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Shell positions itself to gain from rising demand for EVs

Moscow

DEMAND for electric cars will continue to surge irrespective of oil prices as consumers buy into a technology aimed at making driving fun while being environmentally friendly, according to Royal Dutch Shell plc.

"It's a technology many of our customers like," Istvan Kapitany, head of Shell's global retail business, said in an interview in St Petersburg, Russia. "They get a joy out of it, they feel passionate about it, they think it's a great driving experience."

Mr Kapitany is not the first oil industry executive to highlight how the cool factor could play a big role in the spread of electric vehicles. BP plc's chief economist Spencer Dale said in 2016 that the technology could wipe out most of the projected growth in oil demand from cars in the next two decades if consumers embraced it enthusiastically - on a par with Apple Inc's iPhone.

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Social desirability is important enough for consumers to ignore that battery-powered technology is currently more expensive than internal combustion engines, Mr Kapitany said. "Customers don't always make rational decisions - if it weren't like that, it would be very difficult to sell sports cars," he said.

It may take until the middle of the next decade for the cost of electric vehicles, or EVs, and internal combustion engine technology to reach parity, according to Bloomberg NEF. Though EV sales have surged, they still make up only about 3 per cent of all new cars sold globally but will rise to 55 per cent by 2040. Mr Kapitany estimated that 1.2 million to 1.5 million electric cars will be added this year to the 3.5 million on the road as at end-2017.

Tax incentives offered to EV buyers in some countries, as well as regulatory moves to lower carbon emissions, add to their attraction, he said. Brent crude's recent surge to over US$80 a barrel fuelled expectations of an increase in demand for electric and hybrid cars to market. Prices have since dropped to about US$60, bringing down petrol with it and making cars that run on the fuel more economical.

Shell, Europe's largest oil company by market value, is positioning itself to gain from the demand for EVs. Last year, it bought Europe's largest charging provider NewMotion and agreed with IONITY - a Munich-based venture between BMW Group, Daimler AG, Ford Motor Co and Volkswagen AG - to expand the business.

Shell's plans include increasing the number of EV-charging stations that it has in Europe with IONITY to 100 by the end of next year from the two sites they currently operate in Austria and France. "We are going to be giving our customers the ability to fill up their cars in five minutes," Mr Kapitany said.

Rapid-charging technologies will change the behaviour of EV customers at fuel-retail forecourts, so they will need to improve their convenience-store offering. "Currently, they spend an average 17 minutes at our service stations and buy double of what an internal-combustion car customer would buy," he said, referring to purchases from convenience stores. Forecourts of the future will likely have "more non-fuel services in the front - a convenience store, restaurant, battery-charging, battery-changing and car-sharing services."

"It'll be far more a mobility service centre than a petrol station," he added. BLOOMBERG