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Market Segmentation Drives Both EV Adoption and Demand for Charging Infrastructure - Ep. 4

In this series of articles, I’ve explored the drivers of electric vehicle (EV) adoption, the development of EV charging infrastructure, and some confusing myths around what will become one of the largest infrastructure transitions in history.

In my first article, 'De-bunking the Myth of Consumer Preference in EV Adoption', I showed that government regulation drives EVs adoption far more strongly than does consumer choice. In the second 'De-bunking the Myth of Price Parity in EV Adoption', I looked at how the higher prices of EVs don’t seem to inhibit their adoption, and in the latest 'De-bunking the Myth of Charging Infrastructure and EV Adoption', I demonstrated that the development of public charging infrastructure (or lack thereof) doesn’t necessarily drive the take-up of electric vehicles. 

Here, I’ll further develop that infrastructure point, presenting a logical approach to projecting where driver demand for charging resources will emerge, when it will emerge, and what types of infrastructure will be demanded. 

EV Adoption Drives Demand for Charging Infrastructure 

With far less than 2% of the global car parc electrified, nobody yet knows how, when, where, and at what cost drivers are eventually going to want to charge their EVs. Here at Steer, we serve both public and private-sector clients with a pragmatic and commercial approach to defining “good” charging infrastructure as a function of the scale of cash flows produced and of their predictability.

Emerging demand for charging infrastructure is driven by the pace of EV adoption. The adoption curve reflects both the expanding penetration of EVs within new car sales and the ageing out of increasingly older ICEs.

Acknowledging both the 2030 prohibition on the sale of new diesel and petrol-powered cars (ICE) by the EU, UK, many American states, and other governments around the world and the average useful life for an ICE of about 20 years, we should expect nearly 100% fleet electrification by 2050. 

Expanding this curve to our global car parc, some simple calculations indicate that the World may require $1.5 trillion of investment in EV charging infrastructure by 2050. From an investor’s point of view, the commercial viability of that infrastructure relies on a robust projection of where demand will emerge, when it will emerge, and specifically what types of charging infrastructure will be demanded. 

Market Segmentation Better Defines the Where and When of Emerging Demand 

To date, much of the EV adoption in the UK has exploited a subsidy within tax-efficient company car and salary sacrifice schemes. Not surprisingly, the EV penetration of company-registered cars here is 9x that of privately registered cars.

As growing EV production outstrips demand from these tax-efficient structures, manufacturers will re-direct excess supply through a cascade of decreasingly profitable market segments. “Premium” and then “value” retail segments attract supply before lower-margin commercial programs (e.g., car rental fleets, etc). Finally, used markets emerge as new EVs cycle through their initial owners.

Discreet characteristics of these market segments shed particularly useful light on the “where” and “when” of emerging demand. As an example, tax-efficient and premium retail drivers tend to display higher levels of household income and enjoy better access to off-street parking with convenient and inexpensive residential charging. Their “first mover” adoption of EVs and wider access to private charging resources delays demand for public charging resources, particularly within identifiable residential neighbourhoods.

A Simple but Crude Lexicon of EV Charging Resource

Household Type
Off-street (65% of total)
On-street (35% of total)

Home Charging
Private AC resources drawing from the homeowner’s domestic supply
Public curbside and other resources selling AC supply on a retail basis
80% of total demand

Away-from-home Charging
Publicly available and typically more costly rapid/ultra-charging (e.g., motorway services and retail/leisure destinations) selling DC supply on a retail basis
20% of total demand

Impact for Investors 

Developers of commercially viable EV charging infrastructure must decipher where demand will emerge, when it will emerge, and what types of infrastructure will be demanded. Mandated by government regulation, the pace of EV adoption drives such demand, and by considering manufacturers’ segmentation strategies, investors gain access to a more nuanced predictability of the location and timing of demand for charging infrastructure. 

By translating the real-world experience of EV charging into financial return metrics, we help define this emerging asset class that will attract huge investment from both equity and more structured vehicles through the next several decades. 

Catch up on our Steer New Mobility: Busting Myths - EV Vehicles series...


climate change, new mobility, sustainability, behaviour change, infrastructure, myth busting, disruptive technologies, technology & digital, cities & places