Focus: EV charger makers brace for slowdown as new Made In America rules kick in

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21/03/2023 17:40

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    By Abhirup Roy and Hyunjoo Jin
       SAN FRANCISCO, March 21 (Reuters) - Manufacturers and
operators of electric vehicle chargers in the United States are
bracing for a slowdown in production and deployment as they
scramble to comply with "Made in America" terms of a $7.5
billion federal program meant to accelerate the industry.
    Long-awaited rules laid out by the White House last month
are part of President Joe Biden's effort to build an
electric-friendly highway system by 2030, tackling climate
change and creating local jobs. 
    Requirements to immediately start assembling the chargers at
U.S. factories and to use U.S.-made iron or steel enclosures
have caught many in the EV charging industry off guard,
according to company executives and industry experts.
    The biggest makers and network operators of EV charging
stations include Tesla Inc  TSLA.O , ChargePoint Holdings Inc
 CHPT.N , EVgo Inc  EVGO.O  and Electrify America.
    Companies and some state officials who will manage the
federal funds are warning that the country currently lacks the
domestic production capacity - particularly on high-speed
chargers - and that strict enforcement will slow the rollout,
drive up costs and possibly hurt the industry Biden seeks to
nurture. 
    "Everyone was hoping that there would be a waiver on the Buy
America and Made in America," said Aatish Patel, co-founder of
XCharge North America, which imports chargers from its
manufacturing plant in Beijing. "That throws a wrench in a lot
of people's plans."
    A requirement to source 55% of the cost of components from
the United States was deferred until mid-2024, but executives
expected deferrals in other terms as well.
    Patel said it typically takes 12-18 months to move
production from another country, adding that XCharge, one of the
largest sellers of EV fast chargers in the European Union, was
accelerating setting up a U.S. facility to comply with the
rules, which could push costs up by about 25-30%.
    About two-thirds of the federal plan funding will go to
states while applicants such as cities, counties and Native
American tribes can compete for the rest.
    In Arizona, the state's Department of Transportation is
leading efforts to build charging stations, and expects $76.5
million in federal charging funds over the next five years.  
    "Buy America is likely to be another constraint in terms of
how fast we can get the stations out," Thor Anderson, a project
manager at the Arizona Department of Transportation, told
Reuters. "Everybody is going to be looking to install new
charging stations at once so that's going to put a lot of
pressure on the manufacturing of chargers." 
    But the federal government said it expects there will be
enough chargers to meet the "limited" initial demand even as the
program ramps up.    
    
    TESLA'S EDGE
    Fast chargers can add hundreds of miles of driving range in
an hour or less. That compares with the five hours or so it
takes the less-expensive Level 2 chargers to top up a vehicle. 
There are about 30,000 fast-charging machines around the nation,
of which about 60% are made and operated by the industry's
leading EV maker, Tesla. The particularly powerful charger
models can cost more than $100,000. 
    Tesla makes them at its factory in Buffalo, New York,
meeting the requirements for final assembly. The stakes are
higher for other companies that are yet to set up their
manufacturing in the U.S. and depend on the federal program for
much of their revenue. 
    At the behest of the U.S. government, Tesla has started to
open its charging stations to non-Tesla cars, but it is not
clear whether it will bid for federal funds. Tesla did not
respond to a request for comment. 
    The first, $1.25 billion round of the Biden buildout is
focused squarely on the highway fast chargers, with later rounds
including slower chargers for overnight charging, for instance.
    
    FRUSTRATING SPEED BUMP
    EVgo Inc  EVGO.O , a charging network operator with more
than 850 fast-charging locations, said there is a process to
individually request for a deferral of the "Made in America"
rules but it is unsure if the government will allow that. Its
South Korean charger manufacturer, SK Signet Inc  260870.KN , is
planning to open a Texas factory to produce up to 10,000
direct-current fast chargers annually by 2026.
    But EVgo Chief Commercial Officer Jonathan Levy said there
is risk that 2023 projects could wait while the supply chain
catches up, and it is difficult to plan.
    "You have this uncertainty. Am I going to get that waiver?
Do I need to hold off? What does it look like?"
    Shares of EVgo jumped nearly 10% on Feb. 15, when the U.S.
government announced the new rules for chargers. Since then,
they have lost about a quarter of their value. Rivals
ChargePoint  CHPT.N , Wallbox  WBX.N , Blink Charging Co
 BLNK.O  and Tritium  DCFC.O  have dropped about 30% over the
same period compared with a drop of near 5% in the S&P 500
 .SPX .
    Elliot Johnson, chief investment officer at Evolve ETFs,
which manages over $4 billion in assets, including investments
in EVgo and Tesla, said the new rules were frustrating but only
speed bumps.
    "It only makes those who are successful more valuable," he
told Reuters.

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 (Reporting by Abhirup Roy and Hyunjoo Jin in San Francisco
Additional reporting by Jarrett Renshaw in Philadelphia
Editing by Peter Henderson and Matthew Lewis)
 ((abhirup.roy@thomsonreuters.com; +1 415 941 8665;
@abhiruproy30;))