The U.S. EV market continues to accelerate as consumers transition to EVs (fully electric battery EVs or BEVs). EV sales averaged 57% annual growth from 2011-2022, albeit from a very low base, according to the U.S. Department of Energy. Forecasts vary, but the trajectory is clear: The U.S. needs a large-scale buildout of charging infrastructure to meet state and federal targets; and consumer demand for speed, reliability, and price.

Why this matters:  S&P Global Mobility's forecast indicates the number of public charging stations in the U.S. will grow to almost 1.8 million by 2030 from about 140,000 at the end of 2022, complemented by a steep increase in residential chargers to about 10 million in 2030. EV infrastructure is the critical link in addressing range limitations, charging speeds, and reliability considerations that consumers cite as key barriers to switching to an EV.

What we think and why:  Developing a national EV charging grid requires a complex orchestration of stakeholders that states are uniquely positioned to steer. Despite evolving technologies and ambitious mandates, we expect states will continue to pursue EV funding from a combination of state, federal, and local resources, and through private investment. Furthermore, in our opinion, states will be able to develop alternative pledged revenue sources to replace motor fuel tax revenue, mitigating credit risk for gas tax-secured debt.

Infrastructure Investment And Jobs Act—A Down Payment For EV Infrastructure Funding

The $7.5 billion allocated for EV infrastructure in the Bipartisan Infrastructure Law (BIL), which enacted the Infrastructure Investment and Jobs Act (IIJA), includes approximately $5 billion to develop a network of charging stations and $2.5 billion for publicly accessible alternative fuel infrastructure such as EV charging stations, along with hydrogen, propane, and natural gas fueling stations. In addition, approximately $10.9 billion in funding is available for transitioning school buses, transit buses, and passenger ferries to low- and/or zero-emissions alternatives; and $12.7 billion is dedicated to the deployment of all types of hybrid vehicles and fueling infrastructure, which includes EVs and related charging devices. Electric grid and battery-related investments were identified as eligible to receive $10.3 billion.

National Electric Vehicle Infrastructure Formula Program (NEVI; $5 Billion)

To allocate the $5 billion, the NEVI was created under the IIJA, and will apportion the funding to states, Washington D.C., and Puerto Rico from federal fiscal years 2022 to 2026. States are required to submit plans annually for their strategic deployment of NEVI funds and annual allocations are made to the state's department of transportation. NEVI funds can cover 80% of eligible project costs with private sector (more common) or state funding used for the remaining 20% cost-share.

Funding can be used for the acquisition, installation, network connection, operation, and maintenance of EV charging stations, as well as long-term data sharing. More specifically, funding will be directed to designated alternative fuel corridors (AFCs) for a national network for EVs--mainly along the national highway system--with DC fast chargers located every 50 miles within a mile of the corridor. After a state's AFC network is built out, remaining funding can be used on any public road or publicly accessible area.

Discretionary grant program for charging and fueling infrastructure ($2.5 billion)

A competitive grant program supplements NEVI funding and allocates $2.5 billion equally between corridor charging (along designated AFCs) and community charging, particularly in rural and underserved communities for equity considerations. Eligible projects include the acquisition and installation of publicly accessible alternative fuel infrastructure such as EV charging stations and hydrogen, propane, and/or natural gas fueling infrastructure. Similar to NEVI, there is a match requirement with the federal share of eligible project costs at 80% and private sector or state funding used for the remaining cost-share.

Overview of current EV market penetration and U.S. state and federal targets

The penetration of EVs (BEVs and PHEVs) as a percentage of vehicles in operations remains low (less than 1%), with about 3 million vehicles on the road. S&P Global Mobility expects EV usage will reach 18 million by 2030, or about 12% market share. Furthermore, S&P Global Mobility expects new EV sales will rise to about 5.5 million or 50% of total vehicle sales by 2030. Consequently, some estimates indicate an additional $35 billion might be required to meet EV passenger vehicle forecasts, state mandates, and a federal target that calls for 50% of new vehicles sales to be EVs by 2030.

We view state and federal EV adoption rates as somewhat ambitious, particularly given current weak market penetration, the relatively high cost of current EVs compared with internal combustion engines (ICEs), and EV range limitations. Moreover, consumers might extend the useful life of their ICEs or purchase new ICEs before state EV mandates take effect, which could slow consumer EV adoption rates. As a result, we believe the timeline for EV adoption might be slower than U.S. state and federal targets suggest. Nevertheless, we expect market share losses in ICE, hybrid, and other alternative-fuel vehicles as new EV models launch, challenging incumbents with more affordable options and greater battery range capabilities.

Despite the complexities of developing widespread EV public charging infrastructure, S&P Global Ratings believes states are uniquely positioned to help steer the EV transition. Issues facing the states include identifying future funding sources; managing a myriad of policy objectives, regulatory requirements, and evolving national standards; matching the pace of charging infrastructure with auto industry manufacturing capabilities; adjusting to actual consumer preferences and adoption rates; and working with regional investor-owned and public utilities, regulators, fuel providers, and public and private partners. Adding to the complexity is the sheer number of stakeholders across the universe of global auto manufacturers, consumers, and utilities, as well as local governments and private developers looking to partner with public entities.

Charts 1 and 2 highlight the 16 states that have adopted EV mandates and recent EV sales by state as a percent of total auto sales. As of March 2023, new EV sales as a percentage of total auto sales were 5.3% nationally but varied significantly by state. Notably, coastal states led with much higher adoption rates.

Chart 1

Chart 2

Public Charging Infrastructure Is A Starting Point For Consumer Adoption

The sprint to build out EV chargers among states is vital, particularly where EV mandates exist. Consumers often cite a lack of public charging infrastructure as a key EV adoption barrier. There were about 70% more publicly available EV chargers in 2022 compared with the number in 2019, according to the U.S. Department of Energy--modestly outpacing EV sales growth during the same period. However, new EV charger rollout has been uneven among states (chart 3). For example, California added about 9,000 new EV chargers since 2020, more than three times the number in New York, which added the second most. California currently leads the nation in public EV chargers, followed by New York, Florida, and Texas.

Chart 3

EV Charging Infrastructure Buildout Costs Are Expected To Rise Through 2030 Despite Uncertain Demand

S&P Global Mobility estimates the $7.5 billion in BIL funding could provide only about 400,000 charging stations through 2026, predominately level 2 AC chargers (chart 5), given their lower cost and site readiness. This amount, combined with about 140,000 public charging stations in the U.S. currently, results in a sizable gap of more than 1.26 million public charging stations to meet future demand. To close the gap, McKinsey estimates the cost of hardware, planning, and installation for an additional 1.2 million charging stations is at least $35 billion through 2030 for passenger vehicle demand, which excludes potential capital needs for commercial (medium- and heavy-duty vehicles) fleets.

Private investment remains the largest component of EV infrastructure funding, followed by U.S. federal and state governments, and investor-owned electric utilities. Private investment in EV charging infrastructure increased considerably to almost $13 billion in early 2023, up from less than $200 million in 2017, to meet growing needs, according to Atlas Public Policy. In comparison, state funding totaled almost $1.6 billion by early 2023, up from $300 million in 2018, according to Atlas Public Policy. A significant portion of recent state EV funding has come from the Volkswagen diesel emissions environmental mitigation trust as part of Volkswagen's $2.7 billion settlement with the federal government and the State of California for violations of the Clean Air Act, providing funding to reduce emissions within the transportation sector. States may apply 15% or about $424.8 million from the settlement to EV charging stations. In addition, the settlement agreement required Volkswagen to invest $2.0 billion in EV infrastructure over 10 years, with $800 million allocated to California and the remaining $1.2 billion to the remaining states. As of December 2022, investor-owned utilities have been approved to invest about $5.2 billion in transportation electrification in 34 states (excluding EV-related expenditures like grid upgrades) with almost $2 billion eligible for publicly available charging in 31 states, according to Atlas Public Policy.

In July 2023, several major automakers, including BMW, General Motors, Honda, Hyundai, Kia, Mercedes-Benz, and Stellantis, announced a joint venture to build approximately 30,000 EV chargers in the U.S. with an investment of at least $1 billion. The group is targeting sites in urban and highway areas, with the goal of opening the first locations by mid-2024. This initiative is similar to an investment in Europe, which was funded by many of the same automakers. Automakers are increasingly shifting their fleets to EVs, and believe more charging station availability and potential shorter wait times will aid consumer adoption.

We believe that, in addition to private sector investments, states might allocate supplemental appropriations for EV charging infrastructure buildout like California's almost $3 billion pledged investment, or alternatively issue debt to fund a portion of their capital needs. We expect this funding will add to other transportation-related projects, potentially accelerating transportation-related capital plans if federal or private sector investment does not materialize. Most state NEVI plans rely on private sector investment and incentives for their EV grid buildout, which might lessen the state portion for buildout.

Chart 4

Overview of EV charging stations

We expect states will use two primary types of EV charging stations as they expand their grid: level 2 AC chargers and level 3 DC fast chargers. Currently, there are about 143,000 charging stations in the U.S., with level 3 accounting for about 22,000 of them. Of that amount, Tesla's supercharger network accounts for about 17,000, which are gradually being expanded to non-Tesla vehicles, with several major automakers recently announcing the adoption of Tesla's connector as the future charging standard in their vehicles.

Charging definitions

• AC level 1: What most people will have in their homes, equivalent to a 110-volt wall outlet. Would require 20 hours to fully recharge an EV
• AC level 2: Equivalent to an upgraded home charger that uses a 240-volt outlet (used for an electric clothes dryer) and usually requires a 50-amp breaker for each charger. Takes about five hours to fully recharge an EV. Often also seen in shopping centers
• DC level 3 fast charging (DCFC): Requires larger and higher voltage grid connection to convert the AC current to DC. An EV's battery management system must be able to handle the rapid flow of electricity--currently as high as 350 kilowatts. Takes 15-20 minutes to recharge most DCFC-ready vehicles from 10% to 80% state of charge
• Tesla proprietary level 3 charger: Can add about 200 miles of range to a Tesla vehicle in 15 minutes. Tesla has offered converters to other brand vehicles for use in its superchargers in Europe, with plans for U.S. adoption in the works

Chart 5

S&P Global Mobility expects that about 95% of new chargers will be level 2 AC chargers. These have lower installation and operating costs since they do not need high voltage lines, which can be difficult to install near established urban developments.

Since level 2 AC chargers are slower than level 3, more physical stations per site are needed due to the longer charge time, which can become an issue for smaller EV charging sites where fewer vehicle parking spots are available.

Observations from select state NEVI plans

States will annually submit plans to the Federal Highway Administration (FHWA) and the Joint Office of Energy and Transportation for review and public posting describing how the state intends to distribute the funds. The FHWA announced approval of all initial state plans on Sept. 27, 2022. NEVI funding allocations to states totaled $615 million in federal fiscal year 2022 and are estimated at $885 million in 2023. Summarized below are select state plans for building EV charging infrastructure with NEVI and discretionary competitive grant funding.

Chart 6

U.S. States Begin Challenging Drive Toward Electric Vehicle Charging Infrastructure

Although EV forecasts are subject to considerable variability, the trajectory is clear: For EVs to reach state and federal targets or policy goals, the U.S. needs a large-scale buildout of charging infrastructure to meet industry standards and consumer demands for speed, reliability, and price transparency, and we believe the BIL will provide only a down payment. There are estimates that an additional $35 billion could be required to meet growing consumer demand, state EV mandates, and a federal target that by 2030 50% of new vehicles sales be EV. We consider the buildout of EV charging infrastructure as a critical link to addressing range limitations, charging speeds, and reliability considerations, which consumers frequently cite as key barriers to switching to an EV. Furthermore, we believe states are uniquely positioned to help navigate the complexities associated with consumer adoption of EVs, growing EV charging infrastructure needs, and potential credit considerations and credit risks associated with declining motor fuel tax revenues. Overall, we expect that pledged revenues for motor fuel tax revenue-secured debt may transition over the long term but we believe they will remain resilient in the face of this modernization.

Related Research

• Credit FAQ: U.S. Auto Dealers Navigate New Roads, July 20, 2023
• Industry Top Trends Midyear 2023: At A Crossroad, July 27, 2023
• S&P Mobility--EV Chargers: How many do we need?, Jan. 9, 2023
• Credit FAQ: How Will The Electric Revolution Impact The Credit Quality For The Global Auto Industry?, Oct. 20, 2022
• Credit FAQ: A Look At Who's Jostling For Position In Electric Vehicle Markets, Sept. 7, 2022

External Research

• Will The Charging Networks Arrive In Time?, MIT News, May 22, 2023
• Why America Doesn't Have Enough EV Charging Stations, Wall Street Journal, Nov. 29, 2022