The EV revolution is already upon us. As electric vehicles are becoming more affordable and approachable by consumers, the growing adoption of battery electric vehicles (BEVs) drives the need for reliable and convenient charging infrastructure. The global EV charging network is expected to reach a ~210 million installed base of charge points with a focus on major regions including EU, the US and China by 2035. Turkish BEV car parc is expected to exceed the two million mark by 2030, paving the way for the growth in public and private charging units which can reach 118-122k points in 2032 from 8-11k units in 2023.
Although Turkish charging market continues to attract new market entrants reaching a total license holder of 143 as of October 2023, almost 80% of public charging infrastructure landscape is still led by five charging network providers. Majority of the new entrants are hesitant to invest due to the challenges of finding the best locations to achieve a high utilization for a profitable EV charging network, as well as evolution in the EV charging technology, increasing maintenance expenses and rents. Several strategic options from ensuring a seamless charging experience, developing new business models, leveraging economies of scale through international expansion to generating additional retail revenues through partnerships can be evaluated to overcome this core problem.
Global EV charging market
Electric vehicle (EV) charging is coming of age, with more regulatory and commercial certainty around battery electric vehicle (BEV) adoption. By 2035, BEVs is expected to account for 60% up to 90% of new light vehicle sales leading to more than 370 million BEV light vehicle parc across Europe, US and China. Sales of battery electric vehicle (BEV), the main driver of demand for charging infrastructure, will drive the need for a charging infrastructure, leading to a ~210m installed base of charge points in 2035 across these regions.
The growth of EV will be highly dependent on upcoming government policies and incentives, but declining total cost of EV ownership, ease of reach to a wide-spread EV charging network and developing battery technology are most critical from customer perspective. According to a global survey we conducted with more than 5,000 respondents, top 3 reasons of not buying an EV are as follows: Purchasing price is (57% of respondents), insufficient charging network (35%) and insufficient range anxiety (34%).
Recent EV charging developments in Türkiye
Despite consumers’ concern about limited availability of public charging being one of the top barriers to further EV adoption, EV sales set a record in 2023 in Turkish market. According to recent data published by Automotive Distributors’ and Mobility Association (ODMD) in Türkiye, new EV car registrations in the first nine months of 2023, reaching 39,051 units, have exceeded new sales of 4,056 units during the same period of 2022.As Strategy& Türkiye, we estimate that the Turkish EV car parc is expected to grow with 92% CAGR from 14,553 thousand (Source: Turkstat) in 2022 to 2.000-2.200k towards in 2030.
The growth in EV market is expected to boost the number of EV charging stations from the demand-side. According to the latest public statement by The Energy Market Regulatory Authority “EMRA” on 20 September 2023, total number of public charging points reached to 8,861 in 4,221 charging stations across Türkiye including 6,633 alternate-current (AC) charging points and 2,228 direct-current (DC) charging points.
Based on Strategy& Türkiye’s analysis, number of private and public charging units in Türkiye is expected to increase from 8k-11k in 2023 to 118-122k in 2032 by growing at an average compound annual growth rate (CAGR) of 33%, with the share of DC charging units making up for approximately 5-10% of total.
Since 18 April 2022 after “the Charging Service Regulation”, the, 143 corporations including energy system providers, software companies, and first-time energy investors acquired a charging network operator license in Türkiye. However, few players dominate the majority of market by providing access for more than 80% of total charging stations. For instance, Eşarj by Enerjisa, G-charge, Trugo owned by TOGG, ZES, Voltrun (alphabetical order, does not represent any market share) are among the largest charging network operators. With increasing number of CPO licence holders, EV public charging may remain a fragmented market in the near term yet consolidation might be a possible future scenario in the future similar to other capital-intensive markets.
Possible solutions to handle the current challenges in the Turkish EV charging market
As charging provider operators (CPOs) and other market players are on the race to build enough public stations to meet future demand, achieving sustainable profit is the main challenge that they face today. High installation costs, underutilization of charging stations and lack of differentiation are driving forces in today’s EV charging market. As Turkish EV charging market attracts new players, CPOs should ensure customer stickiness, build a competitive positioning through differentiation and new business models, achieve profitability by gaining economies of scale through international expansion and right location selection, and creating additional revenue streams for sustainable growth.
A charge point operator (CPO) needs to manage various stakeholders efficiently to enable the best possible charging experience for EV drivers. The reliability of EV charging service with consistently working chargers is the main basic requirement to create a seamless customer experience and ensure customer stickiness. Continuous monitoring through IoT systems, use of predictive maintenance and partnerships with local service providers are crucial for the continuity of charging service.
Unsurprisingly, given the relative immaturity of EV charging market and difficulty in achieving sustainable profits, we observe market players are testing new business models focusing on different parts of value chain.
As Strategy&, we identified six main revenue pools across the EV charging value chain ranging from charge point hardware to additional value-added services. Across these revenue pools and the charging segments, we see seven key plays that market players can pursue.
The CPO business model is asset heavy with significant capex investment with a typical payback period of 7-10 years although it may vary by location. Assuming an ability to retain price mark-up on purchased electricity, utilization of installed chargers is the key driver for profitability for CPOs. Based on similar lessons in different markets, we expect the CPO business to follow four key development stages based on ability to drive utilization and maintain pricing:
Secure key sites for future roll-out when the BEVs stock is low and not so many chargers needed. Typical utilization ratio is below 5%.
Focus on quick roll-out to avoid charging anxiety as BEV sales/stock increase. Utilization improves to 5-10%.
Optimize utilization through right partnerships and additional value add as the stock of BEVs increase further and utilization increases to 10-15%.
Focus on further business network optimization resulting from increased competition and margin pressure.
Selecting the right location is a significant component of public charging. While building a network of charging stations, CPOs should identify and secure the most popular sites both in dense urban areas and on highways early on. Also, availability of power and electrical-grid capacity plays a critical role in ease of installation.
In addition, Turkish players such as Zorlu Enerji aims to expand its activities including the sale, installation and operation of electric vehicle charging stations in Turkey to overseas markets through its subsidiaries. Zorlu Enerji has already established subsidiaries in more than 20 countries for expanding its operations and leveraging economies of scale.
As more EV charging players enter the market, CPOs may face potential erosion on revenue and profitability driven by declined customer stickiness. By adding adjacent revenue streams such as charger reservation, package delivery to cars, CPOs can be able to reduce their dependency on charger utilization, but to differentiate their offering in the market.
Building an ecosystem of partnerships and alliances will also be crucial for CPOs. Today, various stakeholders in EV charging ecosystem including CPOs, OEMs, retailers build partnerships within the industry or across different industries. Recent examples include:
OEM – retailer partnership: Volvo Cars and Starbucks are collaborating to establish an EV charging network at the coffee company’s U.S. stores, powered by ChargePoint, a leading CPO in the U.S.
CPO – retailer partnership: Cinemark and Ikea use Volta and Electrify charging network system in their store locations, respectively.
OEM alliances: While General Motors and Ford are partnering with Tesla on EV charging network, OEM players including BMW, Honda, Hyundai, Kia, Mercedes-Benz and Stellanti join forces to build a charging network in North America.
Key strategic questions for EV charging market entrants and existing players
Since EV penetration in Türkiye has not reached to the expected level yet, the timeliness of market entry, having the right business model in place, identification of new revenue streams, differentiating customer experience, building scalable partnerships and ecosystem will be the critical success factors for CPOs.
As Strategy& Turkiye, we suggest the EV charging industry stakeholders to conduct a thorough assessment of the market potential and competitive landscape for designing a game-changing growth strategy.
What are the strategic options that we can evaluate for a successful market entry into the Turkish EV charging market?
Which part(s) of the EV charging value chain can we create most value?
What is the size of the addressable market and expected profitability levels for these strategic options? How much do we need to invest?
What are the key market, competitive and regulatory risks that we need to mitigate?
How does the EV charging fit our existing or future capabilities?
What kind of business models can we create?
How should we design our go-to-market strategy around key target customer segments, products, pricing levels, supplier network and the required capacity?
As PwC Strategy&, we leverage our strategy-through-execution capabilities to help our clients in the various industries including energy, automotive, retail, telecom and financial services industry from day zero of their investment evaluation to various support areas including market and competition assessment, financial due-diligences, M&A research, and program management with an integrated approach.
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