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EVs are the Road to the Future, Big Oil Hears the Message

Rimmi Singhi
FuelCell Energy's (FCEL) CCS technology will reduce carbon emission in Drax Power Station.

Electric Vehicles (EVs) are gaining traction with automakers discarding gasoline engines for electric motors. As more and more auto giants are stepping into the EV market space, Big Oil companies are indeed getting the message to re-align their models and have already started taking baby steps to that end for adapting to the changing times.

Booming Electric Cars Revolution

There has been a sweeping shift in thevehicle industry from internal combustion engines toelectric-powered versions.A host of factors, such as pollution issues, government sops, cost advantages, technical superiority and increasing adulation from both automakers and customers have turned the fortunes in favor of EVs. Stricter fuel-efficiency standards imposed by countries across the world have been making electrically charged cars all the more desirable.

European nations, namely France and the UK have already specified future plans of completely banning the sale of diesel and gasoline cars. China, the largest car market in the world, has also decided to totally switch to the EVs and is expected to emerge as the biggest market for electric cars globally.

With various auto giants rolling out electric cars, nearly 60%of new car sales and 33% of the global car fleet are estimated to be electric by 2040. The fact that the electric effect is in full force with EVs on track to dominate the market in the future has sent a clarion call to the energy industry as well.

Oil Supermajors Are Getting Plugged in 

Global automakers are expected to invest more than $300 billion over the next decade to electrify their fleets. This has caught the attention of the oil industry boardrooms with the top-rung oil companies betting on the long-term EV prospects. Energy majorsare realizing the potential threat to their business in an era of EV and are taking effective responsive measures. 

The latest example being Chevron Corporation CVX, which is dabbling in EV charging by collaborating with EVgo to offer EV charging ports at California gas stations. Notably, more than a dozen EVgo fast chargers—ranging from 50kw to 100kw in power, are already under construction at five Chevron stations. Chevron believes, the partnership with EVgo will provide customers with an array of refueling choices in the future and diversify its asset portfolio. Before partnering with EVgo, the U.S. supermajor had invested in EV infrastructural developer ChargePoint Inc in 2018.

As demand for cleaner vehicles is expected to soar, BP plc BP acquired UK’s largest car charging firm, Chargemaster, for $170 million in 2018 and intends to build a network of 400 high-power charging points (with 150 kw capacity) at its retail sites in the United Kingdom by 2021. The leading British energy player also invested $5 million in the U.S. mobile EV charging company—FreeWire Technologies—to offer rapid charging facilities across its retail stations in Britain and Europe.

In 2018, Italian oil giant Eni S.p.A E signed an agreement with the EV-focused charging operator IONITY, which is a JV formed by world’s major carmakers, namely BMW Group, Daimler AG, Ford Motor Company and Volkswagen Group with Audi and Porsche. The energy firm is targeting to equip around 400 stations across Europe with 2,400 chargers by 2020.

Last year, French fossil fuel giant TOTAL SA TOT inked a deal with ChargePoint to increase the availability of EV charging solutions across the United Kingdom. TOTAL also acquired EV infrastructure firm G2mobility to accelerate growth of its EV charging business. With above 10,000 charging points, France-based G2mobility expands TOTAL’s footprint in EV charging businesses, ranging from designing smart charging stations to optimizing energy usage management and selling integrated services. As part of the G2mobility deal, TOTAL also teamed up with the cable company Nexans to aid in the development of infrastructure for electric cars in France. The supermajor,which carries a Zacks Rank #2 (Buy),also launched two innovative lines of fluids for electric and hybrid vehicles late last year, which will help the firm obtain a leading position in electric mobility.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shell Leading the Charge Toward EV, ExxonMobil is an Outlier

Among the Big Oil companies, the one that’s certainly ahead of the game is Royal Dutch Shell plc RDS.A. The company, which aims to become the biggest electric company in the world in early 2030s, has been on a buying spree as it intends to move its focus to cleanerenergy sources. The Anglo-Dutch energy giant clinched its maiden EV deal in 2017 by acquiring New Motion, one of Europe's largest EV charging networks. Shell further collaborated with IONITY and has also launched vehicle recharging stations as pilot projects in California, Britain and the Netherlands. It also invested $31 million in a fledgling EV charging company, Ample.  Early, this year, the company signed a contract to buy Greenlots, which will enable it to become the first super major to own a U.S.-based charging service. Greenlots would help Shell build its own charging network while opening a revenue stream in licensing high-margin software.The oil giant is likely to enter into many such pacts going forward as it intends to invest around $2 billion a year through 2020 in its New Energies division, focusing on alternative fuels, renewable power and EV charging infrastructure.

While Shell is at the forefront of EV technology deployment among the energy supermajors, U.S. oil giant Exxon Mobil Corporation XOM has been a laggard in this space. While earlier this year, it was reported that the integrated major has been actively contemplating to make investments in EV charging, nothing specific has been disclosed yet. 

The Last Word

Will EV charging market become a new battleground for the energy majors in the future?

Big Oil companies are tapping into the electric era as a hedge to survive in case the gasoline sales start drying up. The oil and gas giants want to cash in on the wide adoption of the electric cars, thereby burgeoning the customer base and revenues. Although Big Oil is currently flirting with electricity and making token investments considering their financial scale, their growing interest in EV charging underscores the fast-pacing momentum of the EV market, which would flatten oil demand in transportation in the near future. Small investments in electricity will position the industry players better by providing households and businesses with cleaner power along with lending the retail outlets a green edge with EV charging.

So far, European energy giants are faring better in the EV charging space as compared to their U.S. counterparts. As the race to the energy transition intensifies further, it will be interesting to watch the oil and gas biggies compete for the pole position, trying to slip into the driver’s seat of the new fuels industry.

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
TOTAL S.A. (TOT) : Free Stock Analysis Report
 
Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
 
BP p.l.c. (BP) : Free Stock Analysis Report
 
Eni SpA (E) : Free Stock Analysis Report
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
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