Every major automaker now has electric vehicles (EVs) in their product lineup. Countries and some U.S. states are looking to phase out the sale of combustion engines within the next decade or so. The writing is on the wall: Gasoline and diesel are going to be displaced, though probably not completely replaced, by electricity.
What happens now? Companies like TotalEnergies (TTE -1.25%) and Shell (SHEL -0.15%) change with the times or go out of business.
There's plenty of time
Despite the clean energy zeitgeist, energy transitions are not overnight occurrences. The infrastructure that must be built takes time to get into place. The process is not tracked in days or years, but decades. So it is wildly premature to suggest that the end of oil is upon us.
That's good news for energy giants like Exxon and Chevron, which are moving very slowly when it comes to clean energy. They believe that demand for oil and natural gas will remain robust enough for them to focus on what they do well, which is produce, process, and distribute carbon-based energy products.
Image source: Getty Images.
Not all of the integrated energy companies feel the same way, however. They, too, believe that oil and natural gas remain important to the global economy, but view using today's carbon profits to fund a transition toward cleaner energy as a more appropriate course of action. Two of the biggest proponents of this are TotalEnergies and Shell. BP (BP -1.17%) is also charting a similar course, but its leverage is materially higher than that of all of its closest peers, so most conservative investors are likely better off elsewhere.
The auto benefit
The efforts of Shell and TotalEnergies are broad-based, so they include things like buying and building wind and solar farms. But there's a unique benefit these two companies possess that will be hard to replicate. They have massive distribution networks that extend all the way to the consumer via gas stations. These properties, however, are more than just gas pumps, as most now contain convenience stores as well. So people stop in to fill their car and often grab a few things they need along the way (like coffee, soda, and snacks).
But here's the interesting thing: It's not that hard to add charging stations for electric vehicles to such properties. TotalEnergies is embarking on just such a program in Europe at its roughly 300 locations. Shell has similar plans, noting recently that it has more retail locations than McDonald's. The big upside, however, is likely to be the fact that charging takes longer than filling a gas tank, so there's more time for customers to spend money in the attached stores.
This, however, is just one piece of the puzzle. For example, Shell, which already has more charging points than its European peers, set a goal of 500,000 charging points of all kinds by the end of 2025. As TotalEnergies highlights, people charge their cars in many different places, including home (roughly half the time), at the office, and on the road. So there are more places to expand and ways to invest, but all benefit from the highly visible EV connection that TotalEnergies and Shell will have at their gas stations. If you want a safe, reliable, and trusted way to charge your EV, Shell and TotalEnergies will likely be top of mind.
EV charging is still pretty minor when compared to the oil operations at both of these companies. So they are hardly pure play options in the energy sector. And they compete with many other companies, from established brands to upstarts. Still, you don't build a business overnight, though acquisitions are playing a big role in both of these companies' plans. And brand recognition is important when you are dealing with consumers. For those taking a long-term view of the EV space, market cap giants like TotalEnergies and Shell have the financial strength, size, and desire to be big players.
Thinking long term
TotalEnergies is dedicating roughly a third of its $14 billion to $18 billion capital investment plans to clean energy, of which EVs are likely to see their fair share. Shell's investment plans are even bigger, at up to $22 billion a year, with a keen focus on the energy transition. The future will include more EVs, and these two energy giants plan to be there to serve them, using cash from today's carbon operations to fuel the transition. While not pure plays, they are a safer way to play the emerging EV market than upstarts that don't have the same scale or brand recognition.
