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Electric vehicle market is growing rapidly, and the EV charging market is growing even faster. But running an electric vehicle charging business is not a profitable business for most service providers – at least not yet. One of the main reasons that hamper the profitability of EV charging business is hidden costs. What are they & how to avoid them?
Guests: Timo Kenttälä, Product Manager at Oomi Energy & Aleksi Patana, Country Manager at Virta
Host: Jason Millward
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If you are not able to listen, you can read the transcript below.
Intro
Jason M.
Hello there and welcome. My name is Jason Millward and you are listening to Plugged into Virta - the electric vehicle charging podcast. The future of mobility is electric. In this podcast we will discuss the newest and hottest topics in the world of e-mobility, smart EV charging, energy management and the business around it. We will go under the surface and discuss openly about the challenges, opportunities, solutions, and trends.
We will give you honest, fact-based information and tell you what it means in practise, in plain English. So, if you want to hear insights from top experts, learn more about the world of EV charging and the future outlook, or just want to listen to some inspiring stories from around the world of EV charging, this podcast is for you.
Interview
Jason M.
So, in today's episode, we're going to talk about hidden costs in EV charging business and how to avoid them. My guests today are Timo Kenttälä and Aleksi Patana. The electric vehicle market is growing rapidly and the EV charging market is growing even faster. But running an electric vehicle charging business is not a profitable business for most service providers, at least not yet. One of the main reasons that hamper the profitability of EV charging businesses is hidden costs. What are they and how to avoid them?
So, before we dive into today's subject and talk about the profitability of EV charging business, maybe you guys could just introduce yourselves and tell us a bit about yourselves.
Aleksi P.
Hello, I am Aleksi Patana from Virta and I work as a senior sales manager in Finland, but let's forget about the titles. What I am doing here is helping our partners to succeed and that is the main point here. I am the coordinator and the person that will help Timo and others in Oomi, every time there is something wrong. Or every time there is something that is a bit more complex, and you cannot take care of it via email or something like that.
So, the idea is that we can cooperate and make everything go as easy as it can be for mutual operations as a reselling entity that can have ready made products and operate very easily and cost efficiently. So that is what I am basically doing at this point. I think it is going just nice. How about you Timo?
Timo K.
Thanks, Aleksi. So, this is Timo Kenttälä from Oomi Energy Company. I work as a product manager at Oomi and I pretty much do everything related to e-mobility at the moment. So, the main tasks are to develop the business model in general. How can we make ourselves some money in this field. That includes finding the right solutions, partners, finding the right customers, et cetera. It is a very interesting market to work with and I am very excited about this business in general.
Jason M.
Oomi was established in the spring of 2020 and it's one of the biggest energy companies in Finland. Oomi offers electric car charging to housing cooperatives, homeowners, and companies on a turnkey basis. Timo, why did Oomi decide to enter the EV charging business?
Timo K.
Well, of course we all know the situation that we need to get rid of the fossil fuels and that needs to be done rather quickly. As we know that there are a lot of passenger cars and also heavy-duty vehicles running on fossil fuels and they need to be transformed into electric ones in a large scale. So, there is a big business potential here. And that is what we are looking for, of course. As our roots are in the energy business, that is a logical step for us. So, Oomi sales electricity, we do also solar power systems to companies and private people as well and getting charging solutions for electric vehicles is a logical step for us.
Jason M.
What does it take to run an EV charging business? I mean, if I would want to start offering EV charging services to my customers now, what would I need?
Timo K.
That requires quite a lot in the end, so of course you could do this in a rather simple way without any, let's say smart solutions, but that does not enable you to, for example, do the invoicing et cetera. All the maintenance tasks and that kind of background operations need to be taken care of.
So, what we do at Oomi, we focus to market and sell the right solutions to our customers and that is our focus area and to be able to succeed in this task, we need to find the right partners and solutions who can support us and that is why we approached Virta. They can offer us quite a nice package that we can resell with our own brand.
Aleksi P.
I could continue and say that the biggest point what we are doing at Virta is that we are trying to make the EV charging so easy for Oomi that they do not even need to care about most of the things - that nitty gritty, little stuff and very hard things to nail in this whole thing called EV charging. Especially combining private and public charging and making a seamless solution. It requires a big scale, bigger than Finland has, bigger than probably most European countries have, so that can be made into business. So, what we try to do and what we are succeeding at is that we make the solution itself for the end customer so that Oomi can concentrate on selling the whole solution to B2B businesses or households, so they do not have to deal with the multiple sides of things, because this is a bigger thing. This is not possible to be made from five or so pieces. It is bigger than what someone or some corporation can build from separate stuff themselves in a small scale within the country. This is much broader thing to nail so that the end customer gets what they really need. The expectancy of an end-customer is very high in EV charging.
Jason M.
Virta is just trying to provide the glue, the infrastructure to hold that together and then make it easier for companies like Oomi to just go ahead and sell what they need to their customers without having to worry about all the back-end functionality and all that sort of business, right?
Aleksi P.
Yes, if we succeed in the best way, Oomi shouldn’t even know or think about this rather nitty gritty or hard things like back-end problems or hardware solution problems that come from the product development. They should not even think about those, or at least their sales. Of course, Timo and I will talk about those quite a lot.
The person selling our solution via Oomi, it is really getting the best solution that they can sell and they can upscale quite fast in their own business model when selling other solutions like solar PV and electricity and have one of the products for EV charging that feeds all the important needs.
Jason M.
Okay. So, let’s be clear and honest here. Is the EV charging business profitable yet for most players? Why? And what are the main reasons?
Timo K.
I guess that quite a clear fact, that not too many players in the market are making good profit yet. And of course, if we look at the statistics, we know that there are not too many battery electric vehicles out there yet. For example, in my home country Finland, we have about 2.7 million passenger vehicles, and as I recall right, we have about 10.000 battery electric vehicles on the roads, so there are not so many possibilities to make business by selling the electricity through the chargers yet.
But as we know, the forecasts may be that within 5 to 10 years, we will have a significant number of cars on the roads and the market is developing very rapidly, so that is what we are very keen on.
Aleksi P.
Yeah, I think what Oomi is doing very nicely is to build up a big foundation to do the whole business when it starts to scale. We can help them to build their network and build their customer’s network ahead. They can build from 100 charges, to 2.000 charges to 10.000 to one million quite easily with this approach. It will not stop in a certain point because there is something that needs to be taken care of, and it was not thought through when the business started. Oomi has a great chance because Oomi is quite new company and you got to choose what you start doing in a quite well-placed time.
Jason M.
You mentioned hidden costs. What do you mean by hidden costs? Can you elaborate on this a bit?
Timo K.
Yes, there is actually quite a lot going on behind the scenes, so if you take a look at the charging point, for example, if it is a hotel or golf court or anything like this, one needs to recognise the charging point at some technique, the invoicing needs to be taken care of, all the credit details, customer support, privacy policy, et cetera.
And these are all the same things, whether you have one or 1.000 charging points, you need to take care of that technology and also human personnel behind that to be able to provide the service. We at Oomi, we are not doing this ourselves. And here is where we benefit from the Virta platform and their technology and expertise.
Aleksi P.
Yeah, I think that's pretty nicely put. I think most of our solutions, they are going further than that when we go international. There are things like VAT, taxation wise it is pretty hard, because every country has different kinds of laws and when two countries say that: “We want the VAT from the same charging event.” There needs to be some international company that can take care of those cases, because there is a lot of traffic between Finland and Sweden or Finland and Estonia for example.
And when we go to the middle of Europe, the transportation between countries, it is much broader also. So, there's stuff like that that Virta tries to take care of and has the best solutions in the world at this time, because those things will not scale up if we only build things from one country or one company perspective. Virta is trying to combine multiple companies in their platform and Oomi is one of the greatest companies in Finland doing stuff like this. We try to make it seamless because, correct me if you want Timo, but I think Oomi will quite nicely stay in Finland and not go to Sweden and other countries at this time.
Tomi K.
At least for the next years to come, I think we will. We will focus on Finland, but you never know what happens in the future.
Aleksi P.
That is for sure. But there might be some charges that come to an Oomi charger from Sweden, so these problems may sound small at this time, but when we scale that business up from 1.000 to 1.000.000, this will be a major problem. And when there are two governments telling you that you are doing this wrong, that is not a nice place to be.
Jason M.
Timo, Oomi Energy has found a way to avoid these hidden costs. Could you tell us more about your business model and your cooperation with Virta?
Timo K.
Yes, sure, I already mentioned a little bit earlier that we rely here on Virta and we use their technology and services as background in our own system and offering to our customers. So really Oomi focuses on marketing and selling charging solutions to our customers, whether they are private people or companies, et cetera.
And to be able to do this, we need a strong partner who takes care of the invoicing, credit details, private policy, VAT things et cetera. So that is kind of the configuration here when it comes to the business case. We do the sales work, the marketing work and we build our own charging brand based on the Virta motor, if you could put it that way.
Aleksi P.
That is really nicely put. I think you are doing great. The co-branding and the brand you have built in relatively little time is quite strong already and I think it will get a lot stronger in Finland and maybe people abroad also want to see what is happening in Finland, via Oomi.
Jason M.
What does the future look like? Where are we going to be in the next five years. Do you think this will be profitable by then?
Timo K.
For sure, I think that's quite obvious at the moment. All the forecasts show strong growth in this field. So, if we have the strong growth, that is quite clear that there are business possibilities ahead of us. So, this is now a good time to enter the market and find your own concept, and really develop the whole business model that is related to this. E-mobility is actually quite a large business area, so you can approach the market in different ways. And I know that many companies have little bit adjusted their business model during the past years and I believe that you need to be quite aware of the current market situation during the years to come also. You cannot fix just one business model and stick to that, but rather be actively looking for new possibilities and find your own way to succeed in the market.
Aleksi P.
I agree completely. The point is that now it is a good time to start in the market and to have a ready solution. You cannot start practising at this time because, well, at least the device selling and EV charging will be a big business in a few years, and those who do not manage to get their solution as a complete solution to work in few years, they will probably need to think of something else.
But market growth is still exponential, so now it looks bad, but it will look very good at certain point. The difference between Virta and Oomi at this point is that we can provide a solution and you can make money a bit earlier than we can, because we are doing the big work behind and that does not scale that fast. We need millions of EV drivers to scale that up to a very profitable business. But selling charger units and the full service, while knowing all the costs so you can calculate your business models via that, that helps to get the reselling business to be profitable a bit earlier than the whole EMP or what Virta does, the whole end-user solution, back-end solution as a profitable business.
Jason M.
Any final thoughts or topics you would like to discuss before we finish up?
Tomi K.
Well, there is a lot to discuss about the EV business for sure, but I think we have a limited time. So, I guess we can do another podcast, maybe with some other theme in the next months or years to come. I am very excited to be involved in this business area. Personally, I have been fond of cars since I was a little boy and I have a background in electric technology, so it is very nice to be able to work in this field at the moment. I’m really excited about the future.
Aleksi P.
Yeah, for sure we will invite you to a future podcast. If we will continue making this and I do not see why not. Thank you very much for joining us.
Jason M.
Guys, thank you very much. It has been a pleasure.
Outro
Jason M.
And that’s it for this episode of Plugged into Virta: The electric vehicle charging podcast. Thank you for listening!
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Until next time, thank you for joining us. Let’s take charge of the future – together.
