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Energy

Four Ways the Energy Industry Can Prepare for the Electric Vehicle Age

The tipping point of electric vehicle (EV) sales has arrived, setting the energy industry on a new path–with no turning back. Is your business ready?


The replacement of fuel vehicles with electric vehicles (EVs) has become a case of not ‘if’, but ‘when’.

As of the first-quarter of 2021, more than 10 percent of cars sold in Europe are electrically chargeable.1 In Norway alone, that figure is 82 percent for the same time period.2 Globally, governments and policymakers are committing to net-zero targets. International carmakers, such as General Motors, Volvo, Volkswagen and Jaguar Land Rover, are transitioning to become all-electric in the next 15 years.

With battery technology developing at a rapid pace and costs coming down, 2023 is now tipped as the year when mass market EVs will reach cost and margin parity with internal combustion vehicles.3

What does this all mean for energy majors?

The arrival of the EV tipping point will disrupt the legacy fueling value chain in fundamental ways. In an EV-led world, drivers no longer need a service station when they can charge at home or work. This will result in reduced petroleum sales, but more importantly, in the loss of the intimate relationship with end consumers.

To Adapt to This Changing Environment, Treasuries Must Prepare Now

The first movers will gain flexibility in an uncertain marketplace – and a head start on new market entrants.

Here are four strategies to help ensure your business can keep up.

Deepen customer relationships across multiple touchpoints

Energy majors will face many new challengers as they battle for their share of the EV marketplace. The key to success will be customer-centricity. They must evolve their treasuries to serve customers and fleets at multiple touchpoints, not only the forecourt.

This brings a host of opportunities to build a deeper relationship with drivers and businesses. For example, by providing both domestic energy and access to a car charging network, the benefits of improved brand visibility and client loyalty can be realized. Customer data becomes more valuable too, through learning car charging locations and habits.

But this also brings raised expectations. Treasury must deliver the ability to pay for vehicle power via subscription, RFID or contactless wallet, while home power remains paid via direct debit; potentially all managed from the same app. Split payments or reconciliations may be required for the first time. Any collected payments data may currently belong to different business units, resulting in the inability to derive timely, meaningful insights from the same customer. The illustration below shows the wide range of new transactions that will need to be mastered.

 

Ev Road Infographic
shift from internal silos to enable interconnected payments

For multiple touchpoints and payments platforms to reach their full potential, group treasuries must cut across the silos that currently separate individual business units. For example, an energy major’s EV charging network division may have been the result of an acquisition, already leveraging new payment rails such as RFID cards or digital wallets. By contrast, the domestic electricity distribution, toll collection and service station businesses may be separate entities, all utilizing tailored or legacy payment solutions, siloed practices and disconnected data repositories.

Transactions are evolving from straightforward fuel purchases to multiple channels in a client-centric mobility ecosystem and treasuries must mirror this new reality. Ensuring these new client touch-points are covered by a single, shared treasury function will help underpin these new B2C strategies.

Pivot to providing a payment platform

Long journeys, or a lack of driveway, mean that EV drivers will need to charge away from home. A myriad of charging point companies, along with new mobility platforms, will take advantage of this, resulting in a huge combination of power and payment options.

Customers will prefer user-friendliness and a single payment solution, meaning the demand for a harmonized payments platform will increase. The best platforms will deliver world-class user experiences, multiple payment options and will not be limited to the traditional players.

E-Mobility Service Providers (e-MSPs) and Charge Point Operators (CPOs) have an opportunity to gain a significant competitive advantage by developing their own payment and/or billing platforms as well; provided, of course, that the treasury function is ready for such a change.

A platform provider can create additional value through the ability to cross-sell new products such as parking, maintenance or tolls. A platform provider that goes further and processes payments for third-party automotive services, therefore becoming a regulated intermediary, unlocks even more benefits including deep insights from payments data, better brand leverage, improved liquidity from customer deposits and the ability to earn FX or transaction fees.

Embrace digital upgrades, including deployment of new payment rails and APIs

Of course, the traditional roles of treasury will remain. The new opportunities highlighted above can only be exploited with a treasury that secures a robust and diverse capital structure and effective risk management. But the ability of treasury and payments teams to capture new data and provide new insights will be crucial if these new business models are to be explored.

Internally, the deployment of Virtual Accounts and APIs will result in centralized visibility and faster feedback on the success of new consumer interactions. Faster feedback means faster decisions, a key competitive advantage for an energy marketplace in transition. Treasuries will need to understand how to keep data consistent, secure and controlled if the greatest benefits are to be gained.

The Evolution from Internal Combustion to EVs Is Fully Underway

Companies serving the demand for vehicle recharging must have treasuries that work across business divisions, drive growth by deploying cutting-edge payment technologies and act as dynamic payments intermediaries for an entire ecosystem.

They will also be the companies that drive actionable insights from new sources of valuable payments data — ensuring fast business decisions in a time of generational change.

It’s often said that data is the new oil. In an age where fuel and lubricants are increasingly being replaced by volts and apps, it seems payments data, underpinned by a single, digital, cross-siloed treasury, will indeed become a key way to ascertain new customer trends and drive revenue.

J.P. Morgan has served the energy industry for decades. Leveraging our deep understanding and experience of the market, we constantly move with the times in order to provide market-leading digital solutions and intelligence for our clients.


To learn more about our energy industry solutions,
please contact your J.P. Morgan representative.


1. ACEA (European Automobile Manufacturers Association - https://www.acea.be)
2. ACEA (European Automobile Manufacturers Association - https://www.acea.be)


The views and opinions expressed herein are those of the author and do not necessarily reflect the views of J.P. Morgan, its affiliates, or its employees. The information set forth herein has been obtained or derived from sources believed to be reliable. Neither the author nor J.P. Morgan makes any representations or warranties as to the information’s accuracy or completeness. The information contained herein has been provided solely for informational purposes and does not constitute an offer, solicitation, advice or recommendation, to make any investment decisions or purchase any financial instruments, and may not be construed as suc

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Treasury and Payments Energy Digital Innovation