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What the Tesla Supercharger layoffs could mean for America's EV buildout

Pras Subramanian

May 4, 2024

Tesla and CEO Elon Musk's move to gut the Supercharger team is a head-scratcher. But it also may open up new opportunities for other firms.

The latest layoffs at Tesla (TSLA) this week cut close to the bone of the EV pioneer’s big competitive advantage — its ubiquitous Supercharger network.

As first reported by EV blog Electrek, Tesla laid off nearly the entire Supercharger organization, which was responsible for the build-out of its best-in-class charging network. Major automakers recently signed up to use its NACS (North American Charging Standard) plug.

Nearly 500 workers were let go from the group, including senior director Rebecca Tinucci. CEO Elon Musk made the move last week, according to Bloomberg and other sources, and it comes after Musk spearheaded a headcount reduction that totaled over 10% earlier this month. Tesla’s former head of strategic charging programs confirmed the layoffs on X as well.

The growth of Tesla’s Supercharger network, totaling 6,249 Supercharger stations and more than 57,000 connectors, will now reportedly slow and construction at certain locations will cease.

Musk addressed the Supercharger news on X, stating that the network will grow at “a slower pace” for new locations.

What this means for the future of Tesla’s Supercharger network, and the larger EV build-out across the US, is unknown and throws a lot of planning in doubt.

President Joe Biden has put tremendous political capital into the EV transformation of the US fleet of cars on the road, including a $7.5 billion build-out of the nation’s EV charging infrastructure. Through the use of public and private funding, the White House targets 500,000 new chargers by the end of the decade via the National Electric Vehicle Infrastructure (NEVI) program.

Tesla is one of the bigger White House partners in the NEVI initiative.

"Tesla has already been awarded money under the federal government's NEVI program; there's no way Mr. Musk would walk away from effectively free money,” said CEO Andres Pinter of Bullet EV Charging, one of Tesla’s Supercharger contractors, to Reuters. Pinter said Tesla’s decision to pause its Supercharger buildout was a “kick in the pants” to his business, leaving current Tesla projects in limbo.

Pinter believes that the administration’s “free money” will likely mean Musk reconstituting the charging business, as opposed to abandoning it. And Tesla’s automaker charging partners hope that is the case.

Automakers like GM, Ford, Kia, Polestar, Stellantis, Honda, and others have signed up to access the Supercharger network, and will incorporate Tesla’s NACS plug inlet in their future vehicles, under the promise that the Supercharger network would continue to grow at a steady pace.

“We have nothing new to announce regarding our plans to transition to NACS [also known as the SAE J3400 standard],” GM said in a statement to Yahoo Finance concerning Tesla’s latest move. “We are continuing to monitor the situation regarding changes to the Supercharger team and the potential impacts.”

Ford, which earlier this year received access to the Supercharger via the use of a Tesla-made adapter, said its “plans for our customers do not change” at the moment. Rivian, which also gained access to the Supercharger network this year, told Yahoo Finance that its “owners continue to have access to the Tesla Supercharger Network, and we have begun shipping NACS DC adapters to our customers.”

Most of the automakers who responded to Yahoo Finance echoed one another, with Kia also stating that its plans haven’t changed and it will build toward NACS compatibility.

The news clearly blindsided Tesla’s automaker partners, with one source at a major automaker telling Yahoo Finance the move by Tesla was “crazy.”

“Laying off the Supercharger team is going to slow access to the network for [original equipment manufacturers] … and slow the pace of infrastructure deployment,” said K.C. Boyce, vice president of mobility and energy practices at market research firm Escalent. “[Supercharger layoffs] are going to put a damper on EV sales growth for Tesla and non-Tesla manufacturers.”

Escalent’s data shows that availability and awareness of charging infrastructure impact buyers' decision to adopt EVs, and Tesla was the first car company to realize and execute on it.

Furthermore, Boyce believes Musk’s push into AI and robotaxis, which has been the main focus for investors since Musk's robotaxi reveal date earlier this month, may be at the expense of its successful charging network.

Is the Supercharger network worth the cost?

While some analysts believe Tesla’s Supercharging business could be worth billions of dollars, others are not so sure.

Peter Ramsay, a former energy analyst at Argus and BP and now editor in chief of the EV inFocus newsletter, believes Musk’s move to limit spending in charging was actually a smart move.

“Musk’s decision to reduce costs in a non-core area with ongoing high CapEx requirements and little visibility towards attractive profit margins should be seen as understandable, even if perhaps not communicated in the best way,” Ramsay wrote.

BNEF saw Tesla (prior to the move to axe the Supercharger team) pulling in $7.4 billion in revenue globally in its charging business by 2030. Tesla pulled in nearly $100 billion in revenue in 2023 alone.

The charging business should be able to stand up on its own, Ramsay believes, and then it may be worth something, eventually.

“But our view is that charging evolving from [a] tool to help Tesla growth to something judged much more on its prospects as a business opportunity — which could well progress further to a decision around a potential sell-off of the division to a more natural owner — could be overall positive.”

Tesla’s move to curtail the growth of the Supercharger network also opens up pathways for other companies to step in.

“EVgo is actively engaged 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 nationwide fast charging network,” said Sara Rafalson, EVgo’s senior vice president of market development and public policy, to Yahoo Finance.

While EVgo is one of the bigger players in the industry, others believe a new player could emerge and take on what Tesla started.

“This unexpected move by Tesla is not indicative of a broader trend or fundamental issue with the EV charging business model. Instead, it points to an open opportunity in the industry,” said Patrick Sullivan, CEO of commercial charging firm EV Realty.

Sullivan believes this is a moment for others to step up and lead “version 2.0” of the charging industry, as it moves toward open standards and interoperability. Those 500 or so laid off from Tesla have valuable expertise, he said.

“Tesla alumni are already everywhere, including on our own team, where they 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 we will see the force multiplier of this talented group of professionals once they find new roles at companies in this space.”

Ramsay noted in a post published on Wednesday that in Tesla’s Q1 earnings report, “Services & Other” gross profit tumbled by 40% to $81 million, and the “largest material factors” in the segment had nothing to do with charging, but revolved around used car sales profit and parts sales.

Moreover, Ramsay cites BNEF estimates that Tesla only generated $1.74 billion last year in charging revenue, or 1.5% of total revenue. While the charging business was expected to grow in upcoming years, the business is still a “fairly insignificant” part of Tesla’s small services division that barely makes any money, relatively speaking.

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