Electric vehicles (EVs) currently account for about 2 percent of the automotive market. Is that enough to justify the costs to retailers to install charging stations? Probably not. But at the same time, various car manufacturers have announced their plans to roll out more EVs in coming years, and the Biden administration has set a formal target, calling on the industry to reach 50 percent EVs by 2030. If half of all drivers had EVs, would that be enough? Probably so. For gas stations, truck stops, and convenience stores, the real question then becomes, What is the point at which the answer changes?
According to the parent company of the RaceTrac chain of stores, there currently is not a “viable business case” for adding charging stations to its existing retail locations. In contrast, a small chain of 46 gas stations in Texas and Oklahoma has decided to add them, but the chief executive of the firm also admitted that the choice meant having to figure out the best designs and pricing on the fly.
The decision also depends on what other relevant actors seem likely to do. For example, some industry experts predict that widespread adoption of EVs is still a long way off, such that investing in charging stations today is too early. They anticipate a slowing rising curve, meaning that the retailers can take some time before putting their money into charging stations that very few people are using.
From a competitive perspective, gas stations and convenience stores worry about their capacity to sell electric charges profitably if instead utility companies start developing their presence in this market. According to one argument, charging stations should be incentivized and subsidizedb the government, to ensure they are available everywhere. In that case, existing utility companies might get contracts to install charging stations in non-retail locations, such as at rest stops along highways. If consumers can use those stations, they might be less likely or willing to make a separate visit to their local convenience store to get a charge, rather than just charging from the road and then waiting until they get home to complete the refueling.
But despite these concerns, the promise of charging stations is hard to ignore. If predictions of expanded adoption are accurate, someday people are going to start demanding this service—perhaps especially the wealthy market of consumers who already can afford a Tesla, for example—or else take their business elsewhere if it isn’t available. In addition, even the most powerful chargers need about a half-hour to give a vehicle battery a good boost, which means that convenience stores would have a captive audience of shoppers for at least that long, who are likely to grab some snacks and drinks while they wait.
Discussion Questions:
- Should convenience stores and gas stations invest in charging stations now or wait? Defend your answer.
- What factors should these firms take into consideration in making their choice?
Source: Jennifer Hiller, “Gas Stations Face Tough, Costly Choice on EV Chargers,” The Wall Street Journal, August 10, 2021