VW’s subsidiary Elli abandons its hardware business and opens itself to investors
Volkswagen Group Charging GmbH, better known under the brand name Elli, is undergoing a comprehensive strategic reorientation and will focus primarily on digital services related to charging and energy management in the future. This was confirmed by Elli’s CEO Giovanni Palazzo during an exclusive interview with electrive.
“We will gradually reduce our hardware business going forward,” Palazzo announced. Instead, Elli aims to concentrate on business models that generate recurring revenue and are scalable, such as fleet management, charging cards, and charging apps. The existing hardware business has served as a means to an end: Elli first had to establish a solid revenue base in its digital business before it could now dispense with key hardware activities, according to Palazzo.
The new strategy now focuses on only two core business areas: Mobility and Energy. “We are concentrating on transaction-based, digital, and scalable business models that are also as capital-light as possible,” explains Palazzo. According to the CEO, the decision is driven by an increasingly competitive market environment. While electric mobility continues to grow, many providers of charging infrastructure and related services are under significant financial pressure. Palazzo expects further consolidation in the industry in the coming years.
For Elli, the strategic shift is also a response to the different economic characteristics of its business areas: while digital services can be expanded relatively easily to new customers and markets through standardized processes and platforms, hardware, installation, and infrastructure projects require significant human and financial resources. The crisis at the parent company Volkswagen likely also plays a role.
AC Wallbox will no longer be produced
The reorientation has specific consequences primarily for the hardware business. Not only is VW’s subsidiary giving up production of the battery-backed fast charging stations known as Flexpole in Hannover, but Elli also plans to phase out its own AC wall chargers in the future. Existing inventory is set to be sold out, after which no further orders will be accepted.
However, this should not change anything for existing customers: “There are no impacts on the use or applications of the devices that have already been sold. Nothing changes either in terms of customer service or maintenance,” Palazzo assured electrive.
The Elli CEO emphasizes that this move is not due to poor sales performance or technical issues. Rather, the business of unidirectional wall chargers no longer aligns with the desired level of scalability.
At the same time, Elli does not intend to completely abandon home charging. “Home charging is certainly important,” the Italian executive stresses. However, Elli plans to give lower priority to unidirectional charging and stop selling its own AC wall chargers. Palazzo sees the future in residential settings in bidirectional applications such as Vehicle-to-Grid and Vehicle-to-Home. More on this below.
No more hardware installation for fleets either
The withdrawal from the hardware business goes beyond the private wallbox business. Elli also aims to change its role in building and operating charging infrastructure for business customers and the Volkswagen Group. So far, the company has implemented such projects in part on its own. In the future, more specialized partners are expected to take over the planning, construction, and maintenance of the physical infrastructure.
Elli wants to focus instead on those parts of the value chain that can be scaled digitally. This includes connecting charging stations to backend systems, as well as charging, energy, and billing services.
What will happen to existing infrastructure services for fleet customers is still under internal review. According to Palazzo, various solutions are possible, including handing over these services to external partners. Implementation is set to proceed in phases and be completed by the end of 2027.
Digital charging and fleet services are set to grow
As mentioned earlier, the future Elli strategy is based on two pillars: Mobility and Energy. Looking closer at the details: In the Mobility segment, the company aims to further expand its MSP business with fuel and charging cards as well as fleet management services.
The integration of LogPay’s fuel card business plays a crucial role here. Elli can serve not only pure electric fleets but also companies whose fleets still consist of a mix of gasoline and electric vehicles. “We can create a bridge between gasoline fuel and electric charging. That’s exactly what this market needs,” believes Palazzo.
The company sees significant growth potential in this sector. Commercial customers have more complex requirements for billing and managing their vehicles, while large volumes of transactions can be processed through centralized platforms.
Palazzo also notes that margins in the business with commercial charging customers tend to be higher than in the consumer market. Therefore, Elli aims to strengthen its position as a mobility service provider (MSP) not only among consumers but especially in the B2B segment. The core of the MSP business is to enable access to as many charging stations from various operators as possible through roaming, and to charge for charging sessions to consumer and fleet customers.
Sixt uses Elli’s MSP solution
In addition, there is the business of offering digital charging services to other brands and companies such as Sixt. The car rental company integrated Elli’s MSP solution into its app at the beginning of 2024. These systems are now set to be made available to additional customers, with one initial deal on the verge of being finalized.
The second pillar is the energy business. Here, the electricity tariff Elli Naturstrom remains a key product. The company aims to expand its existing offerings with dynamic tariffs and new services related to two-way charging.
Two-way charging as a new growth area
Vehicle-to-Grid (V2G) could become a significant new business area according to Palazzo. The Elli CEO sees this as an opportunity to integrate electric vehicles not only as electricity consumers but also as flexible energy storage units into the power system.
Elli is still preparing for the market launch in November of the V2G service announced in June, in collaboration with The Mobility House. The hardware will no longer be developed in-house but will be provided by external partners. The company itself plans to focus on areas such as energy market integration (trading), electricity pricing, and other digital services.
According to Palazzo, Elli has tested various hardware solutions over the past 18 months. The delayed product launch was also due to the lack of a sufficiently reliable solution for commercial use at that time. Elli ultimately chose a bidirectional DC wallbox from the Chinese manufacturer EV-Tech.
"We believe V2G could be a real game-changer. For the first time in the history of the automotive industry, we can enable customers to generate their own income," says Palazzo. What he means is that customers will receive a credit of up to 720 euros per year on their electricity bill if they make active use of V2G. Elli calls this a "bonus for engagement" for vehicles that stay connected to the charging station in V2G mode for a certain amount of time each month.
The prerequisites for economic success are not only functional technical systems but also appropriate regulatory frameworks. In September, Elli, along with other companies, sent an open letter to the Federal Network Agency demanding simpler rules for two-way charging. However, last-minute changes to the so-called MiSpeL regulations by the agency have since eased tensions somewhat.
Vehicle-to-Home (V2H), which involves supplying electricity to a household from a vehicle battery, remains part of the strategy. Palazzo also sees great potential here, but points to the technical complexity of installing and integrating various components.
Volkswagen sticks to its strategic business area
According to Palazzo, stepping back from hardware does not mean that Volkswagen intends to scale back its charging and energy business as a whole. On the contrary, given the growing sales of electric vehicles, such services will remain a key part of the group’s strategy. Palazzo expects high triple-digit million-dollar revenue for this year.
At the same time, Elli is now experiencing what is also happening with other VW subsidiaries outside their core business: the search for external partners or investors, as is the case with MOIA or PowerCo. Palazzo confirms that several companies have shown interest in discussing potential investments or closer strategic cooperation. However, nothing is ready for signing yet. The priority is, above all, the opportunity to scale the business internationally more quickly and enter new markets, according to Giovanni Palazzo.
Part of the 400 employees must leave
Now for the uncomfortable part: the restructuring will also have an impact on the employees. Elli currently has just under 400 employees on its payroll. Functions directly related to the hardware and infrastructure business, as well as parts of central administration, may be particularly affected. Palazzo does not want to provide a specific figure for the number of positions that might be eliminated at this time. It is also unclear whether layoffs will be necessary as a result.
However, negotiations with the works council are already underway regarding the job cuts. Palazzo emphasizes that the restructuring poses a difficult situation for the employees, but believes the changes are necessary to ensure Elli’s long-term competitiveness.