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How to get fleet managers on the autogas bandwagon

October 3, 2012 By    

It’s all about the money.

As gasoline and diesel prices continue to hover around the $4 mark, corporate interest in propane autogas remains high. Companies testing the alternative fuel when gasoline was about $3 per gallon (mostly for the public relations benefit of going green) now view propane autogas not only for its eco-friendly benefits, but as a way to save money – the one true motivator to companies and fleet professionals no matter what the industry.

I’ve been in the alternative fuel vehicle industry since 1991. I’ve promoted compressed natural gas (CNG), biodiesel, ethanol and, most recently, propane autogas. (And just to clarify, yes, propane autogas is the same propane used for heating and cooking, but the internationally recognized term “propane autogas,” or simply “autogas,” helps fleets identify fueling stations.)

I have found that fleet managers are fairly predictable. Their interest in alternative fuels always piques when oil costs increase and always dips as oil prices decline. This time, though, it’s different. No one anticipates petroleum costs shrinking anytime soon. And although the propane industry has made substantial progress, fleets still aren’t switching to propane autogas in record numbers. Why?

Remember when I said the only motivator is saving money? In a fleet manager’s mind, this means saving money on operating costs (the actual cost of the fuel), but not paying any additional up-front costs.

Everyone wants to save on operating costs – but not by increasing their capital costs to do so. Their boss or board doesn’t want to hear it. So telling customers that they will save 30 to 40 percent by switching from gasoline or diesel to propane autogas won’t work if they have to increase their capital budget in order to purchase new vehicles.

Another common challenge is customers who have to change their vehicle class to purchase propane autogas vehicles. For example, if a fleet is currently running a Ford F-150 and the only available propane autogas vehicle is the Ford F-250, they have already increased their capital costs before they have even factored in the cost of the propane autogas system. This must be factored into any economic analysis.

So what is the solution? Stay calm and bake on.

What I mean is baking in the cost of the system into the price of the fuel. Very few, if any, companies will tell you that they have capital for new vehicles, let alone new propane autogas vehicles. But, somehow, they all can go way over their operating budget when fuel prices rise. They have no choice.

At a conference last month, a fleet manager from a nationally known organization said he couldn’t get any capital expenditures into his budget. However, when asked how much over his proposed budget his fuel costs were this year due to increased gasoline prices at the pump, he said, “Oh, about $2 million.”

Huh? Did he just say $2 million over his operating costs?! Obviously then, the money is there.

This “cost-baking” model has been used by the CNG industry successfully for decades. The CNG industry marketer signs fleets to a “take-or-pay” agreement that increases the cost of the CNG over the estimated payback period of the system, still keeping the alternative fuel at a lower cost than gasoline or diesel. Once the system is paid off, the fleet experiences lower fuel costs and pockets the difference.

The propane industry already does this for propane water heaters, furnaces and grills. Why not propane autogas vehicles?

I think that the time is now.

 

Greg Zilberfarb is CEO and president of TSN Communications, a division of the Sales NetWork Inc., a full-service consulting company specializing in niche marketing and communications solutions to companies, non-profits and government agencies. He welcomes questions and comments at greg@tsncommunications.com.

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