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The future of the petrol station forecourt

With the rise of electric vehicles comes a corresponding shift away from gasoline and combustion fuels. So far, the economic attraction of turning gasoline pumps into chargers is limited. So, what happens to oil and gas companies’ mobility assets in a low-carbon world?

By 2030, up to 20% of all registered vehicles in Europe will be electric vehicles (EVs), according to the International Energy Agency (IEA). And the share is likely to rise even higher toward 2035 thanks to new regulations, such as banning the sale of new cars with gas- or diesel-powered engines. Other reports suggest this timeline might be even shorter because of consumer demand and the urgent need for climate action. In addition, new technology is reshaping how consumers’ mobility needs will be met in the future.

As these trends collide, the energy and mobility world will rapidly change over the next five to 10 years. Making the matter even more complex is the fact that the rate of change is not uniform across Europe. Three archetypes are emerging:

  • Maturing markets. Early adopters with supporting infrastructure, assisted by relatively short travel distances and pavement space for private charging, such as Nordic countries and the Netherlands
  • Scaling markets. Large-volume markets with lagging infrastructure but a strong regulatory push for rollout, such as Germany, the United Kingdom, and France
  • Lagging markets. Markets that have regulatory incentives in place but a lagging infrastructure rollout, such as continental Europe, Italy, and Spain

Four factors are driving these varying levels of adoption:

  • Regulations, subsidies, and incentives
  • Charging network accessibility and availability
  • The supply from original equipment manufacturers (OEMs) and their ability to meet market demand
  • Geographic and urban conduciveness for EV use cases, such as pavement space and the average distance traveled

The customer is changing, and new opportunities are emerging

Consumers’ needs and demands are also changing. The typical consumer now wants personalized experiences, is more willing to adopt a subscription model, and wants instant gratification. These demands are intersecting with new mobility trends, such as the growing adoption of EVs and declining car ownership. In fact, the IEA expects the traditional model of privately owned internal combustion engine (ICE) vehicles to see much fewer sales by 2030, with EVs accounting for more than half of European vehicle sales and more than 10 percent of the sales of shared vehicles.

Travel and movement patterns are also changing—accelerated by the pandemic and disruptions to the way people work—with people on the road at different times of day. Meanwhile, the traditional concepts of high street retail and convenience are now viewed very differently. People are taking fewer trips for business, education, and shopping, and since the pandemic started, day trips have been on the rise with fewer people taking overnight trips.

These changes are shifting the ways that consumers interact with fuel providers. For example, since the onset of the pandemic, more people are working from home, which created market uncertainty for fuel forecourt owners and opened the door for new players that are looking to own the customer experience from different perspectives, such as electricity retailers moving into EV charging models. Four new categories are emerging, each with different motivations, rationale, and sources of power (see figure).

In addition to the changing B2C needs, B2B players and commercial fleet operators are also wrestling with more complex concerns about fleet management, with more heterogenous vehicle types, new billing models, and a more complicated recharging model. For example, there is a wider trend of “grey fleet” adoption, with more than 75 percent of UK drivers using their private vehicles for business travel during the week and charging at home, at work, or on the journey.

Traditional energy companies need to be in the game or risk getting squeezed out. Profit margins are slim in the traditionally low-profit parts of their portfolios, with average margins across Europe at 4 to 10 percent. In addition, many non-energy players are using EV charging as a loss leader to draw traffic to retail and other amenities. The winning model will be about more than providing charging infrastructure, and companies that set their sights on building attractive and sustainable propositions will need to address a much broader spectrum of consumer needs.

Unlocking the opportunities

In this still-nascent and uncertain environment, fuel forecourt operators and owners have three strategic responses to choose from:

  • Diversify and grow the business.
  • Actively manage the decline and the ongoing need to service ICE vehicles. With pushback from some vehicle OEMs and the anticipated useful life of cars of 15 to 20 years, this market will continue.
  • Divest from the business.

Many traditional energy players are taking multiple bets, especially in urban mobility. For example, Shell, BP, and Total are investing in fast-charging, micro-mobility, and EV subscription schemes, typically as upgrades and complements to their forecourt portfolios.

Newer competitors are focusing on maximizing the utilization of their assets by serving multiple archetypes, such as GRIDSERVE, Energy Superhub, and Euro Garages in the UK. These greenfield models are gaining traction thanks to partnerships across mobility players to establish multi-modal sites and meet customers’ needs. Many of these models are serving a mix of logistics, fleets, suburban commuters, and urban micro-mobility on the same footprint.

The question of what to do with the retail forecourt assets is pertinent and complex, including getting clarity on the consumer promise, assessing alternative valuations, phasing, and identifying the “no regret” moves. So far, the economic attraction of flipping hydrocarbon fuel stations directly to rapid EV chargers or alternative fuels is limited. Profitable models will require partnerships investments, adjacent revenue streams, and creative business models—relatively difficult and new concepts for traditional oil and gas players.

Energy providers and consumers are facing several pain points when it comes to adopting EVs:

  • Twenty-five percent of EV connections fail to charge because of poor reliability.
  • Payment terms are a hinderance rather than an enabler.
  • Traditional services are struggling to attract footfall.
  • Profitability in traditional service models remains low.

Three questions to answer

The winning model will match reliability with convenience and optimization of the grid load and demand. The above developments are expected to materialize within the next three to five years in the maturing and scaling markets. However, if the transition is delayed, early movers can still capture significant benefits. Early participation and wise moves on the appropriate real estate would benefit positioning for the future mobility landscape.

When reviewing the advantages of fuel forecourt operators against the greater ecosystem and charting the way forward, the following questions emerge:

  • Who is our customer, and what do they need?
  • How do we want to relate to them?
  • How do we set up for success?

The B2B and B2C needs are decoupling …

Although related, B2B and B2C customers have differing needs that were not exhibited in traditional ICE ownership models. Typical retail customers value convenience and will need additional motivation for recharging at petrol forecourt sites rather than at home or at work. For example, according to a report commissioned by the EU, 70 to 80 percent of EV owners are expected to charge at home, at work, or overnight for up to 5x less charging cost than for refueling on a per-mile basis. Commercial fleet owners and operators (B2B) players are concerned about billing issues and more heterogeneity in their fleets, with additional complexity regarding where, when, and how to recharge vehicles and different maintenance profiles for EVs versus traditional combustion engines.

… driving the need for renewed value propositions …

Rebuilding the forecourt experience around these needs will entail reviewing the main customer promises that the operator wants to own. Examples of consumer promises include the following:

  • Help me get from A to B with the lowest carbon footprint.
  • Help me eat fresh and healthy on the go.
  • Help me optimize my domestic and travel energy consumption.
  • Help me use my EV to generate revenue and balance my energy use.
  • Help me manage compensation for my employees as they recharge at home, including time-of-use charge rate differences.

… which must align with signature strengths

Each of these promises requires a different set of capabilities, asset footprint, and business model. Defining the ambition for serving customer needs, the attributes within, and the capabilities required is the first step in determining the required actions for petrol stations and forecourts.

After defining these elements, the next step is a strategic review of the asset base. Key considerations in this process include the following:

  • The relative strengths of forecourt owners and operators (location, existing relationships, existing infrastructure, and brand identity)
  • Who and how to effectively partner with, particularly emergent players such as utility companies and OEMs
  • How to quickly and cost-effectively test hypotheses and pilot new offerings

It’s time to make the transition

Partnerships and agile business models must be the focus.

Success in this transition will hinge on getting clarity about the consumer offering and capitalizing on the signature strengths—both explicit and implicit—to deliver on what consumers need. Signature strengths such as prime locations, proximity, customer intimacy, and data transparency are just a few examples that can be capitalized on to gain ground quickly in this space.

In a fast-growing landscape, few companies have all the pieces to execute this transformation, with many industry players underestimating the need for an ecosystem of partners to deliver the customer promise. The winners will be those that can test new solutions quickly and play an integral role in an emerging ecosystem, directly addressing the emerging customer needs.

The authors wish to thank Justin Kobal for his valuable contributions to this report.

Article courtesy of Kearney Consulting. Authors: Rhiannon Thomas, Partner, Chris Berry, Principal, Petr Materna, Partner