Tesla Won the Charging Battle in N. America
Last year, Tesla announced that its supercharger network would progressively be open to other brands. The company has just struck two major deals to provide deep integration into its network.
As of its latest Investor Day last March, Tesla had opened 50% of its European network to the competition as well as 10 stations in N. America. This was just the beginning. Strategic deals announced with Ford and GM over the past couple of weeks go much deeper and will likely have major strategic impact on the US charging ecosystem.
Ford announced a deal with Tesla in late May 2023 in a surprising admission that Tesla offers the best charging solution composed of the largest charging network and a proprietary connector (NACS). Ford’s EV drivers will gain full access to Tesla’s 12,000 DC chargers in N. America as of early 2024, first using CCS-to-NACS converters. Starting in 2025, Ford will equip its EVs with Tesla’s NACS.
GM followed suite with a similar deal with Tesla announced on June 9. Logically, it appears that the conditions of this deal are identical to that Ford presented just two weeks earlier. This is a huge deal for the auto industry in N. America.
Ford and GM are a taking short cut to accelerate their EV growth, boosting the network so their customers will have access to 12,000 superchargers, a number that keeps growing. For comparison, there is a total of approximately 35,000 public DC fast chargers in the region, including Tesla’s.
Both incumbent OEMs will integrate Tesla’s software to help locate optimal chargers based on their destination and battery’s state of charge (also see infrastructure balancing below), as well as activate and pay for charging sessions. Ford and GM will fully rely on the tech of a very successful competitor for their customers’ charging experience, putting the future of a strategic feature in Tesla’s hands.
NACS vs. CCS, Tesla vs. the rest of the industry
Combined Charging System (CCS, in light grey below) was first presented in 2011 and has become the current global industry besides GB/T in China — and CHAdeMO in Japan where BEV penetration is very low. The following year, Tesla introduced Model S with a proprietary connector design (in black below). It is much more compact and lighter than CCS, while also offering plug-to-vehicle connectivity to open the charge access door and identify the vehicle.
On the downside, Tesla’s charging solution is currently capped at 250 kW whereas CCS-based charging is available at up to 350 kW. Yet, peak power is not sufficient to assess charging speed as the power profile during a charging event is key. Also, Tesla is developing higher power solutions.
Whereas Tesla was forced by the EU to embed CCS connectors for interoperability purposes (like it has done with USB-C for smartphones), the company has maintained its proprietary solution in N. America. Last November, Tesla gave license-free access to its plug design with the objective to make the standard. To be clear, Tesla renamed it North American Charging Standard or NACS.
Tesla offers a better charging experience
I can speak of experience as a Tesla owner who previously had a Chevrolet Bolt. Non-Tesla BEV owners by and large rely on charging apps to locate plugs, then have to estimate whether their battery’s current state of charge will get them there. Upon arrival, drivers deal with a credit card or a badge to be recognized, then a display to operate the equipment. Incumbent players are progressively embedding solutions to address both trip planning and friction-less plug-and-charge capabilities. They are several years behind Tesla which keeps improving its charging experience.
Reliability has also proven to be a major differentiator among charging networks. In the USA, Tesla’s reportedly stands at reportedly over 99% whereas others’ reliability was recently assessed at only 72%. Tesla’s chargers are not only simpler by design (e.g., no card reader, display or start buttons), they also only interface with a single communication protocol whereas others must deal with multiple brands. In addition, Tesla’s chargers are designed and built in-house, and their supply chain is highly vertically integrated, contrary to many charger providers.
Another major bonus is economics. Tesla’s hardware and installation cost stands 20% to 70% below that of competitive solutions depending on the geography according to Tesla (see pre-assembled 4-charger station below). Since the EV maker is also the operator, it focuses on minimizing operating cost which has reached $0.12/kWh (excl. energy) in Q4 2022, down 35% since Q1 2021. This has been achieved particularly thanks to higher utilization which will further increase with the Ford and GM deals.
Tesla’s NACS becomes the industry standard in N. America
In fact, NACS is already the de-facto industry standard in the region based on sheer market share. Tesla vehicles represent over 70% of all BEVs on N. American roads. Even though the competition has gained ground overtime, Tesla still controlled about 60% of the BEV market in Q1 2023.
With the addition of Ford and GM, i.e. the other two Top3, the three companies represented close to 75% of the BEV market in Q1 2023. It is not too much of a stretch to call Tesla the winner of the charging battle in N. America. Unlike in the VHS-vs.-Betamax battle in the 1980s, it is not just about volume supremacy but also about tech leadership.
Whether NACS ends up killing CCS in N. America is not an existential issue for past and future EV drivers since adapters will exist in both directions. This interoperability set as a condition by the federal government’s incentive is indeed critical as vehicles remain on the road for many years. At the same time, independent charging networks — e.g., Electrify America, ChargePoint, EVgo —will be forced to equip their stations with NACS connector if they don’t want to miss out on a major chunk of the market.
What’s in it for Tesla?
Tesla has much to win from these deals. The company is ready to reap the benefits from 10+ years of investment in its charging infrastructure. The EV maker will certainly generate a margin on each charging event and most likely collect a lump sum and/or annual fees from OEM partners, thus contributing to its already leading profitability.
Tesla will also have the upper hand on new tech and gain access to data related to vehicles from other OEMs, e.g., vehicle location, usage patterns, technical charging profiles etc. Tesla could use its strategic position as a weapon in the future, leaving no charging alternative to its partners!
In addition, opening its network to other brands could also give Tesla access to funds from the federal infrastructure bill — $7.5 billion dedicated to high-speed charging stations — under conditions defined by the National Electric Vehicle Infrastructure formula. However, the White House’s immediate reaction after the GM deal was to insist on the need for interoperability as a condition to claim incentives, i.e., “install a minimum (number) of CCS (plugs)”. Will Tesla pick a fight with the federal government, install a few CCS plugs (I doubt it), or simply continue to invest on its own dime?
Risk for Tesla owners and technical constraints for Ford and GM
The recent deal will mean lower charger availability for Tesla owners like me. The company’s proprietary trip planner optimizes time and location of charging events with the objective to balance station load in real time. Nevertheless, lower availability is unavoidable.
Tesla reported during its last Investor Day that the percentage of customers waiting dropped from 2% in 2019 to 1% in 2022 while average delivery per plug increased from 150 kW to 200 kW per day. There is no doubt that Ford and GM BEV drivers will have access to the same functionality — at the sake of Tesla owners.
As for Ford and GM vehicles, the location of their charge ports and to some extent their electric architecture may have to be modified. Indeed, Tesla’s charging stations are designed to plug into connectors located in the rear left whereas the charge ports on all Ford vehicles and on GM sedans and SUVs are located in the front left. It’s a good thing that Tesla’s gen 4 supercharger — first deployed in Europe — is fitted with a longer cable.
In the end, Ford and GM’s strategic moves with Tesla will contribute to reducing range anxiety with potential EV buyers, thus bringing more customers to the deep electrification wave. And that’s a great thing overall. Now the question is which industry domino will fall next on Tesla’s side.
Managing Director, Orsay Consulting
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