Small Business

How gas station economics will change in the electric vehicle charging future

Products You May Like

Cavan Images | Getty Images

As electric vehicles proliferate, some gas stations are making expensive overhauls to add EV charging stations. 

In most cases, they aren’t scrapping traditional liquid fuel pumps. But select locations, including an RS Automotive in Takoma Park, Md., and a Shell station in Fulham, England, have made a full switch.

Location, cost, power requirements and conversion time are among the multiple considerations that factor into a gas station’s decision to convert all or a portion of their existing infrastructure to allow for EV charging. 

“Figuring out how to do this on an active site can be complex and challenging,” said Neha Palmer, chief executive of TeraWatt Infrastructure, which is developing a network of electric vehicle charging centers for fleet operations across California, Arizona, and New Mexico. “How do you sequence the construction when you have vehicles that might want to fuel there?” 

Here’s what gas station owners need to know about the EV charging trend and their future.

The EV fast-charging model

Locations like office complexes, hospitals and hotels typically offer a slower charging option, since people generally stay put for hours at a time. Gas stations, however, are investing in Level 3 chargers, which are more powerful and generally charge a car in 20 to 30 minutes. 

While slower charging stations are often free to motorists, that’s not generally true for fast charging stations, given ongoing operational expenses such as electricity and extra fees charged by utilities in commercial settings, said Seth Cutler, chief operating officer of EV Connect, whose software tools help companies build charging station networks.

Big oil company franchisers and car dealers are on board

For large oil giants, adding EV chargers is both a defensive and offensive play. 

Gas station numbers have been decreasing at a sharp rate in the past three decades and the trend is expected to continue in the coming years, according to Shubhendra Anand, vice president of research and strategy at Market Research Future. In fact, at least a quarter of service stations globally are at risk of closure by 2035 without significant business model tweaks, according to consulting firm BCG.

The Biden administration has a stated goal of having 500,000 electric vehicle chargers nationally where EVs make up at least 50% of new car sales by 2030. By current administration estimates, there are more than three million EVs and more than 130,000 public chargers nationwide.

The European oil majors are among the energy sector leaders in the global EV charging push.

Shell has EV-charging-only mobility hubs in China and the Netherlands, in addition to the Fulham location. The company intends to own more than 70,000 public EV charge points worldwide by 2025, and 200,000 by 2030, according to an email statement from Barbara Stoyko, senior vice president of mobility for Shell Americas.

BP also sees the need for mixed-use hybrid refueling and EV charging stations, according to Sujay Sharma, chief executive of BP’s electric vehicle charging business in the U.S. “Today’s gas stations are well positioned to adopt EV charging due to locations in high-demand areas, in addition to their existing convenience offerings including restrooms, food and beverage,” Sharma stated in an email. 

Franchise car dealers are also increasingly getting on board, thanks to pushes from automakers like GM and Ford.

As of late last year, 65% of Ford’s dealers had opted into the EV certification program (a little under 2,000, according to data shared by Ford), as it has started to make the role of car dealers central to the EV transition process. 

The National Automobile Dealers Association said in a May release that franchise owners will spend an estimated $5.5 billion on EV infrastructure across OEM brands, with per store costs ranging from $100,000 to over $1 million. 

Upfront costs can be jaw-dropping, incentives help

Adding EV charging capabilities is not a one-two decision that owners should take lightly. Indeed, the return on investment could be seven to 10 years on average, according to an estimate provided by Yair Nechmad, co-founder and chief executive of Nayax, a global commerce enablement and payments platform, which offers its services to gas stations.

The hardware and software for fast charging can run between $50,000 for one charger and $500,000 for multiple fast chargers and dispensers, said Michael Hughes, chief revenue officer of ChargePoint Holdings, a technology company that makes EV charging hardware and software to help drivers find local charging stations and amenities. The infrastructure, meanwhile, which includes the cost of breaking ground, running power, permits and contractors, generally costs about twice that, he said.

That makes it advisable to incur all the infrastructure changes upfront, even if a gas station only intends to make a few chargers available at the onset, said Rohan Puri, chief executive of Stable Auto Corporation, which helps make charging stations more profitable for companies that own and operate them. His advice: “Put in as much power as you think you’re going to need in 10 years.”

There are numerous federal, state and utility-based incentives for commercial businesses to purchase and install fast chargers. This includes the U.S. Department of Transportation’s Federal Highway Administration NEVI Formula Program, which provides generous funding to states to strategically deploy EV charging stations. 

Gas station owners can search for information on incentive programs they may qualify for.

Location is a key factor, gas station franchise concerns

Even with incentives, there can be barriers to entry, location being a major factor. According to the U.S. Department of Energy, 80 percent of EV charging happens at home, which makes adding EV charging less appealing for in-town gas stations, Hughes said. Local gas stations also don’t generally have amenities to keep people entertained while they are charging their vehicles.

Real estate can also be prohibitive. A traditional gas station may have two islands with four pumps each for liquid fuel; the same utilization rate would require about 40 charging stations, Hughes said.

By contrast, gas stations along major highways between highly traveled destinations can be ideal for electric charging hubs. These locations tend to have multiple amenities, offering people the opportunity to grab a cup of coffee, get a quick bite to eat, stretch their legs or walk the dog while they charge their vehicle, Hughes said.

Convenience stores like Sheetz, Wawa, Royal Farms and Buc-ee’s that double as gas station operators are also starting to add electric chargers at certain locations, said Albert Gore, executive director of The Zero Emission Transportation Association, a federal coalition that advocates for EVs, and who is a former Tesla and SolarCity executive. It can’t be “a place that you’re just going to run in and buy a Snickers,” Gore said.

While there can be a first-mover advantage for gas stations, some owners, like Blake Smith, founder of SQRL Holdings, a gas station and convenience store operator, are taking it slow. His company operates more than 150 convenience store gas station locations and offers electric charging in select locations in Florida. By contrast, the company hasn’t installed any EV charges in Arkansas, where it has more than 60 stations.

“I would never recoup my investment,” he said, adding that a move to all electric charging could be decades away. “We’re not flipping a switch to where gas vehicles are getting off the road and it will be EV-only.”

Products You May Like

Articles You May Like

Home prices hit record high in May as sales stall
As retirement looms, many Gen Xers are still playing catch-up
Older voters want candidates who will protect Social Security, poll finds. Yet parties are tied for their support
80% of Americans say grocery costs have notably increased since the pandemic started, survey finds
Stellantis plans to grow Jeep sales 50% by 2027

Leave a Reply

Your email address will not be published. Required fields are marked *