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Shell (RDS.A) Clinches Maiden EV Deal, Acquires NewMotion


Europeanoil giant Royal Dutch Shell plc RDS.A recently inked a deal to acquire NewMotion which is Europe's one of the largest electric vehicles (EV) charging networks.

Deal Highlights

Per the deal, NewMotion will retain its brand and operate as a wholly-owned subsidiary of Shell. NewMotion has around 30,000 private electric charge points in the Netherlands, Germany, France and UK. It also runs around 50,000 public charge points in various countries in Europe for over 100,000 customers.

With this deal, Shell wants to cash in on the wide acceptance of the electric cars and thereby increase its customer base and revenues. Shell believes that the deal will provide customers range of re-fueling choices in future and bring diversification to its asset portfolio.

Shell’s Vision and Initiatives

By 2025, Shell aims to attain 20% of its global fuel station sales from electric vehicles recharging and alternative and low carbon fuels like biofuels, battery recharging and liquefied natural gas. The company will invest approximately $1 billion per year till 2020 in its New Energies division as it intends to shift its focus on cleaner and renewable energy sources.

Shell has also launched vehicle recharging stations as pilot projects in California, Britain and the Netherlands. It also plans to build hydrogen fuel stations in Germany. The Anglo Dutch giant is changing its marketing business according to the change in demand pattern, which focuses more on alternative fuel.

The acquisition of NewMotionby Shell marks the most significant deal by an energy supermajor in the EV market. Energy companies realizing the potential threat to their business in an era of electric vehicles are taking effective responsive measures. BP plc BP is in talks with electric vehicle makers to enter into partnership agreements for providing charging stations at its retail sites. In September, TOTAL S.A. TOT signed a deal with NewMotion to provide customers access to electric vehicle charging network.

Electric Cars Are The Future

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 fortune in favor of EVs. Stricter fuel-efficiency standards are being imposed by countries across the world which seem to be in favor of EVs. European nations such as France and UK have already specified future plans of completely banning diesel and gasoline cars sale. China, the largest car market in the world, has also decided to totally switch to EVs at an unspecified date, has sent a clarion call to automakers as well as the energy industry.

The Road Ahead

With the transition to electric vehicles gaining momentum, the trend could eat into global oil demand and upend the energy sector in the coming years. It is estimated that electric vehicles will cause the oil demand to reduce by 3.5 million barrels a day by 2025. Per Bloomberg reports, one-third of automobiles in the world will be electric by 2040, a shift that will cut demand for oil production by about 8 million barrels a day.

Therefore it makes sense for the energy companies to re-orient and re-strategize to adapt to the changing times and invest in alternative fuels. Many oil majors like TOTAL, Chevron Corporation CVX, Shell and ExxonMobil Corporation have already started making efforts to de-carbonize the energy system with gradual shift into alternative fuels.

Zacks Rank

Headquartered in Netherlands, Shell is one of the largest integrated energy companies engaged in production, refining, distribution and marketing of oil and natural gas. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Shell have rallied 12% year to date compared with 1.4% growth of its industry.

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