EV charging: The opportunities for fuel retail

1. Electric cars will be the new norm

The rise of electric mobility has caught the attention of many fuel retailers around the world. At first, some dismissed it as a trend for green thumbs. Others viewed it as an unrealistic and out-of-reach technology—which few would want and fewer could afford. Hardly anyone acknowledged electricity’s potential to revolutionise the mobility industry. A couple of years later, however, the sentiment couldn’t be more different.

We went from 1 million EVs on the road in 2016, to nearly 20 million today worldwide. In the coming decade, the number of EVs on our roads will grow even more. It’s predicted that there will be over 200 million electric cars, vans, trucks, and buses on the world’s roads by 2030.

The rapid uptake of electric vehicles is driven by consumer behaviour, commercial fleets, government legislation and incentives, as well as pledges by OEMs.

All of these shifts provide a unique opportunity for fuel retailers to tap into, and leverage, their strategic location and infrastructure. Below, we take a closer look at each of these trends.

Private passenger vehicles

More than 50 percent of consumers looking to buy a new car consider going electric. Whether they’re driven by a sustainability mindset, an ambition to reduce their dependence on foreign oil, or simply convenience and price, EVs are capturing the minds of consumers today.

As a result, electric vehicles have reached the tipping point in society. According to a recent McKinsey & Company report, passenger EV adoption reached the critical point in the second half of 2020, when electric car sales and penetration accelerated in major markets despite the economic crisis caused by the COVID-19 pandemic.

Commercial fleets

Whilst private passenger vehicles are often the first thought when it comes to electrification, commercial vehicles actually represent a significant portion of the emissions from transport. As governments and businesses seek to achieve carbon neutrality, electric vehicles are already being deployed en masse in commercial transport.

To name a few, IKEA, Amazon, UPS, DHL, FedEx, and Uber have all announced fleet electrification to proactively address the climate crisis and meet their emission reduction targets.

Original equipment manufacturers (OEMs)

Electric vehicles are verging on the point where they are simpler and cheaper to produce than fossil fuels-powered vehicles. According to research by BloombergNEF, while today EVs are more expensive to produce than ICE vehicles, by 2027 they will be at cost parity, and by 2030 EVs will be cheaper than a conventional ICE vehicle.

To demonstrate this point, by 2025 there will be around 400 new EV models on the market, illustrating OEMs’ commitment to ramping up EV production. For many of these models, the price premium for driving electric will be consigned to history sooner rather than later, making the switch to electric mobility more affordable and more accessible for the majority of drivers.

At the same time, some OEMs, including Ford, GM, and Mercedes have started their intentions to end ICE vehicle production altogether.

Government legislation and incentives

In 2021, discussions centred on the end date for the sale of vehicles with an internal combustion engine (ICE). New regulatory targets in the European Union and the United States now aim for an EV share of at least 50 percent sales by 2030, and at least 30 countries, including the UK, have announced timelines or intentions for ICE sales phaseouts.

Together, these trends present significant challenges for fuel retailers worldwide. According to a Boston Consulting Group study, without substantial changes to their business models, at least a quarter of service stations worldwide are at risk of closure by 2035.

2. Electric mobility challenges for fuel retail

The rise of electric mobility is underpinned by demands from consumers and businesses alike to become more sustainable. For years, sustainability was seen as either an afterthought for businesses or a noble cause for non-profit organisations. Over the past decade, however, sustainability has become one of the driving forces of innovation—both in mobility and beyond.

As consumers' positive perception towards sustainability and sustainable alternatives—like electric vehicles—began to become more mainstream, their perception of the oil and gas industry soured.

Public perception of fuel retail

In recent years, the oil and gas industry has faced more opposition than ever before. Whether it’s from a public who increasingly considers climate change a global emergency, or from the lack of accountability from fossil fuel organisations, public trust in big oil is eroding.

The fact is that fuel retailers are intrinsically intertwined with big oil. Often, petrol stations are the only touchpoint the majority of consumers have with big oil and gas companies. As younger, environmentally conscious, and politically motivated consumers grow in both size and market share, this points towards a serious public perception challenge for fuel retailers.

As the global consulting firm EY says, these younger consumers “viewpoints will become especially vital to the continued relevance of the [fuel retail] industry.”

To confront this reality, even oil and gas companies are beginning to reconsider their position in today’s decarbonising world and how they want to do business in the future… and one key target is EV infrastructure.

As the number of electric vehicles on the roads continues to skyrocket, it’s essential that charging infrastructure meets the demands of drivers.

The Tesla Paradox

And then comes the Tesla paradox: whilst OEMs have traditionally only produced the vehicle itself, Tesla’s expanded Supercharger offering has changed this paradigm.

As the company owns its own charging network, Tesla has the ability to own more of the transportation value chain. And the company isn’t alone: other manufacturers are making moves to vertically integrate their charging infrastructure.

Oil and gas investing in EV infrastructure

Fuel retailers are stepping up their game to avoid the risk of handing over their customers to OEMs entering the EV charging market and position themselves from success in the age of new mobility.

According to a McKinsey and Company estimate, whilst today the value pool for EV charging is negligible, with a high level capital-expenditure investment, EV charging has the potential to become a $20 (£16.5) billion industry by 2030. As a result, major industry players are investing in EV charging infrastructure across the globe:

• Shell announced it will install 500,000 on-street electric vehicle charging points by 2025;
• BP will increase its network of EV charging points to 70,000 by 2030;
• Total will increase its EV charging network in Europe to 150,000 charging points by 2025 from 18,000 today.

Together, these announcements point towards a shifting mindset from big oil companies. EV charging is not only a way to rekindle public trust, but it’s also on the cusp of becoming more profitable than conventional fuels.

“If I think about a tank of fuel versus a fast charge, we are nearing a place where the business fundamentals on the fast charge are better than they are on the fuel.” — Emma Delaney, head of customers and products at BP

3. Electric mobility opportunities for fuel retail

Fuel retailers are in a privileged position—both in terms of existing infrastructure as well as market position—to capitalise on the electric mobility revolution.

By building on their strategic location around major roadways, fuel retailers can tap into this growth, (re)connect with younger consumers, and actively accelerate the transition to electric mobility by reducing consumers' range anxiety.

Addressing range anxiety

Today, many potential EV drivers cite range anxiety—or the uncertainty about finding charging stations—as the main barrier to buying an electric car. But it’s a chicken and egg scenario: without adequate infrastructure, electric vehicle uptake will be slower; yet without the vehicles on the road, infrastructure will continue to lag behind.

To address range anxiety, governments on both sides of the Atlantic are promoting EV charging infrastructure:

• In the UK, Boris Johnson said the government would spend £1.3 billion on charging infrastructure to support the transition to electric vehicles;
• In the EU, a target of 3 million public charging points by 2030 has been set as part of the European Green Deal;
• In the US, the Biden administration has called for $7.5 billion worth of EV charging infrastructure as part of his historic $1 Trillion Infrastructure Bill.

As a result of this investment in EV infrastructure, drivers’ fears about not being able to charge are dissipating and our research suggests that this will only further accelerate the electric mobility transition.

Offering on-the-go fast charging

In the early days of electric mobility, charging an electric car was slow—think days—and driving range was short. Whilst these vehicles were perfect for daily commuting, for longer distance journeys, they could not compete with their fossil fuelled counterparts. However, the technology that underpins electric mobility has evolved dramatically over the past few years.

Today, the range of electric vehicles has grown exponentially and almost all EVs can now fully charge their battery in under an hour at a fast charging station. These two factors combined point to EV drivers becoming more mobile and undertaking longer journeys—providing charging stations are available.

The charging stations that allow these rapid charging times are called ‘fast’, ‘DC’ or ‘Level 3’ charging stations, depending on who you’re talking to. Unfortunately, fast charging stations are still few and far between, and drivers are often forced to rely on slower residential or public charging stations.

This is where fuel retailers come in. With the introduction of high-power, DC charging stations to the market, fuel retailers can essentially fill the missing link in terms of EV charging infrastructure: on-the-go charging.

Whereas EV drivers may be able to charge at home or at work, these charging stations are likely to be far slower than fast charging stations. This presents a unique opportunity for fuel retailers to get ahead.

What’s more, following our research, 38 percent of current EV drivers in the UK already charge their electric cars at petrol stations and motorway services, and a further 15 percent would like to if the option was available.

Attracting commercial fleets

While passenger cars are often the first thought when it comes to electrification, commercial vehicles actually represent a significant portion of vehicles on the road. As governments and businesses seek to achieve carbon neutrality, electric vehicles are already being deployed en masse in short-haul transport, last-mile logistics, and commercial business fleets.

Logistics companies, such as Amazon, UPS, DHL, IKEA and FedEx, are aggressively electrifying their fleet to reach carbon neutrality. Others, including Uber, LeasePlan and Origin, have also embarked on the shift to electric fleets. Looking ahead, it won’t be long before many more brands adjust to an electric future.

Become part of mid-route charging strategies

As fleets electrify, the demand for public charging infrastructure will soar: beyond overnight charging, many fleets will also need to charge mid-route.

In fact, mid-route charging strategies can be profitable, not only for extending delivery range, but also to avoid the investment into charging infrastructure altogether. Firms with limited space at their depot or who wish to use cheaper vehicles with shorter ranges may rely entirely on mid-route charging.

“Overall, we see a huge opportunity in fast charging for consumers and business, as well as fleet services more generally—that’s where we see the growth, and where we see the margins.” — Emma Delaney, head of customers and products at BP

4. What is DC fast charging?

Depending on who you talk to, you may have heard fast charging be referred to as DC, Level 3, or rapid charging. But what really is fast charging, and what do those terms mean?

Today, there are three ‘types’ of EV charging: Level 1, Level 2, and Level 3. Each level has a different power output and therefore charging speed, with the fastest being Level 3. Unlike Level 1 and Level 2, Level 3 chargers use direct current (DC) instead of alternating current (AC).

Electric car batteries, like other electronics, are designed to work on DC—the power grid, however, only provides AC. Therefore, electricity from the grid needs to be converted from AC to DC so it's usable by EVs.

At Level 1 and Level 2, the conversion from AC to DC takes place by the car via an onboard AC/DC converter. With Level 3 charging, on the other hand, electricity is converted by the charging station itself and fed directly into the battery, bypassing the slower onboard converter. This allows for much higher power output and, as a result, faster charging speeds.

How petrol stations can benefit from DC charging

Whilst Level 2 charging infrastructure is already present across many households and public parking locations, fast charging options are significantly more limited. As a relatively new, demanding technology, in terms of both infrastructure and power, fast charging is not suited for either of the aforementioned locations.

However, fast charging is essential for long-distance travel with EVs, and petrol stations are perfectly positioned along major roadways to serve this demand.

What’s more, they generally already have the parking facilities to accommodate vehicles and the space to install DC charging equipment. Many petrol stations also provide attractive services, such as food offerings, small shops, or cash washes, that can deliver real added value to EV drivers whilst their electric vehicle charges.

Fuel retailers are in a privileged position to leverage this trend, building on their existing infrastructure and strategic location around major roadways.

As batteries improve, the capacity and charging speed that EVs can accept increases every year. Combined with the growth in EV sales, the demand for fast charging will only continue to increase in the near future.

As a result, fuel retailers have both the resources and opportunity to meet this growing need, attract new customers, and future-proof their business.

5. Attracting customers with fast charging

As people increasingly switch away from ICE vehicles, they have fewer reasons to visit petrol stations. By installing EV chargers, fuel retailers can ensure that they remain relevant for EV drivers and can attract this lucrative new segment of the market. As we’ll see below, EV drivers are an alluring clientele, so attracting them is simply smart business.

EV drivers are high-value customers

Compared to the general population, EV drivers are more likely to be employed, have a higher income, and are more educated. According to our research, current EV drivers are predominantly male, younger than the general population, and have a higher median household income.

Serving EV drivers thus allows you to upsell premium services, such as barista-made coffee, independent food options, or a high-end car wash, bringing in more profit.

The question is, how can you attract this well-to-do clientele? Well, the mere fact of offering EV (and especially fast) charging can put your business on the map… literally. Online mapping services, like Google or Apple Maps, index charging stations which can help attract EV drivers whilst they’re on the road or when they map out their long-distance journeys.

Many forward-thinking fuel retailers are looking to EV charging as an opportunity to add a new stable revenue stream, upsell well-to-do customers with premium products, and future-proof their business.

Finally, offering EV charging can be a way to win back an increasingly environmentally-conscious generation. By providing a sustainable alternative, fuel retailers can remain relevant to these consumers and plug a gap in the EV infrastructure network—becoming a catalyst for the sustainable mobility transition.

Retain existing customers

As customers transition to electric vehicles, many do so whilst keeping an ICE vehicle. In fact, 36 percent of current EV owners in the UK also still own a car that runs on petrol or diesel. As a result, some customers that come to fill their tanks may also own an electric car, which they could easily charge at your location given that they’re already familiar with it.

Looking ahead, as consumers increasingly switch to electric, almost all of your current customers are prospective future EV drivers. Offering EV charging, means you can capture and retain that existing customer base when they’re ready to move to electric mobility.

6. How to make money with EV chargers

To deliver more power in less time, DC charging stations are larger and more complex than AC charging stations. As a result, the purchase of a fast charging station itself can cost as much as ten times the price of an AC charging station. They also draw a lot more energy, requiring the power grid to be sufficiently managed. Next to this, regular firmware updates and preventive maintenance is advised to ensure optimal performance.

Whilst this at first sounds negative, these three factors are what offer fuel retailers a genuine opportunity: fast charging stations are generally not suited for residential or municipal public charging.

As a result, by providing this premium service fuel retailers can generate revenue in many ways, including direct revenue from charging, upselling other services, and benefiting from increased online visibility.

Direct revenue

Of course, EV charging offers petrol stations a new stable source of revenue in the form of fees for charging. There are many ways to set up tariffs, such as charging by the kilowatt for the energy used, charging a fixed rate per-minute, setting a flat fee per transaction, or a combination of these. Plus, with advanced charging management software, you can easily allow flexible pricing based on the time of day or utilisation.

Regardless of the chosen tariff, electricity is cheaper and more predictable than fuel. Political instability, such as the invasion of Ukraine, is a salient example of oil prices’ volatility, which can greatly influence margins. Electricity prices, by comparison, are far more stable, and the fluctuations that do occur are more predictable and less susceptible to global political and economic conditions.

Upselling

Beyond revenue from charging, attracting EV drivers also offers the opportunity to upsell complementary services while their electric vehicle charges. For example, they can provide premium food or drink options or a small shop stocked with essentials. Given that EV drivers generally have more to spend than non-EV drivers, they may well be more receptive to higher-end goods that can increase profits.

From upselling opportunities to generating its own revenue, EV charging is a great way to bring in some new business—and it’s only going to get bigger.

Charging strategy

As we have seen, DC chargers are an expensive investment that require a few considerations. Indeed, not all DC charging stations are built the same: between different sizes, architectures, and power output (ranging anywhere from 50 kW to 350 kW), choosing the right one for your unique situation requires some thought.

The first thing to determine is the size of your prospective EV clientele. You might think about the rate of EV ownership in your country and what models are most popular. You can also consider your location: are you next to a busy road or a small side street?

By getting an idea of the market, you can determine the appropriate scale and scope of your installation, both in terms of the number of charging stations and their power output. For example, if your petrol station is located along a motorway between two major cities, you will likely consider installing a large number of high power chargers to accommodate the demand. If, on the other hand, you’re situated on a smaller arterial road or in a city, fewer, lower power chargers may be more suitable.

7. How fuel retail can attract commercial fleets

Whilst the first thought for electrification is often passenger cars, business fleets represent a significant proportion of vehicles on the road. Many businesses have already started to electrify their commercial fleets, with a focus on light-commercial vehicles used in last-mile delivery and short-haul distribution. Plus, there is a concerted push to electrify big rigs too, with billions being poured into electric truck R&D.

Last-mile delivery

One of the greatest opportunities for commercial electric vehicles currently lies in last-mile delivery. As online shopping exploded during the pandemic, the demand for logistics and deliveries skyrocketed. At the same time, environmental considerations and emissions reduction targets are pushing delivery companies to explore electrifying their delivery vehicles.

For example, Amazon announced a partnership with Stellantis to secure some of its electric delivery vehicles, on top of its existing order of 100,000 electric vans from Rivian. UPS, DHL, and FedEx are also aggressively electrifying their fleets.

Heavy-duty distribution

While less developed than light commercial vehicles, heavy-duty transport represents a major opportunity for electrification. Given their relatively short distances and comparatively low speed, heavy-duty trucks used for short-haul urban transport are especially well-suited for electric mobility.

Additionally, concerns around noise and pollution in cities are pushing governments to regulate delivery vehicles: many trucks that do not meet London’s Low Emission Zone (LEZ) requirements, for example, need to pay a daily charge. As more cities tackle urban pollution, electric trucks offer cheaper, emissions-free alternatives to polluting diesel vehicles.

Current battery technology already enables trucks to cover up to 185 miles (300km) on a single charge, meaning the daily distances travelled by short-haul distribution vehicles can be easily covered with only a few charging stops.

Serving mid-route charging strategies

Whilst many of these companies will be investing in their own charging stations, a large proportion will also need mid-route charging solutions. Some businesses may even avoid investing in EV charging stations altogether, instead fully relying on mid-route charging.

Petrol stations are ideally positioned to serve this market by offering fast, reliable chargers that allow business fleets to integrate them into their mid-route charging strategies. Fuel retailers can take this a step further by partnering with specific delivery or logistics companies to offer their fleets discounted charging rates or priority charging, guaranteeing a predictable revenue source.

8. What about Hydrogen or Biofuel?

Some fuel retailers may be apprehensive about investing in electric mobility when other alternative fuels are out there. What about hydrogen? And biofuels? In the section below, we will examine these two alternative fuels and see how they compare to electric mobility.

Hydrogen

Hydrogen vehicles have been discussed a lot recently and appear as one of the replacements for ICE vehicles, alongside EVs. But how do they work?

Hydrogen vehicles use hydrogen as their energy source, generally by reacting it with oxygen in a fuel cell to generate electricity to power the motors. Because of this mechanism, they are often called fuel cell vehicles (FCV).

Hydrogen vehicles have a number of appealing features, most notably their short refuelling time. Unlike EVs, which need to be charged, hydrogen vehicles can be filled with the fuel at a pump, similar to LPG today. That said, as fast charging technology develops year-over-year, the gap between EV charging time and FCV refuelling is closing rapidly.

The main challenge facing FCV is the production of hydrogen. Currently, about 95 percent of hydrogen is produced from fossil fuels, created as a byproduct of the gasification of coal or by extracting it from natural gas. While it is possible to produce green hydrogen from renewable sources, this process remains prohibitively expensive and is unlikely to become sufficiently accessible for at least another decade.

“The conclusion is clear: in the case of the passenger car, everything speaks in favour of the battery and practically nothing speaks in favour of hydrogen” — Battery or fuel cell, that is the question, Volkswagen

Finally, the development of hydrogen technology is held back by the extremely small market: globally there were only 31,225 FCVs on the road in 2020, compared to 6.8 million battery electric vehicles. With such a limited customer base, building out the necessary infrastructure is difficult to justify financially, as it would likely be underutilised for the next few years and depends greatly on hydrogen adoption.

Whilst the same could have been said about EVs a decade ago, the truth is that modern electric cars use energy much more efficiently than hydrogen vehicles. Whereas EVs draw power directly from the grid, the hydrogen for fuel cells needs to be extracted, compressed, liquefied and transported before being used. All of these steps consume additional electricity, meaning overall, FCVs are only 25 to 35 percent efficient, compared to the 70 to 90 percent of battery electric vehicles.

At the time, when we are aggressively electrifying carbon-emitting activities and shifting our electricity generation to renewables to combat climate change, every kilowatt is precious. Hydrogen’s current efficiency simply does not allow its deployment at a large enough scale.

Biofuel

Another alternative fuel that you may have heard of is biofuel. Biofuels break down plant or animal matter and transform them into bioethanol or biodiesel, which are then added to regular petrol or diesel to improve their environmental footprints. Biofuels are nothing new, and the E10 petrol we use today already contains up to 10 percent bioethanol.

Whilst biofuels are an important tool in the shift away from fossil fuels, they are unlikely to become a dominant energy source for mobility in the future. Whilst vehicles running on high, or full, ethanol (E85-E100) blends exist, they require special engine design and are, thus, fairly rare. As a result, biofuels are at present more of a complement for reducing the emissions from existing ICE vehicles than an entirely separate alternative to traditional fuels.

The future is electric

Whilst other alternative fuels can be valuable tools in the fight against transport emissions, ultimately, battery electric vehicles are set to be the leading solution for decarbonising transport. Indeed, hydrogen is promising but must be contended with a high cost, inefficient production, and an underdeveloped infrastructure, whilst biofuels are more of an addition to traditional fuels than an independent alternative.

The clearest opportunity for fuel retailers today lies with electric vehicles. Whilst today, the EV charging value pool is negligible, by 2030, it’s estimated to be a whopping $20 (£16.5) billion, according to McKinsey. With their existing infrastructure and strategic locations, fuel retailers can tap into this lucrative opportunity and ensure their long-term success by staying ahead of the curve.

The key factors for success will be location, as always, and customer experience. To establish a first-mover advantage, fuel retailers will need to invest early to learn about customer needs and experiment with new propositions and formats. In doing so, they can capitalise on synergies with their established operations and take advantage of the long transition period as the global vehicle pool gradually converts to electric.