Tesla and CEO Elon Musk's move to dissolve the charging business team is puzzling. But it may also open up new opportunities for other companies.
Tesla's latest layoffs have all but completely destroyed the electric car pioneer's enormous competitive advantage — its ubiquitous network of Superchargers.
As the electric car blog Electrek first reported, Tesla fired almost the entire Supercharger organization, which is responsible for building a best-in-class charging network. Major automakers have recently signed agreements to use NACS (North American Charging Standard) plugs.
Nearly 500 employees were laid off, including senior executive Rebecca Tinucci. According to sources, CEO Elon Musk made the decision last week, after Musk spearheaded layoffs earlier this month, totaling more than 10% of the workforce. Tesla's former head of strategic charging projects also confirmed X's layoffs.
Tesla's Supercharger network currently has a total of 6,249 Superchargers and more than 57,000 chargers, and the current rate of growth will slow and construction will halt in some locations.
Musk made news about Superchargers on X, saying the network will grow at a "slower pace" in new locations.
What that means for Tesla's network of Superchargers, as well as the future of larger EV construction across the U.S., is still unknown, and raises questions for many plans.
The current U.S. administration has invested enormous political capital to drive the EV transition for U.S. cars, including a $7.5 billion U.S. EV charging infrastructure. Through the use of public and private funding, the White House has adopted the National Electric Vehicle Infrastructure (NEVI) program, which aims to install 500,000 new chargers by the end of the decade.
Tesla is one of the White House's larger partners in the NEVI program.
Tesla has received funding under the federal government's NEVI program, and Andrés Pinter, CEO of Bullet EV Charging, one of Tesla's Supercharger contractors, said in an interview: "It's impossible for Mr. Musk to give up the low-hanging fruit. Pinte said Tesla's decision to suspend charger construction was a "blow" to his business and would put the current Tesla program in a difficult position.
Pinter believes that the government's "free money" could mean that Musk will restructure the charging business rather than abandon it. Tesla's partners hope the same.
Automakers such as General Motors, Ford, Kia, Polaris, Stellantis, Honda and others have signed agreements to join the Supercharger network and will add Tesla's NACS plug entry to future vehicles, promising that the Supercharger network will continue to grow steadily.
Regarding Tesla's latest move, GM said in a statement: "We have nothing new to announce regarding our plans to transition to NACS, also known as the SAE J3400 standard." "We will continue to monitor the changes in the Supercharger team and their potential impact. ”
Earlier this year, Ford acquired access to Superchargers by using adapters made by Tesla. Ford said that at this time "there will be no change in the plan for customers". Rivian has also been granted access to the Supercharger network this year, with the company saying that its "owners continue to have access to the Tesla Supercharger network, and we have begun shipping NACS DC adapters to customers." ”
Most automakers have responded in the same vein, with Kia also saying that its plans have not changed and will move in the direction of NACS compliance.
The news apparently took Tesla's automaker partners by surprise, with a source at a major automaker telling us that Tesla's move was "crazy."
K.C. Boyce, vice president of mobility and energy practice at market research firm Escalent, said: "Layoffs will slow down [OEMs'] access to the network...... and slow down the pace of infrastructure deployment. "[Charger layoffs] will dampen EV sales growth from Tesla and non-Tesla manufacturers. ”
Escalent's data shows that the availability and awareness of charging infrastructure can influence buyers' decision to buy an electric vehicle, and Tesla is the first car company to realize this and put it into practice.
In addition, Boyce believes that Musk's foray into artificial intelligence and robo-taxis (which has been a major focus of investors' attention since the release of Musk's robo-taxis earlier this month) could come at the expense of his successful charging network.
Is the charging network worth the money?
While some analysts believe that Tesla's supercharging business could be worth billions of dollars, there is no consensus.
Peter Ramsay, a former energy analyst at Argus and BP and now editor-in-chief of EV inFocus newsletter, believes Musk's move to limit charging spending is actually a smart move.
In an article published Wednesday, Ramsey noted that in Tesla's first-quarter earnings report, gross profit for "services and other" fell 40% to $81 million, and that the "biggest material factor" in the area has nothing to do with charging, but around used car sales margins and parts sales.
In addition, Ramsey cited agencies as estimating that Tesla's charging revenue last year was only $1.74 billion, accounting for 1.5% of total revenue. While the charging business is expected to grow in the coming years, it remains a relatively "pretty insignificant" part of Tesla's smaller service divisions and barely makes money.
Ramsey wrote: "Musk's decision to reduce costs in non-core areas should be seen as understandable, although perhaps not communicated in the best possible way. ”
It is estimated that Tesla's global charging business revenue (before laying off the charger team) will reach $7.4 billion by 2030. In 2023 alone, Tesla earned nearly $100 billion in revenue.
Ramsey believes that the charging business should be able to grow independently, and then it may eventually prove its worth.
"But our view is that charging stations will evolve from a tool to help Tesla grow to something that can be judged more on the prospect of its business opportunities – which is likely to evolve further into a decision around the potential sale of the division to more natural owners – is likely to be positive overall. ”
Tesla's move to limit the growth of the Supercharger network has also opened the way for other companies to step in.
"EVgo is actively participating in the development of the J3400 standard as a voting member, and we look forward to welcoming more Tesla drivers to our network as we add NACS to our national fast-charging network," Sara Rafalson, EVgo's senior vice president of market development and public policy, told Yahoo Finance. ”
While EVgo is one of the larger players in the industry, others believe that a new player could emerge and take over the business started by Tesla.
"Tesla's unexpected move is not indicative of a more obvious trend or fundamental problem with the EV charging business model. Patrick Sullivan, CEO of EV Realty, a commercial charging company, said: "On the contrary, it shows that there is an open opportunity in the industry. ”
Sullivan believes that as the charging industry moves towards open standards and interoperability, it is time for someone else to step up and lead the charging industry "version 2.0". He said the roughly 500 people who were laid off at Tesla had valuable expertise.
"Tesla alumni have become ubiquitous, including on our own team, who have been instrumental in helping us build low-cost, high-utilization EV charging solutions for our fleet customers," Sullivan said. "I have no doubt that once these talented professionals find new positions in companies in this field, we will see their power multiplied. ”