Autogas perspective: Market development takes commitment, requires partnerships

What’s preventing propane retailers from venturing into the autogas market?

It’s a question to which we sought answers from Stuart Weidie, president of Alliance AutoGas, Blossman Gas’ autogas fueling and vehicle network.

LP Gas: Not all propane retailers are resistant to the autogas market, but those who resist do so for a variety of reasons. Some resist because the market requires retailers to foster multiple partnerships before they even make their first gallon sale. What are your thoughts on this specific hesitation, and how much is it holding back the autogas market?

Weidie: You’ve started with the most essential and relevant industry challenge facing the autogas market. Going back to 2007 or 2008, when we were first evaluating whether or not to pursue the autogas market at Blossman, we quickly determined a couple of things. One is something that has resulted in the tagline for Alliance AutoGas. It’s informal and unspoken: We have to be responsible for the entire customer experience.

The five imperatives of the market are having access to quality vehicle technology; assuring it gets installed properly; refueling infrastructure that meets fleet requirements, is easy to use and durable; reliable fuel supply; and a means to keep vehicles on the road or a local service provider who is going to provide ongoing support.

If the industry believes we should just drop gas from the big tank to the little tank – which seems to be the business model that is mostly prevalent now – then we’re not going to develop [an autogas] market in the United States. As a propane marketer, you have to have strategic alliances to provide all five of those imperatives.

All of those imperatives are necessary if we’re going to build a market here. The challenge is that the issues related to the vehicles and refueling infrastructure often present complex challenges. They require great commitment, and maybe it’s overwhelming to many in the industry. It is a factor in the lukewarm approach by the vast majority of the marketers.

LP Gas: What are the arguments you frequently hear from propane retailers that keep them from getting involved in autogas?

Weidie: I used to hear this a lot: That we have an abundant supply of propane, and if we create an autogas market it’s going to take away from our retail market. That fear is no longer valid.

Now, I hear people say, “I’m interested in it, but I don’t really know how to get started.” I think that’s simply the biggest obstacle because there are so many components to it. It’s not like a transactional sale. If somebody wants to set up gas logs or a fireplace, you get the logs, install the tank, run the gas line and it’s over. It’s very transactional.

In the case of autogas, we have very long sales cycles; ongoing maintenance on refueling equipment; and you have to assure the vehicles are attended to. The easiest part is providing the fuel supply. It’s the other components that make marketers understandably cautious about pursuing the market.

LP Gas: What advice do you have for smaller propane retailers who are hesitant to venture into autogas?

Weidie: A smaller company can still go out and partner strategically in local areas and put all the pieces together. It doesn’t come together quickly, though. It takes work to manage those relationships.

One question I ask folks is how long does it take you to get 300,000 gallons of residential business? That’s a lot of customers and investment you have to make. The same amount of work is required, but it is a different kind of work or commitment.

The ones being successful have somebody spending 100 percent of the time developing the autogas market. It’s not a part-time job. It’s a little bit like working with homebuilders. If you make two calls to builders and expect them to put everything on propane, you might be disappointed and give up early. Nine or 18 months later, you might have a relationship that allows you to provide product and fuel to the homes they build. You have to go out and see those folks. It requires individuals out there full time. That’s the first step.

LP Gas: Is there a generational divide between those marketing autogas and those who are not?

Weidie: [Some retailers] are comfortable making a good living and don’t feel the need to grow their business, because one of the great benefits of our industry is you don’t have to go out and create a new customer every day. You have residual value in customers because you can sell gas to them year after year. But at the same time, that’s a bit of a curse for the industry because it creates some complacency.

Long term, the health of the industry is dependent on more marketers going out and growing their business; developing the commercial side; developing new markets such as lawn mowers and autogas. [Autogas] is just one means, one market to create some growth.

LP Gas: What role should government incentives play in growing the autogas market?

Weidie: Our view is to have no incentives so uncertainty is eliminated altogether, or have something that’s a little longer term than these one-year incentives – something in the five-year range. I think the one-year incentives simply benefit the existing customer. If we want to go from 220,000 to 3 million vehicles, we need new customers.

We are probably the only alternative fuel in my judgment that doesn’t need incentives. We have a compelling economic case to make to fleet customers in terms of their savings. We’ve had the benefit of being $1.35 less than gasoline for eight years now on an average basis. [Autogas] has been as low as 60 cents and as high as $2.20. That is a compelling economic case.

LP Gas: What are your impressions of the propane school bus market’s evolution?

Weidie: The school bus market is the most encouraging development over the last couple of years. It’s very encouraging to see what Roush [CleanTech and] Blue Bird sales have done over the last two years, and the momentum they’re gaining.
One advantage of school buses is they’re generally kept for 12 years. We’re displacing diesel and eliminating particulate matter that is horrible for our children to be breathing. Not only do we have the cost advantage on diesel fuel, but we’re doing something on the emissions side. That’s added credibility to autogas in general. And an easy thing for marketers to do is work at the local level where they have relationships with people on school boards and administrative people.

LP Gas: Do you have anything else to add?

Weidie: One of the other things that helps create sales of autogas is to provide a program with no upfront cost options. You have to have various financing options, or options that are included in the pricing of the fuel to recover costs over time. This is similar to what many propane companies are doing in the lawn mower market.