There are are several factors that are currently affecting and, in the future, going to affect the future of petrol filling stations. Alternate fuels such as electricity, liquid petroleum gas (LPG), compressed natural gas (CNG), biofuels and self-charging hybrids are increasing their share in the fuel and vehicle markets. The vehicle manufacturing industry is continuously looking to improve efficiency of vehicles and reducing carbon emissions, which would surely have an impact on fuel sales and the way business is conducted.
The emergence and continuous rise of consumer convenience factors and technology (online shopping, home deliveries, on-line banking, work from home scenarios, etc.) together with the post Covid-19 pandemic, will all influence consumer mobility and the possible reduction in the need for fuel. Based on the above, it is inevitable that fuel sale volumes are likely to decrease in the mid to long term, which would subsequently affect the convenience shop sales. The freeway located stations may be resilient for a longer period as the emergence of electric and hybrid trucks seem to be lagging and the current low range of electric vehicles, which would be suited mainly in urban use and short highway trips.
An international company BCG (Boston Consulting Group) has conducted an in-depth study in 2019 of the fuel retail industry and their study predicts – “Although the environments differ from one another markedly, a significant portion of the fuel retail network in some markets could be unprofitable by 2035—even in the scenarios in which new mobility models are less disruptive and fossil fuel sales do not decline precipitously. In a market environment in which electric vehicles (EVs), autonomous vehicles, and new mobility models take off rapidly, up to 80% of the fuel-retail network as currently constituted may be unprofitable in about 15 years that based on current models”.
According to the South African Department of Transport, there are currently ±1,000 registered electric vehicles (EV) on South African roads with this number likely to increase with time and as technology advances and the costs of production makes it more affordable to the consumer as more major brands enter this market. Historically, filling stations have in general been resilient during tough economic conditions. However, as the we move into a new era of lower carbon emissions and the evolving motor industry, I am of the opinion that for filing stations to be economically viable to operate, they need to adapt their business models. One of which could be rolling out more EV charging points at filling stations.
One of the immediate benefits of having EV facilities at filling stations is that currently EV points take up to 30 to 45 minutes to completely charge a vehicle, meaning that customers will spend more time at the convenience stores, restaurants and coffee shops located at the stations. Therefore, there could potentially be an increase in spend in these additional areas of retail. However, as technology evolves, will this be a long-term benefit, remains to be seen due to improving shorter charging periods and longer travel ranges on single charges.
On the other hand one of the risks with investing in EV infrastructure is the general issues of electricity supply with constant load shedding, the current high prices of electricity in South Africa, EV’s cost substantially more than similar petrol and diesel powered derivatives, which may stagnate this market in the short to mid-term.
Fuel retailers in South Africa appear to be in a good position to transform their sites to diversify their operations and offerings. However, going forward, it will be interesting to see if South African retailers will adapt to the times or will petrol filling stations become “relics of history”.