EV Charging Business Models: Pros And Cons

Installing electric chargers today is not only about preparing your business for the shift in transportation. It is also a way to generate more profit and attract more customers. Public charging stations can make your business more profitable and become a revenue stream on its own.

Nowadays, businesses must search for creative ways to boost their customer spending. One of the easiest ways to do that is to transform your regular parking lot into an electric vehicle charging destination. In this guide, you will find the pros and cons of four different business models for electric car charging at commercial properties. Choosing one of these strategies will depend on the nature of your business and its objective.

Loss-Leader Model

With this model, customers can use electric charges for free. The goal is to attract and retain customers. A free top-up can be the determining factor for drivers when choosing a location. The increased revenue acquired through existing business activities will cover the installation and servicing costs.

Pros

• Attract more EV charging customers than with paid models

• Encourage on-site spending

• Grow brand loyalty

Cons

• Liability for the electricity and installation costs

Note: If your business primarily depends on customers arriving by car and spend about at least 45 minutes at your location, you could consider this option as the revenue earned from the drivers may dwarf the cost of electricity.

Total Cost Recovery Model

With this model, EV drivers have to pay for electric vehicle charging. The fee matches the operational costs. When operational cost is sought, an additional margin is added to pay back installation and hardware costs.

Generally speaking, electric car drivers are more and more accepting of paying a fee to charge their vehicle. Most of them judge the value of the price against their home electricity rates. So, the chargers’ hosts will collect revenue if they set prices within the window of what EV drivers find acceptable.

Pros

• Better for rapid electric chargers

• Attract more EV charging customers than profit-making models.

• Enable your charging stations to pay for electricity

Cons

• Attract fewer drivers than with loss-leader model

Note: Consider the need state of your potential customers. A driver that is about to have a long journey ahead will be more willing to pay for electric vehicle charging.

Profit-Making Model

Drivers have to pay to use the chargepoints. That payment is to cover installation, hardware and operational costs and ensures a profitable revenue stream.

Pros

• Attract and retain some EV charging customers

• Charge stations will pay for themselves and generate profit

• Better for rapid electric chargers.

Cons

• Fewer attracted customers compared to other models

Note: Make sure that customers will not think of your business as unfairly exploiting drivers as it may cause reputational damage.

Fully Funded Model

Charging station providers may offer to provide and install electric chargers for free. Make certain that what the offer is of mutual benefit to you and your customers. 

Pros

• Attract and retain some EV drivers

• No operational cost

Cons

• Potential loss of control over charging experience and pricing

When choosing an electric charging business model, it is essential to find the most effective option not only for your particular location, type of business and visiting driver but also for the desired budget.

Choose the loss-leader model if you have the budget for installing charge points and your regular customers spend at least 45 minutes spending money at your business property. Both total cost recovery and profit-making models allow paying for electricity and generating revenue.

When choosing a Fully Funded option, you will not need any start-up capital. However, you will not gain any profit from the charging stations.