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Is there a future for petrol stations?

Posted: 28 Jan, 2022

Earlier this month, the annual TMA UK Review / Preview event took place and a panel of experts reflected on the past year and shared their thoughts on the outlook for 2022.

One of the panellists, David Sanders, a partner in the Energy Transition team at PA Consulting, spoke about the move towards clean energy solutions and who is likely to benefit from the transition, and who is not. One of the markets he said would struggle with the transition to electric vehicles (EVs) was the petrol station market.

David said that currently, many EV owners choose to charge at home or at their destination and while this may change with the introduction of better charging infrastructure, there are currently over 8,000 petrol stations in the UK with an uncertain future ahead of them.

For turnaround professionals, it is useful to consider the future for sectors that are threatened by new technologies and so this article delves a little deeper into David’s projections to consider the future of petrol stations in the UK and how they might transform and adapt to stay viable.

In the transition to EVs, fear over the future for petrol stations was solidified in 2019 when management consultancy Boston Consulting Group published a report that sent shockwaves through the industry. Having studied the global fuel retail industry it said that when most cars were EVs, most service stations would be unable to turn a profit. Under the most extreme scenario, the report said that 60% to 80% of service stations could be unprofitable by 2035, unless they change their business models and radically reimagine the purpose of strategically located roadside real estate.

For some petrol stations, the transition to EV charging is likely to be the way forward. Shell has already converted one of its petrol stations in Fulham, London to an EV station. Opening earlier this month, the EV station has nine 175-kW chargers, capable of charging most EVs from 0% to 80% in 10 minutes. While most of the electricity will come from the grid, the station has built-in solar panels and caters for convenience and comfort with a Costa café, Waitrose store, inside seating area and free Wi-Fi. Commenting on the opening, Shell’s Global Executive Vice President for Mobility, István Kapitány said “EV drivers are looking for a charging experience that is as fast, convenient, and comfortable as possible”.

In Norway, where EV uptake is higher than the UK, the Norwegian EV Association says that many petrol stations are also adapting by shifting from being petrol stations to being energy stations. Norway’s energy stations offer restaurants as well as lounges to wait and work in.

But while Norway’s energy stations and Shell’s EV station may provide a glimpse into the future for some petrol stations, this is unlikely to be the future for small and rural petrol stations. Many face being left behind amid the switch to EV charging infrastructure.

Aside from strong competition from giants like Shell and Tesco, another major barrier to rolling out EV charging infrastructure for owners of small and rural stations is electrification. With most electric vehicles requiring 150kVa and some now requiring 270kVa, the reality is that few small and rural petrol stations have that kind of capacity of electricity available. And even if they do have that capacity, the average cost of installing electric charging facility at a forecourt is around £100,000 for a small number of chargers, a figure out of reach for many independently owned stations.

So, if petrol is a dying force and electrification is incompatible with rural stations, what, then will be the state of small and rural stations in the future? Currently, the outlook is not positive.

Turnaround professionals can help to change this outlook, supporting owners with a total reimagining of purpose for their station(s). Owners of small, independent and rural stations need to consider, if not stopping to fuel up or recharge, why else might people stop at a conveniently located roadside space? There are lots of opportunities when thinking in this way.

For example, petrol stations could transform into ‘community hubs’, offering co-working spaces and meeting rooms, or perhaps into warehouses for online order deliveries, dispatch centres for driverless cars, or one-stop-shops for household needs.

The desire for ‘convenience’ is trending upwards and with more people staying local and working from home, cafés, restaurants, working spaces and collection hubs could prove a successful repurposing for rural stations.

For turnaround professionals helping rural petrol stations owners, or indeed any company facing rapidly decreasing demand due to shifts in the way we live and consume, the challenge will be to get owners to face up to the radical change needed to shift their business into a viable model for the future.

 

TMA UK is part of TMA, a global organisation that represents the interests of turnaround professionals as its members who have the skills needed to assist companies in challenging times. If you need assistance, please contact our helpline on 0844 804 0116

 

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