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Multinational oil and gas company BP and Chinese ride-hailing giant Didi announced a joint venture (JV) to construct as many as 200 electric-vehicle (EV) charging stations in China by the end of 2020. The JV comes shortly after the two companies piloted a charging station in May 2019, which offered ten fast-charging units of 60-120kW.
Here’s what it means for Didi: The JV is another piece of Didi’s efforts to create a robust mobility ecosystem for both its drivers and riders.
An estimated 600,000 vehicle operators on Didi’s platform drive EVs, and should find the charging program especially appealing. A Didi spokesperson said the BP collaboration will help the company "provide [a] better experience for car owners across the country."
Didi stands to benefit if this "better experience" allows it to attract and retain drivers, which can translate into a competitive advantage — competing platforms would struggle to match the breadth and depth of service offerings enabled by a strategic partnership with such a major corporation.
This could help Didi stave off competitors in China’s $23 billion ride-hailing industry, while leveraging its market dominance to expand revenue in tangential services.
But because the EV stations will also be open to non-Didi drivers, they also represent a bolstering of Didi’s greater mobility ambitions. The EV stations that are part of the deal with BP will connect with the Didi-owned Xiaoju Automobile Solutions (XAS) platform, which is where Didi aggregates its mobility services. Didi invested $1 billion into XAS last year in an effort to expand beyond the core business of ride hailing.
Here’s what it means for BP: The JV will help BP capture a larger share of the EV market in China, as integration with the Didi platform differentiates the company from other energy providers.
EVs can run on alternative energies such as hydroelectric, renewables, and nuclear. This could threaten BP’s core business of providing energy in the form of gas and oil. Rather than resisting this shift, BP hopes it can capitalize on it in China, which contains about half of all EVs sold globally, per BP.
According to Automotive News, BP believes the venture could be "scaled up to thousands of hubs across China to reach a leading market position." This could be a massive market, as China’s government has set a target of 4.8 million EV charging stations by 2020. There are an estimated 770,00 EV charging stations in China today.
The bigger picture: This deal is part of a rising effort by traditional oil and gas companies to hedge against the decline of fossil fuel consumption, especially in the transportation sector.
Global demand for gasoline is set to peak around 2021, in part due to the rise of EVs, according to Quartz. As a result, oil and gas companies are beginning to invest in EV infrastructure, which will help them future proof their business model.
For example, both Royal Dutch Shell and French multinational oil and gas company Total both acquired EV charging firms over the last year. We expect this trend to not only continue but also accelerate, especially as EVs come to represent a larger share of total vehicles on the road.
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