Tesla won the EV charging race. So why’s it gutting its Supercharger team?

Tesla plans to lay off roughly 500 employees in its electric vehicle charging business — a surprising move that industry experts warn could threaten the reliability of the company’s nation-leading network of EV charging sites, complicate its execution of federally funded public charging projects, and disrupt its work with automakers that have committed to using a standardized version of Tesla’s proprietary charging system in their future EVs.

The decision from CEO Elon Musk comes as the beleaguered EV manufacturer seeks to regain investor confidence amid the weakening sales and rising competition that have contributed to a nearly 30 percent plunge in its share price so far this year.

Tesla has installed more than 57,000 of its fast-charging ports worldwide. Its U.S. Supercharger network is larger than all its competitors’ networks combined, and considered the most reliable as well. Over the past year, major automakers and U.S. EV charging companies have begun to build their future charging plans around the company’s underlying technology, deprioritizing the competing technology they had previously pursued. Analysts have projected Tesla’s charging business could deliver hundreds of millions of dollars in annual profit by decade’s end.

Despite these successes, it’s likely that the company’s Supercharger network is a money-loser at present. That’s the case for almost all other public EV charging providers in the U.S., most of which still have too few customers to pay off their up-front costs.

Those difficult economics could have figured into Monday’s decision, which has decimated the business group that put Tesla on top of the EV charging world — and shocked the broader EV industry.

“All the information I’ve seen points to Tesla taking an ax to a problem where a scalpel might have been more appropriate,” said Nick Nigro, founder of Atlas Public Policy, which tracks data on EVs and charging networks. The cuts are on top of Tesla’s plans to lay off 10 percent of its global workforce — about 14,000 employees — to reduce costs and refocus the company on Musk’s stated priority of developing self-driving vehicles.

Beyond price, a lack of access to reliable charging stations is one of the main barriers holding back EV adoption. In survey after survey, consumers flag it as a top concern. The ubiquity and reliability of Tesla’s EV chargers have, for this reason, been strong advantages for the company, but Nigro said the layoffs have now thrown that into question.

“A lot of drivers are buying Teslas due to the certainty of the Supercharger network,” Nigro said. ​“That certainty could wane in the future if the reliability of that network suffers.”

Tesla doesn’t intend to shut down its Supercharger network. Musk stated in a post on his social media platform X (formerly Twitter) that the auto company ​“still plans to grow the Supercharger network, just at a slower pace for new locations and more focus on 100% uptime and expansion of existing locations.” Some analysts have defended the move, given the harsh economics of the charging business and Tesla’s need to cut costs and refocus.

But Nigro echoed a broader view among EV charging experts that ​“losing a lot of staff who have institutional knowledge and expertise, which is going to be hard to replace, was a bad call.”

The saving grace for the roughly 500 people losing their jobs, he said, is that ​“those folks are going to quickly find new jobs, either at other automakers or charging providers or at electric utilities, because their expertise is very valuable to this market right now.”

An unexpected turnaround for an EV charging leader

The layoffs in Tesla’s Supercharger group were first reported Monday by The Information, which cited an email from Musk to senior staff. That email announced the termination of Rebecca Tinucci, senior director of the EV maker’s Supercharger business.

Tinucci led the effort by Tesla to persuade Ford, General Motors, and other major automakers to choose the North American Charging System (NACS), the proto-standardized version of Tesla’s unique charging plug and underlying technology, as their preferred technology, rather than the Combined Charging System (CCS) technology standard now used by almost all non-Tesla EVs and charging stations in North America and Europe.

Since mid-2023, almost every major automaker has committed to build NACS connectivity into future EVs for the U.S. market. Most major EV charging manufacturers and network operators targeting the U.S. market have followed suit with pledges to support NACS as well as CCS.

In the wake of Tesla’s layoffs, many of these companies restated their commitment to NACS. Representatives for Ford and General Motors told E&E News that their plans to integrate the NACS design into U.S. EVs starting in 2025 have not changed.

Electrify America, one of the largest U.S. public charging networks other than Tesla, remains committed to its work to offer NACS options at its charging stations in 2025, spokesperson Octavio Navarro told Canary Media.

EVgo, another major U.S. public charging operator, is ​“actively engaged in the development of the J3400 standard” and ​“looks forward to welcoming more Tesla drivers to its network as it adds NACS to its nationwide fast-charging network” starting later this year, Sara Rafalson, the company’s executive vice president of policy and external affairs, told Canary Media.

Whether these plans can hold steady in the midst of Tesla losing the hundreds of employees who have made its charging network as reliable as it is today remains unclear, however.

William Navarro Jameson, strategic charging-programs lead at Tesla, tweeted on Tuesday that Musk ​“has let our entire charging org go. What this means for the charging network, NACS, and all the exciting work we were doing across the industry, I don’t yet know.”

Can charging partners and customers rely on Tesla? 

Jameson also noted in his tweet that the NACS charging technology is ​“not dead, thankfully, since J3400 has already taken up the torch.” J3400 is the standard, certified by automotive standards organization SAE International earlier this year, that makes Tesla’s formerly proprietary NACS charging technology available for use by other companies.

Still, without the Tesla charging team to shepherd the ongoing implementation of that technology across the industry, ​“further improvements to standards and engagements across the industry will suffer,” Jameson wrote.

Tesla’s layoffs also cast uncertainty over the projects the company has won with state transportation departments as part of the Biden administration’s National Electric Vehicle Infrastructure (NEVI) initiative, a $5 billion formula grant program created as part of the 2021 Bipartisan Infrastructure Bill.

According to data from the EV and charging analytics firm EVAdoption, Tesla won 18 percent of the projects awarded in the earliest round of NEVI awards for five states, worth about $8.5 million, The Wall Street Journal reported in September. By February of this year, Tesla had racked up wins for projects in seven of 15 states that had announced their NEVI awards, according to EVAdoption data, E&E News reported.

To participate in the federal program, Tesla had to make its chargers usable by EVs beyond its own — a requirement seen as the impetus behind Tesla’s push to make NACS an open standard.

But simply certifying the NACS technology standard is just the first step in a long and arduous process of working with multiple EV and charger manufacturers, technology providers, and public and private-sector partners, said Nigro of Atlas Public Policy — work that’s all new to the previously closed-off Tesla. The checkered history of other U.S. public charging networks, which have struggled to maintain high levels of reliability and service quality despite using a common charging technology standard, indicates how hard that can be in the real-world.

“There’s a lot of external communication that goes on between a charging provider like Tesla and utilities, state agencies, or automakers trying to get access to the Supercharger network,” Nigro said. ​“Losing those contacts and all the expertise is going to be expensive and will introduce delays in the rollout of new charging sites, or the availability of the Supercharger to more automakers.”

There’s an enormous gap between the EV charging that’s been deployed to date and what is needed to meet the Biden administration’s goal for EVs to make up half of all U.S. car sales by the end of the decade. Analysts predict that the U.S. will need between 500,000 and 1.2 million public charging ports by 2030 to achieve that goal. The Department of Energy’s National Renewable Energy Laboratory estimates that the U.S. will need 182,000 fast chargers to support between 30 million and 42 million EVs on the road by 2030.

Today, the country has just over 41,000 fast-chargers — and more than half were built by Tesla.

What is EV charging worth to Tesla? 

The value of the Supercharger network to Tesla’s underlying EV business is hard to determine.

From the perspective of its value as a marketing and sales tool, ​“it’s likely a very sizable profit center for the company,” given its intangible but unquestioned value in convincing EV buyers to opt for a Tesla instead of a competing EV, Nigro said.

“If you just look at it as a seller of energy, that’s less clear,” he said. ​“Making money selling electrons is hard.”

Tesla doesn’t break out the performance of its Supercharger business unit in its broader financial reporting. But Bloomberg estimated in April that the company generated about $1.74 billion in revenue from its chargers last year.

Given its prospects of serving large swaths of the future U.S. EV charging network, ​“the Supercharger network is going to be printing money very soon,” said Bill Ferro, CTO of Paren, an EV-charging reliability and data analytics company. ​“Now that the industry has selected the connector, they appear to be abandoning their network,” he said — a move that ​“simply defies logic.”

Based on the expansion of its chargers for use by EVs beyond Teslas, the network could achieve $740 million in profit by 2030, Bloomberg projected — a fraction of its $13.6 billion in gross profit last year, but not a financial loss by any means.

But it’s far from clear that Tesla’s broader success in the increasingly competitive EV market relies on it keeping up the pace of the Supercharger deployments that got it to where it is today, said Pavel Molchanov, managing director and equity research analyst at Raymond James & Associates.

“A decade ago, when the entire EV value chain was in its infancy, it was reasonable for Tesla to invest its own capital in deploying chargers,” he said. ​“But today, there are so many stand-alone companies in EV charging.” These include ChargePoint, Electrify America, and EVgo in North America and BP pulse, Fastned, and Ionity in Europe.

More chargers are also set to be deployed by automakers themselves. Last year, BMW, General Motors, Honda, Hyundai, Kia, Mercedes-Benz, and Stellantis announced plans to invest at least $1 billion to deploy 30,000 charging ports on highways and cities in the U.S. and Canada.

“So there is really no need for Tesla to spend money on what is fundamentally a low-margin commodity business: selling electricity to drivers,” Molchanov said. ​“If everything at Tesla were going perfectly, these additional expenses would not be a big deal. But given that Musk is aggressively trying to cut costs at the company, the Supercharger division is a logical area to look at.”

This short-term financial logic may be cold comfort to all the companies and public agencies that have wedded their EV charging expansion and reliability improvement plans to Tesla’s core technology. But it may also open up opportunities for charging competitors, said Beia Spiller, director of the transportation program at Resources for the Future, a nonprofit environmental economics research organization.

“I do think there’s a drawback for people expecting Tesla to expand into their areas and to see these chargers deployed through NEVI,” she said. But ​“the good news is that the standard does exist. Who’s going to come in and use that standard to build these charging stations?”