EVgo (EVGO) Risk Analysis

The U.S. federal government and some state and local governments provide incentives to end users and owners of EVs and EV charging stations in the form of rebates, tax credits, low-cost funding and other financial incentives, which could, in the future, be reduced or eliminated, including as a result of legislative or regulatory action introduced following presidential or congressional elections. The EV market relies on these governmental rebates, tax credits and other financial incentives to significantly lower the effective price of EVs and EV charging stations and to otherwise financially support these industries. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or may be reduced or terminated as a matter of regulatory or legislative policy. For example, the results of the 2024 Presidential and Congressional elections and resulting legislative or regulatory actions, if pursued, could impact the availability or value of these incentives or reduce access to such low-cost funding. In particular, EVgo has historically claimed federal tax credits under Section 30C of the Code. The Inflation Reduction Act revised the credits under Section 30C of the Code to (i) retroactively extend the expiration of the credit as of December 31, 2021 (with such credit continuing to be capped at $30,000 per location for EV charging stations placed in service before January 1, 2023) until December 31, 2032, (ii) revised the credit structure, availability and requirements for EV charging stations placed in service after December 31, 2022 and (iii) introduced the concept of transferability of tax credits, providing an additional option to monetize such credits. As part of the revised credit structure and requirements for EV charging stations placed in service after December 31, 2022, the available Section 30C credit was expanded such that it is capped at $100,000 per item; however, in order to be eligible for such tax credit, EV charging stations must be installed in rural or low-income census tracts. Additionally, in order to receive the full tax credit, labor for EV charging station construction and maintenance must meet prevailing wage and apprenticeship requirements unless an exception applies. There can be no assurance that the EV charging stations placed in service by EVgo will meet the revised requirements for the Section 30C credits, and compliance with such requirements could increase EVgo's labor and other costs. Any reduction in rebates, tax credits or other financial incentives available to EVs or EV charging stations, could negatively affect the EV market and adversely impact EVgo's business operations and expansion potential. In addition, there is no assurance EVgo will have the necessary tax attributes to utilize any such credits that are available and may not be able to monetize such credits on favorable terms. Further, certain features of EVgo OpCo's ownership may limit the available tax credit that can be monetized or utilized. See Part I, Item IA, "Risk Factors - Financial, Tax and Accounting-Related Risks - Changes to U.S. applicable U.S. tax laws and regulations or exposure to additional income tax liabilities could affect EVgo's and EVgo OpCo's business and future profitability." Federal guidance on Buy America requirements applicable to the NEVI Program, which was established by the Bipartisan Infrastructure Law, requires immediate domestic assembly and U.S. steel requirements for chargers to qualify for funding under the NEVI program, with higher domestic content percentages required in 2024. EVgo may be unable to source Buy America-compliant chargers in time to take advantage of early NEVI funding opportunities or only at increased costs. EVgo's customers may request delays or adjustments to their build-out plans in order to accommodate these added Buy America requirements, which could result in delays in receipt of revenue from customers. New tariffs and policies that could incentivize overbuilding of infrastructure may also have a negative impact on the economics of EVgo's stations. Furthermore, new tariffs and policy incentives could be put in place that favor equipment manufactured by or assembled at American factories, which may put EVgo's fast charging equipment vendors at a competitive disadvantage, including by increasing the cost or delaying the availability of charging equipment, by challenging or delaying EVgo's ability to apply or qualify for grants and other government incentives, or for certain charging infrastructure build-out solicitations and programs, including those initiated by federal government agencies. Moreover, a variety of incentives and rebates offered by the U.S. federal government as well as state and local governments in order to encourage the use of EVs may be limited or reduced. In particular, the U.S. federal government offers a tax credit, the maximum amount of which is $7,500, for qualified new plug-in EVs. The Inflation Reduction Act modified the tax credit for new plug-in EVs and added new tax credits for used and commercial EVs. The Inflation Reduction Act removed the phase-out of tax credits for new plug-in EVs with respect to vehicle manufacturers that reached certain production levels beginning in 2023. However, the tax credit is subject to additional requirements and limitations, such as certain adjusted gross income limits for consumers claiming the credit, domestic content requirements for critical minerals and batteries and a requirement for final assembly to occur in North America. Such additional requirements and limitations for such tax credits may reduce incentives available to encourage the adoption of EVs; favor competitors whose production chains enable them to more readily take advantage of such incentives; delay purchases and installations of charging equipment by the Company as manufacturing of charging equipment is moved to the U.S. in order to expand eligibility for such incentives (which, in turn, could delay the Company's recognition of revenue in connection with such stalls); increase the cost of procurement of some inputs in the construction of charging infrastructure; and negatively affect the EV market and adversely impact EVgo's business operations and expansion potential. Any such developments could have an adverse effect on EVgo's business, financial condition and results of operations.

There is an increased focus, including by governmental and nongovernmental organizations, investors, customers and other stakeholders on climate change matters, including increased pressure to expand disclosures related to the physical and transition risks related to climate change and to establish sustainability goals, such as the reduction of greenhouse gas emissions, which could expose EVgo to market, operational and execution costs or risks. EVgo's failure to establish targets or targets that are perceived to be appropriate, as well as to achieve progress on those targets on a timely basis, or at all, could adversely affect the reputation of its brand and sales of and demand for its products. To the extent legislation is passed or regulations are adopted, EVgo could incur significant additional costs of compliance due to the need for expanded data collection, analysis and certification with respect to greenhouse gas emissions and other climate change related risks. For example, in March 2022, the SEC proposed new rules requiring public companies to disclose information related to their direct greenhouse gas emissions and indirect emissions from purchased energy, as well as specific categories of greenhouse gas emissions from upstream and downstream activities in the companies' value chains, otherwise known as Scope 3 emissions. In addition, in 2023, several laws were adopted in California that impose climate-related disclosure obligations on companies, with the scope of the obligations depending in some respects on companies' annual revenues. If the SEC's proposed emissions reporting rule is finalized, it could significantly increase EVgo's compliance costs. EVgo may also incur additional costs or require additional resources to monitor, report and comply with stakeholder expectations and standards and legislation and to meet climate change targets and commitments if established. In particular, EVgo markets the electricity provided from EVgo's charging stations as 100% matched with purchases of RECs. Certain ESG-focused investors and other stakeholders may instead favor direct purchases of renewable electricity, which in turn could lead the Company to choose to purchase electricity through such other sources, which could increase EVgo's costs and have an adverse impact on EVgo's results of operations. Additionally, EVgo may receive requests for sustainability related information about its products, business operations and use of sustainable materials, among other data and may be required to satisfy certain ESG-related requirements as a condition to working with certain counterparties or participating in certain grant programs. Efforts to satisfy such requirements may result in increased costs and EVgo's inability to comply with these and other sustainability requirements in the future could adversely affect sales of and demand for its products and its ability to participate in certain grant programs. In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Unfavorable ESG ratings could lead to increased negative investor sentiment toward EVgo and could impact EVgo's access to and costs of capital. Additionally, to the extent ESG matters negatively impact EVgo's reputation, EVgo may not be able to compete as effectively to recruit or retain employees, which may adversely affect EVgo's business. Such ESG matters may also impact EVgo's suppliers, which may adversely impact EVgo's business and financial condition.

EVgo's public chargers may be exposed to vandalism or misuse by customers and other individuals, increasing wear and tear of the charging equipment. Such damage could shorten the usable lifespan of the chargers and require the Company to increase its spending on replacement, maintenance and insurance costs and could result in site hosts reconsidering the value of hosting EVgo's charging stations at their sites. In addition, the cost of any such damage may not be covered by EVgo's insurance in full or at all and, in the event of repeated damage to EVgo's charging equipment, EVgo's insurance premiums and deductibles could increase and it could be subject to additional insurance costs or may not be able to obtain insurance at all, any of which could have an adverse effect on its business.

EVgo's success depends, in part, on EVgo's continuing ability to identify, hire, attract, train and develop and retain highly qualified personnel. The inability to do so effectively could adversely affect EVgo's business. Competition for employees can be intense and the ability to attract, hire and retain them depends on EVgo's ability to provide meaningful work at competitive compensation. EVgo may not be able to attract, assimilate, develop or retain qualified personnel in the future and failure to do so could adversely affect EVgo's business, including the execution of EVgo's growth business strategy.

EVgo relies on a limited number of third parties, including providers of software, technology and communications services and credit card processors, for the effective operation of its charging network, software platform and mobile applications, for the timely and accurate collection of revenue, and for compliance with certain laws and regulations, such as consumer privacy protections. A failure or limitation of service or available capacity by any of these third-party providers could adversely affect EVgo's business and reputation. For example, EVgo is dependent on the interoperability of EVgo's mobile applications with popular mobile operating systems that EVgo does not control, such as Google's Android and Apple's iOS, and any changes in such systems that degrade EVgo's products' functionality or give preferential treatment to competitive products could adversely affect the usage of EVgo's applications on mobile devices. Additionally, in order to deliver high quality mobile products, it is important that EVgo's products work well with a range of mobile technologies, systems, networks and standards that EVgo does not control. EVgo may not be successful in developing or maintaining relationships with key participants in these industries or in developing products that operate effectively with these technologies, systems, networks or standards. In addition, a significant portion of EVgo's software platform depends on EVgo's partnership with Driivz, an EV charging management platform. If for any reason Driivz is unable to effectively support EVgo's software platform, EVgo's business could be adversely impacted. For example, Driivz is headquartered in Israel, and any escalation of tensions or conflict in or involving Israel could lead to disruptions in the services provided by Driivz to the Company, which could adversely impact EVgo's business. Furthermore, if for any reason EVgo is no longer able to maintain its partnership with Driivz, EVgo may face a material challenge in efficiently transitioning EVgo's software offering. In addition, EVgo currently serves customers from third-party data center facilities operated by Amazon Web Services and Google, as well as others. All of EVgo's services are housed in third-party data centers operated in the U.S., and EVgo employs geographically distributed, redundant back-up data centers for all services. Any outage or failure of such data centers could negatively affect EVgo's product connectivity and performance. EVgo's primary environments are operated by Google and Amazon, and any interruptions of these primary and backup data centers could negatively affect EVgo's product connectivity and performance. Furthermore, EVgo depends on connectivity from EVgo's charging stations to EVgo's data centers through cellular service and virtual private networking providers, such as AT&T and Verizon. Any incident affecting a data center facility's or cellular and/or virtual private networking services provider's infrastructure or operations, whether caused by fire, flood, storm, earthquake, power loss, telecommunications failures, breach of security protocols, computer viruses and disabling devices, failure of access control mechanisms, natural disasters, war, criminal act, military actions, terrorist attacks and other similar events could negatively affect the use, functionality or availability of EVgo's services. Any damage to, or failure of, EVgo's systems, or those of EVgo's third-party providers, could interrupt or hinder the use or functionality of EVgo's services, including EVgo's subscription services. Impairment of or interruptions in EVgo's services may reduce revenue, subject the Company to claims and litigation, cause customers to terminate their subscriptions and adversely affect renewal rates and EVgo's ability to attract new customers. EVgo's business could also be harmed if customers and potential customers believe EVgo's products and services are unreliable.

The operation and development of EVgo's charging stations is dependent upon the availability of electricity, which is beyond EVgo's control. EVgo's charging stations are affected by problems accessing electricity sources, such as planned or unplanned power outages. In recent years, shortages of electricity have resulted in increased costs to users and interruptions in service. In particular, California has experienced rolling blackouts due to excessive demands on the electrical grid or as precautionary measures against the risk of wildfire. Similarly, Texas has experienced failures in its electrical grid due to severe weather. In the event of a power outage, EVgo will be dependent on the utility company and in some cases the Site Host, to restore power. Any prolonged power outage could adversely affect customer experience and EVgo's business and results of operations. Changes in utility electricity pricing or new and restrictive constructs from regulations applicable to pricing may adversely impact future operating results. Utility rates may change in a way that adversely affects fast charging or in a way that may limit EVgo's ability to access certain beneficial rate schedules. In addition, utilities or other regulated entities with monopoly power may receive authority to provide charging services that result in an anti-competitive advantage relative to the Company and other private sector operators.

The success of EVgo's business depends on EVgo's ability to develop and maintain relationships with OEMs, such as GM, Nissan, Tesla and others. These relationships help the Company access new customers and build brand awareness through co-marketing. EVgo may also benefit from promotional programs sponsored by OEMs, such as prepaid charging credits. In some cases, EVgo's OEM partners have agreed to fund capital expenditures related to the build-out of EVgo's charger network. For example, GM is providing payments for performance obligations that will help fund the accelerated build-out of 3,250 charger stalls for EVgo's fast charger network through March 2026. If EVgo fails to develop and maintain relationships with OEMs, or if OEMs opt to partner with competitors rather than the Company, EVgo's revenues may decline and EVgo's business may suffer. EVgo's revenue growth will also depend in part on EVgo's ability to increase sales of EVgo's products and services to fleet operators, including rideshare operators. The electrification of fleets is an emerging market, and fleet operators may not adopt EVs on a widespread basis, operate on the timelines EVgo anticipates or rely on public and/or private fast charging and EVgo's network. In addition to the factors affecting the growth of the EV market generally, transitioning to an EV fleet can be costly and capital intensive, which could result in slower than anticipated adoption. The sales cycle could also be longer for sales to fleet operators with formal procurement processes. Fleet operators may also require significant additional services and support, and if EVgo is unable to provide such services and support, it may adversely affect EVgo's ability to attract additional fleet operators as customers. There can be no certainty that EVgo will be able to identify and contract with suitable additional OEM and fleet partners. To the extent EVgo identifies such partners, EVgo will need to negotiate the terms of a commercial agreement with such partners. There can be no assurance that EVgo will be able to negotiate commercially attractive terms with additional OEM and fleet partners, if at all. EVgo may also be limited in negotiating future commercial agreements by the provisions of EVgo's existing contracts such as "most-favored nations" clauses. For example, EVgo's contracts with GM prohibit the Company from entering into agreements for similar programs on terms more favorable than the terms afforded to GM for a limited period of time. See Part I, Item 1, "Business - Customers, Partnerships and Strategic Relationships." In addition, EVgo may be unable to maintain successful relationships with EVgo's OEM and fleet partners. Some of EVgo's existing agreements require the Company to meet specified performance criteria. If EVgo fails to meet such criteria, the agreements could be terminated, and EVgo may be obligated to pay significant penalties or other damages. If an agreement is terminated, any support payments pursuant to the contract would cease. Finally, if OEMs observe the Company failing to meet EVgo's specified performance criteria, EVgo's reputation may be damaged, and it may become more difficult for the Company to establish new partnerships with OEMs. Any failure to attract and retain OEMs or fleet operators as customers in the future would adversely affect EVgo's business and results of operations.

EVgo's success depends, in part, on EVgo's ability to protect EVgo's core technology and intellectual property. To accomplish this, EVgo relies on and plans to continue relying on, a combination of trade secrets (including know-how), employee and third-party nondisclosure agreements, copyrights, trademarks, intellectual property licenses and other contractual rights to retain ownership of and protect, EVgo's technology and intellectual property. Despite EVgo's efforts to protect its intellectual property, third parties may attempt to copy or otherwise obtain and use EVgo's intellectual property or seek court declarations that EVgo's intellectual property is invalid or unenforceable, or that they do not infringe upon EVgo's intellectual property. Monitoring unauthorized use of EVgo's intellectual property is difficult and costly, and the steps EVgo has taken or may take in the future in an effort to prevent or combat infringement, misappropriation or other violations may be unsuccessful. Any litigation could result in significant expense to EVgo, including the diversion of management's time, and may not ultimately be resolved in EVgo's favor. As of December 31, 2023, EVgo held 23 patents and had 10 additional patent applications pending in the U.S. and abroad. Failure to adequately protect and enforce EVgo's technology and intellectual property could result in competitors offering similar products, potentially resulting in the loss of some of EVgo's competitive advantage and a decrease in revenue which would adversely affect EVgo's business, prospects, financial condition and operating results. The measures EVgo takes to protect EVgo's technology and intellectual property from infringement, misappropriation or unauthorized use by others may not be effective for various reasons, including the following: - the patent application EVgo has submitted may not result in the issuance of any patents;- the scope of any issued patents that may result from the pending patent application may not be broad enough to protect proprietary rights;- any patents or trademarks may be challenged by competitors and/or invalidated or canceled by courts or other government entities;- the costs associated with enforcing patents, trademarks, confidentiality and invention agreements or other intellectual property rights may make enforcement impracticable;- current and future competitors may circumvent patents or independently develop similar inventions, trade secrets or works of authorship, such as software;- know-how and other proprietary information EVgo purports to hold as a trade secret may not qualify as a trade secret under applicable laws; and - proprietary designs and technology embodied in EVgo's products may be discoverable by third parties through means that do not constitute violations of applicable laws. Intellectual property and trade secret laws vary significantly throughout the world. Some foreign countries do not protect intellectual property rights to the same extent as do the laws of the U.S. Further, policing the unauthorized use of EVgo's intellectual property in foreign jurisdictions may be costly, difficult or even impossible. Therefore, EVgo's intellectual property rights may not be as strong or as easily enforced outside of the U.S. Any issued patent which may result from the pending patent application may come to be considered "standards essential." If this is the case, EVgo may be required to license certain technology on "fair, reasonable and non-discriminatory" terms, which may decrease EVgo's revenue. Further, competitors, vendors, or customers may, in certain instances, be free to create variations or derivative works of EVgo's technology and intellectual property and those derivative works may become directly competitive with EVgo's offerings. Finally, EVgo may not be able to leverage, or obtain ownership of, all technology and intellectual property developed by EVgo's vendors in connection with design and manufacture of EVgo's products, thereby jeopardizing EVgo's ability to obtain a competitive advantage over EVgo's competitors.

EVgo may be subject to claims that persons were injured or purported to be injured, or that personal property has been damaged, including due to latent defects, in connection with the use of EVgo's charging stations. Any insurance that EVgo carries may not be sufficient or it may not apply to all situations. Similarly, to the extent that such malfunctions are related to components obtained from third-party vendors, EVs produced by third-party OEMs (including any components of such EVs) or adaptors or other equipment obtained manufactured by other third parties, such third parties may not assume responsibility for such malfunctions. Any of these events could adversely affect EVgo's brand, reputation, operating results or financial condition. EVgo's software platform is complex and includes a number of licensed third-party commercial and open-source software libraries. EVgo's software may contain latent defects or errors that may be difficult to detect and remediate. EVgo is continuing to evolve the features and functionality of EVgo's platform through updates and enhancements and as EVgo does so, EVgo may introduce additional defects or errors that may not be detected until after deployment to customers. In addition, if EVgo's products and services, including any updates or patches, are not implemented or used correctly or as intended, inadequate performance and disruptions in service may result. Any defects or errors in product or service offerings, or the perception of such defects or errors, or other performance problems could result in any of the following, each of which could adversely affect EVgo's business and results of operations: - expenditure of significant financial and product development resources, including recalls, in efforts to analyze, correct, eliminate or work around errors or defects;- loss of existing or potential customers or partners;- interruptions or delays in sales;- equipment replacements or reimbursements for damage;- delayed or lost revenue;- macroeconomic conditions, including inflation, interest rates and volatility surrounding closure or takeover of financial institutions;- delay or failure to attain market acceptance;- delay in the development or release of new functionality or improvements;- bodily injury or harm to customers or other individuals and damage to property;- negative publicity and reputational harm;- sales credits or refunds;- exposure of confidential or proprietary information;- diversion of development and customer service resources;- breach of warranty claims;- legal claims under applicable laws, rules and regulations; and - the expense and risk of litigation. EVgo also faces the risk that any contractual protections EVgo seeks to include in EVgo's agreements with customers are rejected, not implemented uniformly or do not fully or effectively protect from claims by customers, resellers, business partners or other third parties. In addition, any insurance coverage or indemnification obligations of suppliers or other third parties for EVgo's benefit may not adequately cover all such claims or may cover only a portion of such claims. A successful product liability, systematic defect, warranty, or other similar claim could have an adverse effect on EVgo's business, operating results and financial condition. In addition, even claims that ultimately are unsuccessful could result in expenditure of funds in litigation, divert management's time and other resources and cause reputational harm.

EVgo's growth is highly dependent upon the continued rapid adoption of EVs by governments, businesses and consumers. The market for EVs is still rapidly evolving, characterized by rapidly changing technologies, increasing consumer choice as it relates to available EV models, their pricing and performance, evolving government regulation and industry standards, changing consumer preferences and behaviors, intensifying levels of concern related to environmental issues and government initiatives related to climate change and the environment generally. EVgo's revenues are driven in large part by EV drivers' driving and charging behavior. Potential shifts in behavior may include but are not limited to changes in annual vehicle miles traveled, preferences for urban vs. suburban vs. rural and public vs. private, and DCFC vs. Level 2 charging, demand from rideshare or urban delivery fleets and the emergence of autonomous vehicles and/or new forms of mobility. Although demand for EVs has grown in recent years, there is no guarantee of continuing future demand. Public DC fast charging may not develop as expected and may fail to attract projected market share of total EV charging. If the market for EVs develops more slowly than expected, or if demand for EVs develops more slowly than expected or decreases, EVgo's growth would be reduced, and EVgo's business, prospects, financial conditions, and operating results would be harmed. The market for EVs, and ultimately EV charging, could be affected by numerous factors, such as: - perceptions about EV features, quality, driver experience, safety, performance and cost;- perceptions about the limited range over which EVs may be driven on a single battery charge and about availability and access to sufficient public EV charging stations;- competition, including from other types of alternative fuel vehicles (such as hydrogen fuel cell vehicles), plug-in hybrid EVs, high fuel-economy ICE vehicles and other types of charging methods (e.g., battery swaps);- volatility in the price of gasoline and diesel at the pump;- EV supply chain shortages and disruptions, which include but are not limited to availability of certain components (e.g., semiconductors and critical raw materials necessary for the production of EVs and EV batteries), the ability of EV OEMs to increase and on-shore EV production, and technological and logistical challenges (such as component shortages, exacerbated port congestion and intermittent supplier shutdowns and delays and product recalls due to quality control issues), which have resulted in additional costs and production delays and availability of batteries and battery materials;- concerns regarding the reliability, stability and capacity of the electrical grid;- the change in an EV battery's ability to hold a charge over time;- availability of maintenance, repair services and spare parts for EVs;- consumers' perception about the convenience, speed and cost of EVs and EV charging and the availability and reliability of EV charging infrastructure;- government regulations and economic incentives, including adverse changes in, or expiration of, favorable tax incentives related to EVs, EV charging stations or decarbonization generally;- government legislation and regulations restricting the operation of autonomous vehicles;- relaxation of government mandates or quotas regarding the sale of EVs and fuel economy standards;- the number, price and variety of EV models available for purchase; and - concerns about the future viability of EV manufacturers. In addition, sales of vehicles in the automotive industry can be cyclical, which may affect growth in acceptance of EVs. It is uncertain how macroeconomic factors will impact demand for EVs, particularly because EVs can be more expensive than traditional gasoline-powered vehicles. Furthermore, because fleet operators often make large purchases of EVs, this cyclicality and volatility in the automotive industry may be more pronounced with commercial purchasers, and any significant decline in demand from these customers could reduce demand for EV charging and EVgo's products and services in particular. Moreover, any legislative or regulatory restrictions on the operation or growth of the autonomous vehicle industry, or curtailed investment in the autonomous vehicle industry, could limit demand for EV charging from operators in the autonomous vehicle industry. While many global OEMs and several new market entrants have announced plans for new EV models, the lineup of EV models with increasing fast charging needs expected to come to market over the next several years may not materialize in that timeframe or may fail to attract sufficient customer demand. Demand for EVs may also be affected by factors directly impacting automobile prices or the cost of purchasing and operating automobiles, such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import regulations and other taxes. Volatility in demand may lead to lower vehicle unit sales, which may result in reduced demand for EV charging solutions and therefore adversely affect EVgo's business, financial condition and operating results.