J1772

• The Bottom Line: J1772 is not just a plastic plug for electric cars; for a value investor, it's a powerful, real-world case study in economic moats, network effects, and the immense risk of technological disruption.
• Key Takeaways:
• What it is: The SAE J1772 is the standardized connector for Level 1 and Level 2 AC charging for nearly all electric vehicles (EVs) in North America, except for Teslas. Think of it as the “USB port” for most non-Tesla EVs.
• Why it matters: It represents a classic “standard war.” Its battle for dominance against Tesla's NACS standard is a live demonstration of how network_effects can build or destroy a company's competitive advantage (economic_moat).
• How to use it: Use the J1772 standard as an analytical lens to assess the long-term viability, risks, and management foresight of companies across the entire EV ecosystem, from car manufacturers to charging networks.

Imagine the world of electronics before the USB port became universal. Every single device—your camera, your printer, your mouse—had its own unique, bizarrely shaped plug. It was a chaotic mess for consumers and a nightmare for manufacturers. Then, the USB (Universal Serial Bus) arrived and created a common language, simplifying everything. In the world of electric vehicles in North America, the J1772 was designed to be that universal solution. Developed by the Society of Automotive Engineers (SAE), the J1772 is the physical plug and set of technical protocols that allows an EV to “talk to” a charging station and receive a flow of Alternating Current (AC) electricity. This is the type of charging you'd typically do overnight at home (Level 1, from a standard wall outlet) or over a few hours at a public charger in a parking garage or shopping center (Level 2). For years, the industry operated on a simple divide: if you drove a Tesla, you used their proprietary plug (now called the North American Charging Standard, or NACS). If you drove almost anything else—a Ford Mustang Mach-E, a Chevrolet Bolt, a Hyundai Ioniq 5—you used a J1772 plug. This created two separate, competing ecosystems. However, a value investor knows that no standard, no matter how entrenched, is guaranteed to last forever. The recent, massive shift by major automakers like Ford, GM, and Rivian to adopt Tesla's NACS port starting in 2025 has thrown the future of J1772 into question. This isn't just a technical change; it's a seismic shift in the competitive landscape, and understanding it is crucial for anyone investing in the future of transportation.

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.” - Warren Buffett

This quote perfectly captures why a simple plug matters. The J1772 standard was, for a time, a source of competitive advantage. Its potential decline is a lesson in the fragility of those advantages.

To a speculator, the J1772 vs. NACS battle is about picking the winning stock for a quick pop. To a value investor, it's a rich text for understanding the fundamental principles of long-term business analysis. 1. A Live Lesson in Economic Moats and Network Effects: A strong economic_moat protects a business from competition, allowing it to earn high returns on capital over time. One of the most powerful moats is a network_effect, where a product or service becomes more valuable as more people use it. For years, J1772 benefited from a growing network effect. The more cars that used it, the more incentive public charging companies had to install J1772 chargers. The more chargers available, the more confident consumers were in buying a J1772-compatible car. This self-reinforcing loop is the holy grail of business. However, Tesla built a larger, more reliable, and better-integrated network. The decision by other automakers to switch to NACS is a stark admission that Tesla's network effect had become stronger, effectively breaching the J1772 moat. As an investor, this teaches you to constantly question the durability of a moat. 2. Assessing Risk and the Margin of Safety: Value investing is, first and foremost, about risk_management. The core principle is the margin_of_safety—buying an asset for significantly less than your estimate of its intrinsic value to protect against unforeseen problems. The “standard war” in EV charging is a massive, unforeseen problem for companies whose business models were built entirely around the J1772 standard. Imagine a company that only manufactures J1772 charging stations. Overnight, its total addressable market for new installations has shrunk dramatically. An investor who failed to consider the risk of a competing standard taking over would face the permanent loss of capital that Benjamin Graham warned about. This highlights the need to demand a larger margin of safety when investing in industries undergoing rapid technological change. 3. A Litmus Test for Management Quality: How a company's leadership team navigates a technological shift like this is incredibly revealing.

• Legacy Automakers (Ford, GM): Their decision to abandon the standard they helped build and adopt their rival's (Tesla's NACS) can be viewed in two ways. Is it a sign of weakness and a failure to build their own successful charging ecosystem? Or is it a sign of pragmatic, shareholder-focused leadership that recognizes reality and makes the tough but correct decision for their customers? A value investor would likely lean toward the latter, seeing it as a rational capital allocation decision.
• Charging Companies (ChargePoint, EVgo): How quickly do they adapt? Do they have a plan to retrofit existing stations? Are their new products modular and future-proof? A management team that is nimble, transparent, and proactive in addressing this challenge is one you can trust. One that is slow, defensive, or in denial is a major red flag.

4. Uncovering Second-Order Investment Opportunities: Second_order_thinking requires you to look past the obvious consequences and consider the knock-on effects. The decline of one standard and the rise of another creates a new set of winners and losers.

• The Obvious: Companies heavily invested in a J1772-only future face headwinds.
• The Second-Order Effects: Which companies will benefit?
  • Adapter Manufacturers: There will be a multi-year transition period where millions of J1772 cars will need to use NACS chargers. Companies making reliable, high-quality adapters could see a surge in demand.
  • Modular Hardware Producers: Companies that designed their chargers with swappable components (like the plug itself) will have a huge cost advantage over those who need to rip and replace entire units.
  • Software and Payment Platforms: The physical plug may change, but the backend software that runs the network, manages billing, and monitors uptime becomes even more critical. A company with a hardware-agnostic software platform is beautifully insulated from this “plug war.” This is a classic picks_and_shovels_strategy.

When analyzing any company in the EV space, use the “J1772 question” as a mental model to probe the durability of its business. This isn't a formula, but a method of qualitative analysis.

1. 1. Identify the Standard Dependency: Start by asking a simple question: “How dependent is this company's revenue and business model on the J1772 standard (or any single standard)?”
   • A component manufacturer making only J1772 plug heads is critically dependent.
   • A public charging network with thousands of installed J1772 stations is highly dependent.
   • An automaker like GM is moderately dependent, but can pivot its future production.
   • A company providing the cloud-based software for managing charging sessions is lowly dependent.
2. 2. Assess Adaptability and Future-Proofing: Dig into the company's technical and strategic flexibility.
   • Read annual reports and investor calls. Does management acknowledge the standards risk? Do they have a clear, costed plan to adapt?
   • Look at their product design. Is it modular? Can a J1772 plug be easily and cheaply swapped for a NACS plug? Or does it require a “forklift upgrade”?
   • What is their R&D focused on? Are they investing in multi-standard solutions or are they doubling down on a potentially obsolete technology?
3. 3. Analyze the Competitive Landscape: Map out the ecosystem and see where the company sits. Are they on the side of a growing or shrinking network?
   • Track the commitments of major automakers. The flow of future cars dictates the flow of future charging revenue.
   • Watch for government and regulatory actions. Will subsidies or mandates favor one standard over another? ¹⁾
4. 4. Quantify the Financial Impact: Translate the strategic risk into financial terms.
   • What would be the write-down value of their existing J1772-only assets?
   • What is the estimated capital expenditure required to upgrade their network to include NACS?
   • How will a shrinking J1772 network affect their future revenue growth projections? This directly impacts your calculation of intrinsic_value.

Let's compare two fictional EV charging companies to see how this analysis works.

• “Legacy Power Co.”: The oldest public charging network. They have 20,000 chargers, all using the J1772 standard. Their brand is built on being the non-Tesla alternative.
• “FutureProof Energy”: A newer, smaller player. They have 5,000 chargers, but from day one, they designed them with a modular “connector head” that can be swapped out in 10 minutes for about $200.

^ Analysis Metric ^ Legacy Power Co. ^ FutureProof Energy ^

This simple exercise shows how looking at the business through the lens of a technical standard like J1772 reveals deep truths about its long-term viability.

Using a technical standard as an analytical tool is powerful, but it's important to understand its scope.

• Focuses on Long-Term Viability: It forces you to look beyond next quarter's earnings and think about a company's ability to survive and thrive over a decade or more.
• Reveals Hidden Risks: It uncovers technological and competitive risks that may not be immediately obvious from a standard financial statement analysis.
• Excellent Proxy for Management Quality: A management team's handling of a standards challenge is a powerful indicator of their overall competence, foresight, and rational decision-making.

• The “Best” Technology Doesn't Always Win: The victory of one standard over another is often due to business strategy, user experience, and network size, not just superior engineering. An investor can get bogged down in technical minutiae and miss the bigger picture. (Think Betamax vs. VHS).
• The Future is Messy, Not Binary: It's unlikely that J1772 will disappear overnight. The transition will take years, and for a long time, the world will be a mix of J1772, NACS, and adapters. Don't assume a simple “winner takes all” outcome.
• Ignoring Other Factors: The charging standard is a crucial piece of the puzzle, but it's not the only piece. You still need to analyze the company's financials, debt levels, profitability, valuation, and the broader economic environment.

• economic_moat
• network_effects
• margin_of_safety
• risk_management
• second_order_thinking
• disruptive_innovation
• picks_and_shovels_strategy