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   Business
China`s oil majors face uphill climb to adapt to EV future
  Date : 21-04-2024

Reuters

Tucked away on a side road in suburban Beijing, the Xiaowuji battery charging station opened by Sinopec in December 2023 offers a glimpse of China`s post-gasoline future.

Boasting 70 fast electric vehicle charging points, coffee machines and massage chairs, the station is one of thousands being built by the state-run oil giant across the country as it looks to adapt to battery dominated driving.

EV sales in the world`s largest auto market are expected to account for 40% of the 23 million cars sold this year. China`s gasoline demand is predicted to peak by 2025 and could halve by 2045, making a strategic shift an imperative for its biggest oil refiners and marketers, Sinopec and PetroChina.

The state-owned oil companies together operate about 50% of the more than 100,000 gas stations in China and fuel sales account for almost half of their revenue.

"The national oil companies see the writing on the wall, which is why they are working to adapt their service stations to a lower-carbon economy," said Erica Downs, a researcher at the Center on Global Energy Policy at Columbia University.

Other global energy companies like Shell and TotalEnergies are also looking to use the lessons learned to date from smaller early adopting EV markets like Norway and apply them on a much larger scale in China.

But China`s public EV charging sector is beset by market fragmentation, overcapacity, low utilisation and losses, posing challenges for oil companies attempting to adapt their business models.

On a recent weekday afternoon, 54 of the 70 charging points at the Xiaowuji station stood idle. Most of the customers were taxi drivers, one of whom said charging there was faster, though slightly more expensive, than charging at home.

Sinopec, which operated 21,000 charging points at the end of 2023, has earmarked 18.4 billion yuan ($2.55 billion) to its distribution segment this year for the construction of an integrated energy station network, up 17.2% on last year. The group plans to build 5,000 charging stations by 2025.

PetroChina, which operates 28,000 charging points via recently acquired subsidiary Potevio New Energy, announced plans to increase capital spending on marketing and distribution by 49.8% to 7 billion yuan in 2024, focused on comprehensive stations providing oil, gas, hydrogen and charging, according to company filings. The company plans to build a further 1,000 EV battery swapping stations this year.

Each has a market share of roughly 1% of the 2.73 million public charging points in China.

PetroChina did not respond to a request for further comment on its distribution strategy. Sinopec declined to comment.



  
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