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Tesla NACS: The Ethernet of EV Charging?

June 30, 2023 by Joe Panettieri

Tesla's North America Charging Standard (NACS) continues to gain partner momentum, which means the technology could emerge as a de-facto standard for electric vehicle charging systems.

That sounds like great news for the overall EV market -- and EV drivers who want a world-class charging experience that Tesla offers. But there could also be some speed bumps ahead.

Think of it this way: What happens when you plug MS-DOS and Windows users into an Apple-designed world? That's somewhat akin to what we may see as the EV industry tries to align with Tesla's charging network standards. And frankly, we don't know how the NACS charging experience will turn out for EV owners who don't drive Teslas.

It's Deja Vu All Over Again: PCs and Ethernet Networks

To understand the potential upside for Tesla and the overall EV (electric vehicle) market, take a look at the early days of PC networking.

During the late 1980s and early 1990s, PC networks navigated multiple hardware standards (Ethernet, ARCNET, Token-Ring, FDDI and ATM). Multiple network protocols (NetBEUI, IPX/SPX, DECnet, IBM SNA) further complicated matters. The net result? Many companies has multiple PC networks, mini-computer systems and mainframes that were difficult and expensive to interconnect.

Somewhere around 1995, the world began to truly standardize on Ethernet hardware (fast Ethernet, switched Ethernet, etc.) and software protocols such as TCP/IP. When Microsoft Windows 95 and Netscape Navigator each gained critical mass, those underlying Ethernet, TCP/IP and HTTP standards seemingly became ubiquitous. In theory, any networked PC in the world would be able to communicate with any other PC in the world. The power of global collaboration was unleashed.

Similar Big Bang moments occurred earlier in the railroad world -- when standardized track gauges took hold in North America. And in the world of electricity, when the United States standardized on 120V plugs.

Tesla NACS: One EV Charging Standard for All?

Now, a Big Bang moment appears to be unfolding in the electric vehicle (EV) charging network market. One by one, various automotive giants and startups have vowed to integrate with Tesla's NACS standard -- which had been positioned against the Combined Charging Standard (CCS). The lineup of companies supporting the NACS connector now includes ChargePoint, EVgo, Ford, General Motors, Rivian Automotive, SAE International, Volvo and Wallbox.

In short: Rivals want access to Tesla's US network of roughly 20,000 Superchargers, which represent 62% of all high-speed chargers installed along American roads, Bloomberg reports. Those chargers can add up to 200 miles of range to a drained EV battery in 15 minutes, the report noted

What are the additional upsides -- and are there any potential downsides? Stacy Noblet, a Forbes contributor, offered these points in an article that explained NACS vs. CCS considerations:

  • Potential Upsides: Tesla’s Supercharger network is superior to non-Tesla fast-charging networks in terms of reliability and customer experience.
  • The Caveats: That stellar stellar reputation is based only on pairing Tesla EVs with Tesla’s NACS-outfitted fast charging infrastructure; it is a closed ecosystem with no other equipment manufacturer or network provider involved.
  • Potential Downsides: As others enter the picture, the extent to which the Supercharger user experience will change is yet to be seen. 

Read between the lines, and Tesla's charging network delivers an Apple-like experience. The question is whether non-Tesla owners (akin to Windows PC or even MS-DOS users) will gain that Apple-like experience when they pull up to Tesla's charging network and attempt to plug in...

Tesla NACS: Commodity EV Charging Network Or Recurring Profit, Revenue Generator?

Assuming NACS truly emerges as a standard, then Tesla could add $3 billion in revenue in 2030 and more than $5.4 billion in 2032 from non-Tesla vehicle owners, according to a recent report from Piper Sandler, The Detroit News reported.

In the IT market, standardized products typically commoditize over time. Early Ethernet market leaders such as 3Com ultimately imploded (for a range of reasons).

Will Tesla's NACS ultimately suffer the same commoditized fate? That's difficult to say. There should be plenty of EV market growth to fuel network demand and expansion for years to come. And surely, NACS is a recurring revenue opportunity for Tesla -- rather than a one-time product sale. We'll be watching to see if the NACS partnerships live up to the market hype.

As we look ahead to 2024 and 2025, we're reminded of a famous line from baseball Hall of Famer Yogi Berra: "Nobody goes there anymore. It's too crowded."

Let's hope the NACS network strategy and partner strategy doesn't suffer that type of fate.

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