believe one of the biggest opportunities for companies in this field is supplying home chargers. This is borne out by the revenues detailed by Pod Point. But if we think about the switch to EVs and a consumer buying a new car…the next purchase is a charger, they are complementary goods. I don’t know any new EV owners who don’t have a charge point at home. In fact, amongst my fellow otters, discussion about what charger to buy is the next obligatory conversation after talking about when their new Mercedes CLA 250e (a plug-in hybrid) arrives on their driveway. So although public charge points and sockets at businesses or workplaces is important, I believe home chargers offer the biggest growth opportunity in the short term.
This brings me to the total addressable market. The British government has set the ambitious target of stopping sales of new petrol and diesel cars and vans by 2030. So how does that stack up in terms of new vehicle sales and how could that translate into sales of home chargers?
Almost 76,000 battery electric vehicles (BEV) were sold in the UK last year, according to Society of Motor Manufacturers and Traders (SMMT). And that has almost doubled in the first ten months of 2021, with SMMT statistics pointing to 141,000 BEVs leaving car showrooms. If BEV sales continued at the same pace, almost 170,000 would be sold in 2021.
So let’s see where that takes us with respect to Pod Point’s sales. The company says it has a market share of approximately 50-60%, according to data it cites from the government. In the KPIs outlined in the prospectus, Pod Point says it installed 22,647 home charging units in the six months till 30 June 2021. If we assume the same pace of sales for the rest of 2021, that brings us to 45,294 units. These are back of a tag packet calculations though, I’m guessing there’s some lag between booking revenue from charger sales and the installation, and we’re also presuming sales remained flat, whereas we’d be hoping these are growing.
If we compare this figures to the total BEV vehicle sales then the 50-60% market share appears a little high. Even on 10 months of vehicle sales, and a pro rata forecast for Pod Point home chargers, then we’re at 32% market share. Since the SMMT is so accurate and comprehensive in their data collection, we can actually be more precise and take the first six months of 2021. SMMT says 73,893 BEVs were sold in the first six months of the year, giving us a market share for Pod Point of 30%, if we assume 1 new car sale = 1 home charger sale.
I’m making some general assumptions here about the fuzziness of the market. We’re presuming every new vehicle registration entails a home charger purchase. However, some owners may already have a charger, or could be relying on charging at a workplace. Some well-to-do otters could even buy two chargers, one for their penthouse in the city, and another for their holt in the countryside. Other particularly energic creatures could have already outgrown their Tesla and bought a new Nissan Leaf, therefore not needing a new charger. Nevertheless, I believe the general assumption here will provide us with a reasonable estimate. I’m also not touching on plug-in hybrids, since there’s some controversy about whether they are actually being charged.
Moving on to projections about new vehicle sales, and I’ll return to the SMMT who released a nice data set in June with predictions of BEV sales. I’ll take the central scenario outlined, although they do also provide various high and low models. SMMT forecasts BEV sales making up 25% of all vehicle sales in 2025, and I’ll focus on this date range, despite their projections extending out to 2035:
|Year||BEV sales||Projected Pod Point revenues (£732/unit)|
These figures are calculated by taking the Pod Point market share we calculated earlier (30%), which is a little more conservative than that cited in the prospectus, and the revenue per unit. The projections give us quite considerable scope for growth. Remember, Pod Point’s revenue from home charging installations in the first six months of 2021 was £16.5m, as described in the previous post. If we assume revenues remain constant for 2021, we arrive at £33m for the year, and if Pod Point maintained market share for 2022 (75,000 home units installed), based on our hypothesis for new BEV sales, the company would see revenues grow by 66%. And we’re only talking about home installations, that doesn’t include revenue from workplace/business installations or public chargers.
There are several caveats here. Pod Point’s market share could diminish as competitors gain ground. Revenue per unit, which has been rising since 2018, could drop. The company could have difficulty securing the supply of chargers it needs from iPRO, its manufacturing partner. Or, finding the third party contractors to install all of those orders. That being said, I really like this growing market.
This website is provided “as is” without any representations or warranties, express or implied. River Otter Investments makes no representations or warranties in relation to the information on this website. The website is not intended to address your particular requirements. In particular, the information on this website does not constitute any form of advice or recommendation and is not intended to be relied upon by users for investment decision-making purposes.