C-Stores and Electric Vehicle Adoption
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“[Electric] cars have been built for experimental purposes, and we are satisfied now that the way is clear to success. The problem so far has been to build a storage battery of lightweight which would operate for long distances without recharging.” – Henry Ford, quoted in the New York Times, Jan. 11, 1914
With COVID-19 impacting travel, conferences and other mass gatherings, there have been fewer opportunities for peers to mix and mingle and discuss trends. But electrification is one of the many topics that my colleagues and I have been discussing with our clients and prospective clients.
Recently, we spoke with some industry operators about this topic, asking them what they are doing to prepare for electronic vehicles, or EVs, as they become more popular. We discussed hurdles to adoption, their current strategies and their long-term thoughts on broader EV adoption. Even with the different state regulations and the varying urban and rural markets, there were some common themes.
Investing in EVs
EVs have become more available over the past decade as technology has improved and costs have decreased. While most of that progression has been on the demand side, there has been recent movement to regulate the supply side too, including states like California banning the sale of internal combustion engine, or ICE, vehicles by 20351 and automakers increasing their plans for EV production.2
Major oil companies have also been preparing, with BP3, Chevron4 and Exxon Mobil5 investing more than $1 billion each to reduce carbon emissions or achieve a net-zero presence in the future, whether it’s for alternative vehicle fuels or alternative energy sources for vehicle charging. In response to a General Motors Super Bowl ad on EVs, Circle K responded with its “We’re Ready” campaign, but they and other chains are waiting for demand to support the shift.
The timing for all these plans can shift in the future—and as that Henry Ford quote illustrates, the same issues have persisted for over 100 years. Now, Ford Motor Co. is investing $22 billion in EVs6 through 2025 while still pursuing a mix of powertrain options. GM is also investing significantly7—$27 billion to launch 30 EVs globally by 2025, with plans for an all-electric fleet by 2035. Other automakers and original equipment manufacturers are also investing in developing EVs and other low-emission vehicles. It is well-accepted that EVs will become a growing part of the commuting landscape.
Hurdles to Adoption
There’s still no consensus regarding EV adoption, however. Forecasts show that the U.S. will continue to lag behind Europe and China—the other major car markets—in EV adoption.8 Our lower population density sets us apart from Europe and our decentralized government sets us apart from China.
Uncertainty also continues to play a large role in adoption. C-store operators want the demand to be there before they make the investment regarding what type of charger is needed and what revenue model works for charging. In a classic chicken-or- egg situation, though, consumers want the infrastructure to be in place to combat their worries, including local rapid charging options to meet their daily needs and supercharging stations to reduce range anxiety when taking longer trips. Adding to the concern is that government agencies may begin competing with private businesses as a charging resource, as the electrification of rest areas is under discussion.
The most significant hurdle for adoption, as is often mentioned, is cost. Even with state government subsidies, the return is not supporting operators’ investments. Michigan is aiming to have superchargers blanketing their state to support long-distance travel and reduce range anxiety. Still, one operator there said only one or two out of 100 customers were making use of them. Increased availability of superchargers also had them looking into electric vehicles for fuel delivery, but the weight of the batteries continues to restrict usage over some roads. With technology constantly updating, some believe it is difficult to justify investing in the equipment, leading one Illinois operator to stick with leasing their charging equipment for now.
Beyond cost, the infrastructure is not yet available. During new builds and remodels, operators are installing high-voltage lines—with no current plans for chargers—because it’s convenient, but the utility grid is unable to support broad adoption at all sites. Even without broadscale EV adoption, electrical grids have shown an inability to support current needs during inclement weather. What would happen during other natural disasters when people need to charge their vehicles? Those reliant on EVs could potentially be in a tough predicament for days or longer.
A Potential Boost?
President Joe Biden’s American Jobs Plan aims to tackle, among other topics, the broader adoption of EVs. The $174 billion commitment to the electrification of the transportation industry9 is indicative of the strong support the current administration is giving to EV adoption.
This commitment includes rebates and tax incentives to reduce costs for consumers switching to electric vehicles and the administration’s stated goal of 500,000 charging stations by 2030—nearly eight times10 the number of chargers currently available. This increased capacity is meant to reduce many consumers’ concerns that stop them from giving EVs a serious look. However, lobbying efforts to clarify where this investment will go will likely lead to changes as the bill goes through Congress.
Planning for the Future
Gas stations and c-stores are positioned to have a significant role in this expansion, and private investment will likely be needed too, because the issue is larger than just charging stations. Consumers’ needs will change because of the additional time spent at your c-stores. Do you have space for them? Are your amenities and products conducive to consumers spending more time there? The long-term industry trend has been toward larger c-stores, providing flexibility to adjust, and we’ve seen increased financing requests for remodeling of existing sites and new-to-industry stores.
Taking the long-term view, one Colorado operator wants to do more than his current limited rollout of chargers. Because the shift would have a similar impact on him and his competitors, he wants to get ahead of the curve, but his costs would have to come down significantly before he would consider spending more on charging stations. Though the cost of batteries per kilowatt hour has decreased 89% over the past decade11, similar cost improvements have yet to be seen on the supplier side. Their investment capital is being put toward other assets that can generate a quicker return at this time.
Even without current plans for a broad installation of EV chargers, another operator is making changes within the c-store. As larger sites are built, some parts of the floor plans are organized with flexibility in mind—such as accommodating a seating area should it become needed, helping reduce remodeling costs in the future. Until that need arises, though, the space is being used to increase the diversity of products for inside sales. Having these valuable discussions helps us better understand the changing needs of your industry.
Ongoing Uncertainty
An ongoing concern is the next step for vehicle ownership in general. When EVs are more broadly adopted, will households continue to have their own vehicles? Or, as multiple operators have asked us, will a fleet of autonomous vehicles available to everyone become the norm? Or, like the LaserDisc, will another technological breakthrough come along and supplant EVs before they’re widely adopted? Any of these scenarios would create a significant shift in the marketplace in drastically different ways, and c-stores will have to adapt how they attract customers into their stores.
It’s important to look at your markets to determine how to respond to EVs and make long-term planning decisions. EV adoption varies significantly from state to state and city to city, and maybe even location to location within your chain. If you have a location where EV adoption is strong, it could be a sign that long-term changes to your business model could be needed sooner. The industry has shown the ability to adapt throughout its history and is well on its way to being prepared for the next shift, whatever direction it takes.
1 Office of Governor Gavin Newsom
2 Circle K
3 CNBC
4 Chevron
8 Deloitte
10 Statista
Doug Chinery
Fuel Services Relationship Manager
“[Electric] cars have been built for experimental purposes, and we are satisfied now that the way is clear to success. The problem so far has been to build a storage battery of lightweight which would operate for long distances without recharging.” – Henry Ford, quoted in the New York Times, Jan. 11, 1914
With COVID-19 impacting travel, conferences and other mass gatherings, there have been fewer opportunities for peers to mix and mingle and discuss trends. But electrification is one of the many topics that my colleagues and I have been discussing with our clients and prospective clients.
Recently, we spoke with some industry operators about this topic, asking them what they are doing to prepare for electronic vehicles, or EVs, as they become more popular. We discussed hurdles to adoption, their current strategies and their long-term thoughts on broader EV adoption. Even with the different state regulations and the varying urban and rural markets, there were some common themes.
Investing in EVs
EVs have become more available over the past decade as technology has improved and costs have decreased. While most of that progression has been on the demand side, there has been recent movement to regulate the supply side too, including states like California banning the sale of internal combustion engine, or ICE, vehicles by 20351 and automakers increasing their plans for EV production.2
Major oil companies have also been preparing, with BP3, Chevron4 and Exxon Mobil5 investing more than $1 billion each to reduce carbon emissions or achieve a net-zero presence in the future, whether it’s for alternative vehicle fuels or alternative energy sources for vehicle charging. In response to a General Motors Super Bowl ad on EVs, Circle K responded with its “We’re Ready” campaign, but they and other chains are waiting for demand to support the shift.
The timing for all these plans can shift in the future—and as that Henry Ford quote illustrates, the same issues have persisted for over 100 years. Now, Ford Motor Co. is investing $22 billion in EVs6 through 2025 while still pursuing a mix of powertrain options. GM is also investing significantly7—$27 billion to launch 30 EVs globally by 2025, with plans for an all-electric fleet by 2035. Other automakers and original equipment manufacturers are also investing in developing EVs and other low-emission vehicles. It is well-accepted that EVs will become a growing part of the commuting landscape.
Hurdles to Adoption
There’s still no consensus regarding EV adoption, however. Forecasts show that the U.S. will continue to lag behind Europe and China—the other major car markets—in EV adoption.8 Our lower population density sets us apart from Europe and our decentralized government sets us apart from China.
Uncertainty also continues to play a large role in adoption. C-store operators want the demand to be there before they make the investment regarding what type of charger is needed and what revenue model works for charging. In a classic chicken-or- egg situation, though, consumers want the infrastructure to be in place to combat their worries, including local rapid charging options to meet their daily needs and supercharging stations to reduce range anxiety when taking longer trips. Adding to the concern is that government agencies may begin competing with private businesses as a charging resource, as the electrification of rest areas is under discussion.
The most significant hurdle for adoption, as is often mentioned, is cost. Even with state government subsidies, the return is not supporting operators’ investments. Michigan is aiming to have superchargers blanketing their state to support long-distance travel and reduce range anxiety. Still, one operator there said only one or two out of 100 customers were making use of them. Increased availability of superchargers also had them looking into electric vehicles for fuel delivery, but the weight of the batteries continues to restrict usage over some roads. With technology constantly updating, some believe it is difficult to justify investing in the equipment, leading one Illinois operator to stick with leasing their charging equipment for now.
Beyond cost, the infrastructure is not yet available. During new builds and remodels, operators are installing high-voltage lines—with no current plans for chargers—because it’s convenient, but the utility grid is unable to support broad adoption at all sites. Even without broadscale EV adoption, electrical grids have shown an inability to support current needs during inclement weather. What would happen during other natural disasters when people need to charge their vehicles? Those reliant on EVs could potentially be in a tough predicament for days or longer.
A Potential Boost?
President Joe Biden’s American Jobs Plan aims to tackle, among other topics, the broader adoption of EVs. The $174 billion commitment to the electrification of the transportation industry9 is indicative of the strong support the current administration is giving to EV adoption.
This commitment includes rebates and tax incentives to reduce costs for consumers switching to electric vehicles and the administration’s stated goal of 500,000 charging stations by 2030—nearly eight times10 the number of chargers currently available. This increased capacity is meant to reduce many consumers’ concerns that stop them from giving EVs a serious look. However, lobbying efforts to clarify where this investment will go will likely lead to changes as the bill goes through Congress.
Planning for the Future
Gas stations and c-stores are positioned to have a significant role in this expansion, and private investment will likely be needed too, because the issue is larger than just charging stations. Consumers’ needs will change because of the additional time spent at your c-stores. Do you have space for them? Are your amenities and products conducive to consumers spending more time there? The long-term industry trend has been toward larger c-stores, providing flexibility to adjust, and we’ve seen increased financing requests for remodeling of existing sites and new-to-industry stores.
Taking the long-term view, one Colorado operator wants to do more than his current limited rollout of chargers. Because the shift would have a similar impact on him and his competitors, he wants to get ahead of the curve, but his costs would have to come down significantly before he would consider spending more on charging stations. Though the cost of batteries per kilowatt hour has decreased 89% over the past decade11, similar cost improvements have yet to be seen on the supplier side. Their investment capital is being put toward other assets that can generate a quicker return at this time.
Even without current plans for a broad installation of EV chargers, another operator is making changes within the c-store. As larger sites are built, some parts of the floor plans are organized with flexibility in mind—such as accommodating a seating area should it become needed, helping reduce remodeling costs in the future. Until that need arises, though, the space is being used to increase the diversity of products for inside sales. Having these valuable discussions helps us better understand the changing needs of your industry.
Ongoing Uncertainty
An ongoing concern is the next step for vehicle ownership in general. When EVs are more broadly adopted, will households continue to have their own vehicles? Or, as multiple operators have asked us, will a fleet of autonomous vehicles available to everyone become the norm? Or, like the LaserDisc, will another technological breakthrough come along and supplant EVs before they’re widely adopted? Any of these scenarios would create a significant shift in the marketplace in drastically different ways, and c-stores will have to adapt how they attract customers into their stores.
It’s important to look at your markets to determine how to respond to EVs and make long-term planning decisions. EV adoption varies significantly from state to state and city to city, and maybe even location to location within your chain. If you have a location where EV adoption is strong, it could be a sign that long-term changes to your business model could be needed sooner. The industry has shown the ability to adapt throughout its history and is well on its way to being prepared for the next shift, whatever direction it takes.
1 Office of Governor Gavin Newsom
2 Circle K
3 CNBC
4 Chevron
8 Deloitte
10 Statista
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