Electric vehicles (EVs) continue to rise in popularity as sustainability catches many consumers’ interest amid skyrocketing gas prices. So, for the likes of us with business acumen, that presents an opportunity to reap big in the EV industry by setting up an EV charging station. But just like any other venture, you’d want to know for sure the answer to the question, “Are EV charging stations profitable?”

Expansion of the charging infrastructure is highly crucial to the widespread EV adoption in the country. It’s projected that the US vehicle market will comprise 50% EVs out of all new vehicle sales by 2030. That should tell you one thing if you’re planning to set up an EV charging station: the EV charging business has immense potential waiting to be harnessed. In this post, we’ll explore the profitability of the business and answer some of the most pressing questions asked by potential investors, such as “How much do EV charging stations make?”

How EV Sales Compare to Charging Infrastructure Expansion

The main element that creates the demand for charging stations is the availability of EVs. So, before jumping into the profitability of an EV charging station business, let’s look at how the US market has been doing in terms of EV sales. 

Between 2016 and 2022, EV sales have grown at a much higher rate than the charging infrastructure in the United States. By 2022, the sales had increased by almost fivefold to almost 1 million, while on the other hand, charging stations popped up much slowly. That gap can only mean one thing: charging infrastructure growth is not keeping up with the market demand, and this potentially presents a challenge for EV owners after convenient options. 

It also means that more investors need to harness the available opportunity and invest more in EV charging infrastructure. This won’t be just for the profits but also to give the EV market expansion an important boost. Without a solution to the existing infrastructure gap, EV adoption could lose its appeal and convenience, which eventually can hinder the transition efforts to a more sustainable system of transportation. 

Globally, EV adoption keeps rising and is estimated to reach 17 million by the end of 2024. This translated to about one out of five new vehicle sales being EV. Even though the industry faces challenges like volatile battery metal prices, tight margins, and high inflation in some countries, the global sales data shows that the growth of EVs is still strong overall. 

The Business Models for Running an EV Charging Station Business

From the little we’ve discussed so far, it’s clear that there’s a growing demand for EV charging questions, which should give an obvious answer to “Are EV charging stations profitable?” So, what are the different ways you can invest in an EV charging station business?

Let’s look at the various business models you can follow, depending on revenue generation, ownership, and partnerships.

The Owner-Operator Model

Here, you’re the owner operating the charging station. Your revenues come directly from direct customers paying to charge their EVs at a per kWh rate. Payments can also be in terms of per full charging session, or through subscription plans. 

As the owner, you take full responsibility for maintaining the station, electricity costs, and software management. For instance, you could set up a charging station if you’re in the hospitality industry, such as a hotel. Clients come in with their EVs and plug them in at the charging points during their stay at the hotel. 

Host-Owned, Network-Operated Model

In this model, a property owner, like a shopping mall, or hotel, buys and sets up the charging station and then partners with a charging network (e.g. EVgo, ChargePoint) for payment processing and software management. You, as the host, gets to earn a profit while the charging network takes a cut as service fees. 

Charging-as-a-Service (CaaS) Model

Here, a third-party provider owns and maintains the chargers, while municipalities or businesses lease them for a fixed fee. The advantage of this model is that the upfront cost is low.

Utility-Owned Model

For a utility-owned model, a power company purchases and installs charging stations to provide competitive pricing according to the energy on demand. It encourages more people to adopt EVs while also offering stability to the National Grid. 

Advertising & Sponsorship Model

Here, your objective is to encourage the widespread adoption of EVs through advertisement. Revenue comes from the ads or sponsorships from energy companies, retailers, or brands. EV drivers charge their vehicles for free or at a small fee to attract even more users. 

Fleet Charging Model

If you already run a business with EV fleets, such as a ride-sharing or delivery service company, you can also set up a private charging station for the vehicles. This approach makes sure you reduce your fuel expenses while maximizing operational efficiency. A good example of such a model is Amazon’s Rivian fleet that uses private charging hubs. 

A Closer Look at The Investment Costs for EV Charging Station Business

To fully answer the question, “Are EV charging stations profitable?” we also need to look at the costs involved vs the revenue estimates. Setting up a charging stations requires significant amount of upfront investment. If you decide to establish a station with direct current fast charging (DCFC) units, prepare to cough up an even higher investment amount. 

To qualify for incentives from the government, you need EV chargers with internet connectivity. Such chargers are called networked chargers. 

Networking Levels 

The base cost of an EV charger depends on the connectivity type, which is why you must consider this before hopping on. EV chargers with lower pricing might lack the networking capabilities needed to achieve efficient energy management. To maximize the value of your investment, you need to evaluate the connectivity type carefully to pick one that best fits your use case.

• Dedicated Network: These EV chargers connect to the OEM’s proprietary network after purchase. 
• Networked Chargers: These chargers connect to a network like the Future Energy’s interface, which is a cloud-based platform for managing smart systems. 
• Network Capable Chargers: These chargers have the right technology to function as needed, but to use them, they must be connected manually to location-finding and point-of-sale networks. 
• Standalone Chargers: They don’t have the capability to connect to a network, therefore not suitable for commercial charging stations. 

In addition to the networking capabilities of chargers, you also need to look at the power output and the associated costs.

EV Charger Power Output and Costs

Generally, commercial EV chargers are categorized into Level 2 and Level 3. Level 1 chargers, with a 120V power input, are only suitable for residential use. So, when factoring the costs for your car charging business, the charger type, its power output, infrastructure, and accessories required will directly determine how deep you’ll dig into your pockets. 

Generally, Level 2 chargers require 240V power, the same voltage needed to operate a heavy electric appliance. They can output as much as 19.2kW and charge an EV for an hour to power a 40-mile range. For a Level 2 public-facing charging station, the cost starts at approximately $1,500. This is the lower price range, and the chargers can offer roughly 9.6 kW when using a single port. 

On the other hand, Level 3 EV chargers, also called direct current fast chargers (DCFC), need 480V three-phase power. Generally, if an EV charger offers at least 20 kW of power, it’s classified as a Level 3. However, there’s a wide range of power output to consider, which also affects the cost directly.