Tesla (TSLA) just lost out on an opportunity that could have helped expand its electric vehicle (EV) charging network.
In April 2024, the state of Oklahoma offered a federal funding package of more than $8 million for three companies to build EV chargers across the state.
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It selected Tesla, Francis Energy, and local convenience chain Love's Travel Stops to build the network of direct current (DC) fast chargers along its interstate highways. The three companies provided $7 million in private funding.
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The plan's first phase required Tesla to build Superchargers in Catoosa, Henryetta, and Oklahoma City. But now, local Oklahoma news has confirmed that the industry leader could not meet the requirements to comply with the program, prompting state commissioners to vote unanimously to replace it with a much smaller rival.
Turning on Tesla: Why Oklahoma officials switched gears
It’s not often that a company that trades at penny stock levels is awarded a contract that a Magnificent 7 member could not fulfill. But that’s exactly what happened. The state of Oklahoma has replaced Tesla with EVgo (EVGO) , an EV charging and infrastructure company that doesn’t often make headline news.
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According to local outlet OK Energy Today, Oklahoma officials were forced to remove Tesla when it failed to meet program standards. While a specific reason why Tesla could not meet them is not given, Electrek reports that EV chargers needed to be equipped with Combined Charging System (CSS) technology to qualify for the National Electric Vehicle Infrastructure (NEVI) funding.
Most EV chargers come with this adapter but Tesla’s Superchargers do not. That may be why Oklahoma opted to replace it with EVgo.
Jared Schennesen, multi-modal division manager of the state’s commissioners, did not provide much context on Tesla. However, he did note that EVgo significantly reduced the total cost of the project, lowering it by $317,932 after receiving $519,740. “The federal share of the project will increase by $201,781, bringing the final total to $801,780,” he stated.
EVgo may be a fraction of Tesla’s size and operate at a much smaller scale, but its network is fairly wide and continues to grow. It currently boasts a network of over 1,000 DC fast chargers across 40 states.
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Earlier this year, the company teamed up with General Motors to install 2,850 new DC fast-charging stalls by the end of 2024, and today, it reported the opening of its 2,000th. DC fast charging is often appealing to EV drivers, as it takes up to 80% less time than other methods. That’s likely why Oklahoma officials opted for it.
A rising star among EV charging stocks
Tesla likely won’t be too negatively impacted by the loss of the Oklahoma NEVI award. After all, it still maintains one of the largest EV charging networks in the U.S., and its growth is primarily driven by car sales, not charging infrastructure installations.
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However, EVgo is establishing itself as a rising star in the EV charging market. The company’s ability to lower production costs for the state of Oklahoma when Tesla could not suggest it is scaling its operations cost-effectively.
If so, it could win over more states looking to expand their charging infrastructure, particularly for DC fast chargers. Rural states with limited EV charging options may be even more likely to follow Oklahoma’s example, allowing the company to establish a valuable niche in the EV charging market.
That could be welcome news for investors. After all, while EVgo's revenue of $67.5 million grew 92% year over year last quarter, it still reported a net loss of $33 million.
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