July 27, 2017

Alternative Fuel Sources and Your Business

Alternative Fuels

By Anila Siraj, VP Kalibrate Strategy Group

The global trend toward alternative fuels is more than just a trend. The current state of alternative fuel vehicle and infrastructure development indicates that in the relatively near future, we will be able to accurately refer to this as a full-on movement leading to an eventual shift. For instance, the United States Federal Highway Administration (FHWA) is in the process of establishing Alternative Fuel Corridors that offer alternative refueling sites (specific to fuel type, including electric) along designated routes on the National Highway System. The network is expected to expand as demand for these cars grows with our collective, global, increasing interest in environmental awareness and action.

Meanwhile, Volvo has become the first major manufacturer to declare its commitment to ceasing production of vehicles that run only on an internal combustion engine, and France and the UK have just announced a ban on the sale of petrol and diesel vehicles by 2040, and may soon be followed by Norway, Germany, Netherlands and India. All have stated their intention to ban the sales of new petrol and diesel vehicles within the next 10-15 years.

Nation states and vehicle manufacturers are not alone in their interest in this trend; retailers also have a stake in alternative fuel. And so the time has come to consider what the continued trend toward alternative fuels means for your business. For the purposes of this piece, we've narrowed it down to one question: What do electric charging vehicles (EVs) mean for your retail fuel site?

What Does the Rise of Electricity as an Alternative Fuel Source Mean for You?

Predictions about the shift toward alternative fuels causing the next great crash in fuel have been put forth for over a decade. The truth is, we still don't know what's going to happen. We don't know if there will be new regulations surrounding fuel. We don't know how much "range anxiety" will impact purchase decisions, or whether consumers are ready and willing to replace their traditional vehicles. Therefore, we don't yet have the full picture of how quickly this trend will evolve into a shift, or how quickly said shift will reshape the status quo.

But in anticipation of quick movement and adoption, you need to start branching out. Vehicle and charger manufacturers are looking to encourage charger placement — and much of it is happening at traditional fuel stations. Initially, standalone charging was par for the course, with consumers spending several hours at one location, such as a mall, while their vehicles gained juice. But with the advent of faster charging and the decline of longer retail excursions, manufacturers are now approaching fuel and convenience retailers to install chargers on their forecourts.

The very fact of manufacturer leadership in this area means the investment from retailers is minimal. Assuming the proliferation of electric charging vehicles, you will gain customers in one of the same ways you gain customers now: drawing them in via fuel — only in this case, the fuel is electricity. That means you will gain foot traffic and higher retail sales, while giving up just one thing: a small piece of your forecourt space. If you decide that space is a premium, you'll want to weigh out what returns more: the draw of a new type of fueling or the standard parking space you'd otherwise have in your lot.

A further consideration for your business: If you are looking to build or remodel existing sites, you may want to examine priorities to incorporate alternative fueling options. Ask yourself questions such as: What is the state of the alternative fuel market in my area? Should attention to electric as an alternative fuel be on the site development priority list? What is the possible return on adding EV chargers? Demand might not exist right at this moment, but today is ripe with opportunity for retention in the face of change. Deeply examine your market and the potential for growth via current and future supply and demand before making a decision; whatever you do, don't neglect the reality of alternative fuels. Understanding the market can also help you choose where to build or buy if you are searching for new locations.

Gearing up for Electric

However you choose to address the EV market, know that the trend toward alternative fuels doesn't have to be a death knell for your retail fuel site. You can capitalize in much the same way consumers are capitalizing: shifting your mindset to achieve new goals.

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