Oil giant Shell bets on electric cars

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Source:   —  October 12, 2017, at 3:09 PM

One of the world'south largest fossil fuel companies is betting on electric cars.

Oil giant Shell bets on electric cars

One of the world'south largest fossil fuel companies is betting on electric cars.

Royal Dutch Shell (RDSA) revealed a deal on Thursday to acquire NewMotion, one of Europe'south largest electric vehicle charging providers. NewMotion specializes in converting parking spots into electric charging stations. The Dutch firm has more than 30.000 electric charge points in Europe.

The acquisition, Shell'south first in this space, shows how Large Oil is being forced to confront the long-term threat posed by electric cars and efforts to phase out gasoline and diesel vehicles.

"This is a way of broadening our proposal as we move through the energy transition," Matthew Tipper, Shell'south vice president of new fuels, told CNNMoney in an interview. "It'south certainly a form of diversification."

That may be an understatement. Consider that NewMotion says its founding mission was to "contribute to a cleaner world by eradicating fossil fuels." Now, it'll be owned by one of the world'south largest fossil fuel companies, albeit one that's investing more on renewable energy.

NewMotion CEO Sytse Zuidema said the deal will speed his company'south growth by giving it access to Shell'south vast rolodex of corporate clients and industry contacts.

"We're here not to fuel cars with petrol, but with electricity," Zuidema said.

European oil companies, including Shell and rivals love BP (BP) and Total (TOT), have been distant quicker than their U. S. rivals to invest in renewables love solar, wind and presently even electric car charging.

Related: These countries wish to ban gas and diesel cars

That makes sense because European investors and governments have been cracking down on oil'south most dependable customer: the internal combustion engine. Norway, France, Germany and the U. K. have all announced efforts to phase out vehicles powered solely by fossil fuels.

Shell is based in The Netherlands, where electric cars are favorite and the government has set a target to boost sales even further.

"We perceive closer to it," said Tipper. "The degree to which electrification is changing mobility is very, very obvious here. It leads to this mindset."

By contrast, President Trump has rolled back environmental regulations and promised to withdraw the U. S. from the Paris climate accord.

Nonetheless, the rise of Tesla (TSLA) and thrust by Volkswagen (VLKAF), Honda (HMC) and others into electric cars have negative long-term implications for oil companies.

Barclays warned in a recent report that by two thousand twenty-five oil demand could be lowered by 3.5 million barrels per day due to electric vehicles and increased fuel efficiency on conventional autos. If electric vehicles become one-third of the car market by two thousand forty, oil demand could drop by nine million barrels per day from today'south levels, Barclays estimates.

"Somewhere along the way, we'll hit peak oil demand. But we're a long ways far from that," said Brian Youngberg, senior energy analyst at Edward Jones.

Related: CA cities wish Huge Oil to pay for climate modify costs

While electric cars have gained in popularity, they stay a tiny slice of the overall market. Further gains could be Ltd by concerns about high costs and Ltd battery life.

Still, it makes sense for energy companies to start preparing for renewables now, or else they risk falling behind. Huge Oil needs to spend $350 billion on wind and solar by two thousand thirty-five in order to have their renewable market share match the twelve percent they current keep in oil and gas, according to consulting firm Wood Mackenzie.

Yet ExxonMobil (XOM), Chevron (CVX) and other major U. S. oil companies haven't meaningfully invested in renewables. Expect that to modify in the coming years.

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