Retailers share propane autogas growth strategies

Propane autogas is among the growing markets in the industry, and several retailers reflected on their experiences in the market and the opportunities ahead during an LP Gas Growth Summit panel discussion.

The panelists were Gordon Cunningham, director of marketing and sales at Georgia Gas Distributors in Sandy Springs, Georgia; David Gable, president at Hocon Gas in Shelton, Connecticut; Mike Hayden, propane division manager at Co-Alliance in Avon, Indiana; and Jake Otte, operations manager at Otte Oil & Propane in Davey, Nebraska. Below are highlights from the discussion.

LP Gas: Can you each give us a brief summary of your company’s involvement in propane autogas?

Cunningham: I’ve been in the propane business for 20 years. I’ve been in it with my dad [at family-owned Cunningham Butane Gas Co./Cunningham Propane, which was sold in 2015]. We did a lot of irrigation and a lot of residential. We started about seven years ago in autogas, and with very little success, honestly. The price of gasoline was relatively high then, so there were a lot of people who were interested in our area in Arkansas at the time. The price of a conversion was expensive, so it was a hard sell.

When I was given the opportunity to work for Georgia Gas, I was able to tap into new markets, and this allowed me to look into autogas again.

There are some pipeline issues over in the Atlanta region for gasoline. One fleet we picked up in the last month or two [chose] autogas because they wanted the reliability and the price [was advantageous] compared to gasoline. Gasoline in Atlanta now is like $2.69, and that obviously makes autogas very attractive. Also, with improvements in systems for liquid injection, it increases the horsepower and efficiency. The sky’s the limit in Atlanta.

Otte: The autogas market in Nebraska has been really slow. As far as I know, we’re the only retailer pushing it. The largest school district in the state (Omaha) is [on] propane. They have about 500 buses, but that is really the only major thing going on in Nebraska with autogas.

We’ve spent the last five to six years building a local infrastructure. We’re working on two [stations] right now. When trying to sell autogas, a question I get is where are they going to fill up? People would say, “This is a good idea, but where are we going to fill up?”

We don’t sell a lot of autogas yet – we sold maybe 100,000 gallons last year, mainly to fleets in our area. In Nebraska, we’re trying to push schools. It’s a new thing in Nebraska and it takes a little bit of effort. I really think the future is in the school bus market with autogas.

Gable: I’m a little older than most of these guys. I’ve seen propane autogas spike and fall. We used to do conversions in the 1980s. When gasoline and crude prices were high, everyone would want to come talk.

Power plants are moving from coal to all gas. Everything is gas today, and I think that’s the way the engine fuel market is going to go. But you must have a lot of patience – more than you can ever believe. It’s a really slow process.

The [opportunity] right now is the school bus market. It’s being very widely accepted. Blue Bird buses run really well. The school bus market is going to get us the acceptance [with] municipalities and hopefully the general public. But it’s a tough sell.

Hayden: Central Indiana does not have a huge market. There are 147 propane buses, and 100 of them are at Indianapolis Public Schools. Schools in our area are going away from diesel. Many schools won’t buy another diesel [vehicle]. The school system closest to us said 60 percent of their nonscheduled maintenance went to diesel exhaust repairs. That [angle] has been a big push in our market.

We’ve done autogas for about six years. We had the Indiana Department of Revenue convert a bunch of vehicles. Also, we’re working through superintendents’ offices in the two major states we’re in (Indiana and Michigan), driving that and following up with emails about grant programs and things going on. You don’t send an email and see a response the next day with people wanting to talk about this, but there’s a lot of activity in autogas.

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LP Gas: What type of customers seem to respond favorably or have shown the most interest in autogas?

Cunningham: I’ve been with Georgia Gas in the Atlanta area for [about] six months. I haven’t had the opportunity to really explore, but I have gone to see school districts and given them the idea to go to propane for their buses. It hasn’t been really successful for me. As I develop those relationships, hopefully we will be able to develop something in that area.

Otte: Transportation fleets. Taxi cabs. Fifteen-passenger vans. That’s where our market has been. Our two major fleets are 15-passenger vans – people going back and forth to the airport. They came to us and said, “We’re here, we want propane and nobody else sells it to us.” I went, “I’ll be darn.” I think the biggest fleet we have runs about 25 vans, and the other one’s about 15.

Gable: We do the same thing with the school bus administrators. We send business managers information. We’ve spoken in front of associations, council municipalities. We can go on endlessly pounding the message over and over. Every shuttle we service – fleets, plumbers, bug guys, you name it – those are perfect targets. You want high-mileage vehicles that burn a lot of fuel. It’s the quickest payback, but it’s difficult.

Fleet managers like gasoline and diesel vehicles. You have to try to sell them on the idea that propane has such a significant reduced level of maintenance compared with diesel trucks, which are going to get even more complicated in 2017. Propane will simplify your life rather than add another layer of complexion to it.

Hayden: Our autogas is all school buses. In propane, the common theme is there’s no infrastructure. Schools are a big enough user to have infrastructure of their own, but that doesn’t answer the question of where others can use it. At some point, we have to put the infrastructure in.

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LP Gas: How are you selling customers on propane?

Otte: Price is a huge factor. Then you go to greenhouse gases – that’s a huge sell. Also, oil changes. As a company, we have 17 vehicles that run on propane. Some of them get 20,000 miles per year; some get 60,000. We line them all up at one time and change the oil. [Vehicles] look like they’re brand new after most of the oil changes.

Getting fleet managers to do something different has been the hardest thing. Ninety-nine percent of my conversations about autogas are not a sales conversation. They’re just an education conversation to get them to start thinking about it. A lot of the people my age or older remember the vehicles in the 1980s and 1970s. They remember some bad vehicles.

LP Gas: How important have partnerships been in trying to grow the autogas segment of your business?

Hayden: It’s key. We found a good supplier. We’ve got four schools on autogas and three different styles of systems because it worked different for them. Also, we’re a member of UPAS (the United Propane AutoGas Solutions Group).

Otte: We’re not a parts dealer. We’re not a tank installer. I just want to sell gas. So the first thing we did was have a guy come to us. He said he wanted to install our systems. He said he didn’t care if they were natural gas or propane. I said, “If you’re going to do natural gas, we’re not going to deal with you.” Five or six different kit manufacturers have trained him. He’s very good at what he does. He takes care of all the parts and pieces, and I just sell gas.

Unless you are prepared to be a mechanic or do the diagnostics, the first thing I would do is find someone to do it for you. It just creates more problems, unless you’re in that business already. That’s the first thing I’d do because the customer is going to ask you who’s going to do the maintenance.

The first thing the customer’s going to ask you: When I have a problem, what am I going to do? So you have to develop those relationships. I’m also a member of UPAS, and having that support is key. You have to be able to back up your product. If you’re going to sell your product, you definitely need that support. If you plan to advance your company, you need to be a part of something to help improve support for autogas.