Navman probably never thought it would see its value destroyed by a search company. The taxi industry likely never expected to be upended by a phone app. Real disruption is generally a blindsiding event, not an incremental improvement by a traditional irritant.
Retailers are facing huge changes to the way they work and the relationship they have with their consumers, but some face an even greater danger: utter obsolescence. For instance, newsagents risk being destroyed not because of their own decisions but because print publishers failed to manage the migration to digital consumption.
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Likewise petrol stations. A fuel retailer typically earns only a few cents from each litre of petrol sold. To make any money, service stations need to sell a large volume of fuel or operate a highly profitable convenience store selling food, drinks, lollies and tobacco.
But that model is being threatened by the sweeping changes coming to the automotive industry — namely the rise of electric vehicles.
The shift is likely generational — and irreversible — and poses a slow-burning threat to an industry that for a century has been considered bedrock infrastructure. The trend is not their friend and they risk being themselves disintermediated by electric charging infrastructure installed in homes, in office buildings or in locations like shopping centres.
It’s the same conundrum troubling bank branches and some other retail categories: what is the point of your real estate when its purpose is fundamentally dissolved by a tectonic market shift?
Petrol stations were once protected by high barriers to entry to their industry. Now they find themselves challenged by the likes of GPT, which is offering free electric car charging at its Rouse Hill Town Centre and Wollongong Central shopping centres.
“We are currently assessing the potential rollout of more electric car charging stations across our retail and office portfolio to meet the changing needs of our customers,” a GPT spokesperson told Which-50.
“While electric vehicles currently comprise a very small percentage of the car fleet in Australia, we expect there could be a significant rise in the number of electric cars in the coming years with ongoing advances in battery technology and improved affordability.”
The future value outside fuel
James Rosenwax, executive director of engineering company AECOM’s cities sector, argues the true value of fuel stations is largely defined by their strategic locations in our cities.
A city infrastructure specialist, Rosenwax leads a research team which provides advice to AECOM’s private and public sector clients on the planning decisions for cities of the future.
“We have no certainty around what the future holds. However, well-located and connected community hubs, like service stations, are likely to be relevant for a long time to come for a variety of functions,” Rosenwax told Which-50.
AECOM anticipates the hazard profile of service stations will change in ten years, as electric and other lower-emission options find favour with consumers, enabling alternative uses at these sites.
Rosenwax suggests these sites could become important collection hubs for drone-based deliveries, more sophisticated whole food stores, maker spaces and local innovation hubs, and restaurants, while still pumping the odd litre of fuel for the weekend classic car enthusiast.
“These functions are not likely to be feasible if we consider them as ‘one-off’ single-site businesses. However, as part of connected enterprises operated within a technologically optimised system, they present a highly valuable portfolio — which could explain why BP paid Woolworths almost $1.8 billion for 527 sites in December 2016. They are clearly still very hot property,” Rosenwax said.
Meanwhile Elon Musk’s vision for the location of charging stations is more nostalgic. The Tesla CEO recently tweeted he planned to build a drive-in and rock restaurant at one of the company’s new supercharger locations in Los Angeles.
Gonna put an old school drive-in, roller skates & rock restaurant at one of the new Tesla Supercharger locations in LA
— Elon Musk (@elonmusk) January 7, 2018
Whatever the future holds, service stations will need to find a new way to attract consumers.
“These sites will need to become destinations, which is well beyond their current utilitarian nature — we are almost forced to use them,” Rosenwax said.
“This will involve careful brand and design curation across the entire network. Which provider will deliver the best experience and dominate the market as they consider how to re-purpose these strategically located hub sites?”
Electric vehicles could also unlock a new revenue stream for petrol stations.
Rosenwax argues the rise of electric vehicles needs to be viewed in the context of connected and autonomous vehicles, whereby individual car ownership will be replaced by subscription services.
That means driverless cars will need to be docked somewhere when not in use. “Automated car-stackers located at existing gas station sites could be one place for them to do this,” Rosenwax said.
Taking this idea a step further, the cars could become an energy source.
“We should also begin to shift our perception of these stacked cars as vehicles, and rather as energy storage devices to provide greater capacity to our existing electricity grid.”
“Hypothetically, a typical service station footprint could house 50 automated electric cars with battery capacity of 20kW stored in a robotic stacker. Multiplied over just half of the 600 sites across Sydney, this could store 6GW of energy.
“Currently, the entire state of NSW only has 16GW of installed generation capacity. In this worked example, our cars become critical infrastructure for not only ride share, but also an energy source to power our city. There are multiple revenue sources for the owners of these sites in this example.”
Electric vehicle adoption
Fortunately for incumbent fuel retailers, they’ve got a decade to decide how to repurpose their real estate before electric vehicles make a dent on fuel revenue.
While there are two million electric vehicles on the road globally, just 1369 electric vehicles were sold in Australia in 2016 — representing 0.1 per cent of the market, according to the Electric Vehicle Council.
Despite the small number of cars sold the organisation positive consumer attitudes to electric vehicle ownership.
Based on a survey of 500 Victorians, 50 per cent said they would consider buying an electric vehicle and 19 per cent of respondents had spent time researching options for buying an electric vehicle.
But 40 per cent said they wouldn’t consider buying an electric vehicle with range and access to charging infrastructure common concerns.
IbisWorld analyst James Thomson argues electric vehicles will have a greater effect on fuel demand over the next 15–20 years.
“We don’t expect to see electric vehicles having a dramatic effect on fuel demand in the short term,” said Thomson.
“The lower fuel requirements of electric and hybrid vehicles are likely to be offset by population growth and an increase in the number of vehicles, both private and commercial, on Australian roads. This will likely continue to drive increased fuel demand over the next decade.”
Thomson expects the shift towards electric vehicles to continue to be gradual in the absence of government intervention.
While France plans to ban all petrol and diesel vehicles by 2040, don’t expect to see Australia make a similar move until it comes up with an alternative to the fuel excise.
“Electric vehicle adoption still faces several hurdles in Australia. While the charging infrastructure required is being developed, Australia’s system of road funding remains heavily dependent on revenue from fuel excise. Until a revised funding model can be established, we expect little regulatory action phasing out petrol or diesel-powered vehicles,” said Thomson.
The federal government is due to launch an inquiry into road funding in coming months to examine the impact electric vehicles will have on the fuel excise.