Electric vehicle charging has become a big aspect of commercial real estate. There are significant practical issues facing property owners who are trying to anticipate how many residents or commercial tenants or consumers will expect to plug in when they park.
There are big financial implications as well: equipment, installation expertise, running enough power capacity, potentially tearing up existing parking spaces to make them charge-worthy. Some new business strategies, based on energy-as-a-service business models, have firms providing the capital and services to property owners and then taking monthly payments so the financing is spread over time but as operational costs, with the immediate tax deductions that follow.
There’s also been a lot of hype. Get ready now or the EV avalanche will bury you when no one wants to rent your apartment, office, retail, or industrial space. Certainly, some data has been convincing. According to the U.S. Energy Information Administration, using data from Wards Intelligence, EVs and hybrids took 10.9% of light-duty vehicles sales in 2021. According to the Wall Street Journal, EV-only sales were 5.8% of all vehicles sold in 2022, up from 3.2% the year before.
But there are supply problems that are already dampening things. One is rising prices. Tesla, as an example, has been whipsawing through multiple price changes: previously dropping, now up low single-digit percentages, as Reuters reports, although still lower than at the beginning of the year.
“The rising cost of lithium and other battery minerals have prompted car makers to raise prices, which could sap demand,” the Journal wrote. “The average price paid for an EV in the U.S. hit about $66,000 last summer, up from about $51,000 a year earlier, according to J.D. Power.” The average new car price is $48,275, according to Kelly Blue Book. High interest rates make auto loans more expensive, and so the total cost for consumers rises.
Then there are production pressures, shown by multiple EV manufacturers cutting their 2023 outlooks, as the Journal separately reported. Startups Polestar Automotive, Lucid Group, and Fisker have all lowered production expectations. They can’t make enough cars for a variety of reasons.
Warren Buffett said at the May 6, 2023 annual meeting of Berkshire Hathaway, as Yahoo Finance reported, “Charlie [Munger] and I long have felt that the auto industry is just too tough. It’s just a business where you’ve got a lot of worldwide competitors, they’re not going to go away, and it looks like there are winners at any given time, but it doesn’t get you a permanent place.”
It may be true that EV use will increase, but with supply and affordability issues, adoption is currently uncertain. Before going all in on EV charging, CRE property owners would be well served to watch the market and see when manufacturers go all in on product and consumers on purchases.
