End Of Gas Stations III: Coming To A Corner Near You

About 95% of EV charging is done at home overnight. For trips an EV such as this Tesla Model S can charge while the driver has lunch.

About 95% of EV charging is done at home overnight. For trips, an EV such as this Tesla Model S can charge while the driver has lunch or shops. (Photo: Green Car Reports, David Nolan)

Part I: Gas Stations: Not So Long For This World?

Part II: Gas Stations: Will They Survive The Rise Of Plug-In Hybrids?

Sidebar: Econ 101: Why I’ll Never Buy A Gas Car Again.

Lifecycle Changeover: Legacy ICE Giving Way To Early Majority PEVs

Tesla expects to be producing 500,000 battery electric vehicles (BEVs) per year by 2020, almost ten times today’s production.[1] Nissan CEO Carlos Ghosn, in his keynote speech at last week’s NY Auto Show, said that their future is BEVs. Volvo expects 10% of their global sales in 2020 to be BEVs and much of the rest to be plug-in hybrid vehicles (PHEVs). While PEV sales (all plug-in EVs, so PHEVs and BEVs combined) make up less than 1% of the U.S. marketshare today, they already account for 25% in Norway, 11% in the Netherlands, and over 5% in Sweden, Japan, and China. Worldwide PEV marketshare has increased by over 60% each of the past 3 years and this is expected to continue.

The number of viable PEVs available to U.S. buyers will more than quadruple over the next 18 months. Battery costs per kWh are falling about 35% each year and the electric range of all PEVs is increasing.[2]

Last week, Audi’s Stefan Niemand said “Those who have ever driven electrically are lost for the internal combustion engine for all time.”

Nearly 100,000 people stood in lines at Tesla stores to reserve a Model 3 last Thursday. I wonder what the sales folks in Mercedes were thinking? None of these nor the 250,000 others who’ve signed up since will have need of a gas station once they get their Model 3.

Nearly 100,000 people stood in lines at Tesla stores to reserve a Model 3 last Thursday. I wonder what the sales folks in Mercedes (who lost 13% of S and CLS class sales to Tesla last year) were thinking? None of these nor the 250,000 others who’ve reserved a Model 3 since will have need of a gas station once they get their Model 3.

Internal combustion engine (ICE) cars are now entering the legacy stage of the technology lifecycle. This is where CRT screens were in about 2003 when the new flat screens had been around for a few years, early adopters knew about and bought them, they’d proven themselves, they were on their way to becoming price competitive, and if you’d paid attention in Best Buy, you’d likely have seen two or three appear among the hundred CRTs on display. You thought their time was a ways off so you carried home a shiny new 40 lb HD CRT. Three years later, CRTs are no longer available in Best Buy but you’ve got a fairly new one in your living room. You’ll continue to use it but might wish that you’d waited. Fortunately, this wasn’t a monumental expense.

Cars have an extra bit though — resale value. Unlike CRTs, cars are a monumental expense for most of us. Then they lose about 10% of their value each year and if they’re not desirable, their price drops even more. If two years from now it is commonly known that an ICE costs $1,000–$2,000 per year more to operate than a BEV, how much will that ICE be valued?

And then came the Model 3. Everyone was prepped for a slow and orderly migration from gas to electric. New landscape. Since it’s release last week, over 300,000 people have plunked down $1,000 each to reserve a Model 3. This likely hasn’t been seen in the auto industry since 15,000 people ordered Model Ts within days of its release. No doubt folks at GM, Toyota, Ford, BMW, and every other manufacturer took notice. The BEV groups in those companies are likely getting a lot more resources this week, priorities are being changed, and some deadlines are being moved up. Volvo may be thinking that their prior week’s 10%-BEVs-in-2020 estimate is rather antiquated.

Predictions

Here’s the fun part (now and later seeing how far I miss by).

Bloomberg are predicting that there could be an oil crisis by 2023, compliments of increasing numbers of PEVs reducing gas consumption, leading to the bottom falling out of the oil markets. I agree with their reduced consumption numbers but I believe that gas prices will rise. As demand falls, we’ll initially see a drop in prices, but then gas stations and refineries will begin to close, reducing competition. Those left will view legacy ICE drivers as captive customers available for only a short time. And they’ll milk them for all they can.

Here’s how I think things will unfold.

The gas stations that will be the first to go are those near more affluent communities. As cobo Rodreges pointed out two weeks ago, the average car lasts about 11.4 years, so it will take some time to replace all of them (and 15- to 20-year-old cars aren’t unusual). However, people in more affluent communities replace their cars much faster and are more likely to invest in a PEV of some sort. Probably not a good time to own a gas station that serves an affluent area.

This station near North Oaks will likely see an early death as their customer base switches to PEV’s. Volt’s, Leaf’s, i3’s and Tesla’s are already becoming common in the North Oaks Shopping Center across the street. I’d be surprised if this station is still there in five years.

This station near North Oaks will likely see an early death as their customer base switches to PEVs. Volts, Leafs, i3s and Teslas are already becoming common in the North Oaks Shopping Center across the street. I’d be surprised if this station is still there in five years.

Next in line will be those not near an interstate or state highway. As the number of PEVs continues to grow throughout the Twin Cities (and Duluth, Rochester, etc.), people will no longer need these stations for daily local driving and will purchase gas only infrequently for longer trips and minimally for lawn mowers and boats.

Then we’ll see the decline of PHEVs taking away even this bit of gas consumption. I’d guess that few people will ever replace a PHEV with a PHEV. Not because PHEVs are bad but because people will become comfortable with electric and thanks to increased range and charging options will replace their PHEV with an EV. And many of those older PHEVs may be converted to BEVs.

On top of all of that, I think that there will be some cycles that will hasten the decline of ICE vehicles ahead of that 11.4 year life. Fewer gas stations will cause those who still need gas for an ICE to have to drive farther to get it and along with fewer refineries may cause the price of gas to rise. This will further encourage people to migrate to PEVs sooner.

Trading in used to be about the car; it will now be about operating costs for those who own an ICE. Lower costs of batteries and of BEVs will create huge differences in total cost of ownership (initial purchase plus annual operating costs). Hanging on to a used ICE, even one that’s still fairly new, will increasingly not make financial sense.

Knowing the outlook for resale values of ICE vehicles, people will become increasingly reluctant to purchase them. I think we’ve now reached the point where buying a new ICE vehicle could be a poor decision financially, and personally I wouldn’t touch an ICE with a 10-foot pole because I think their value is going to plummet fairly quickly.

Other ICE-specific services like muffler shops, oil change locations, and brake shops (EVs use regenerative braking) will disappear as well, and general auto repair will also likely decline. Tire stores not so much, though autopilot systems may cause some revenue problems for body shops.

Conclusion

Keeping this in mind while planning for the future will be critical for cities looking to the future.

We already have more retail space than will be needed for many years to come. We may be seeing the beginning of the end of the big-box era, with cities and consumers asking for smaller, friendlier, and more local stores and restaurants. There is increasing demand for traditional mixed-use communities that better integrate residential with daily needs like schools and retail.

The vacating of gas stations and other ICE-specific services will be one more element, and a major one, in the reshaping of land and space use that will happen in our communities over the next few years.

—–

(Cover Photo: Scarfone Photography)

[1] This is a very doable 57% annual growth rate. Prior to the launch of the Model 3, some analysts were saying that this number would be closer to 450,000 though. Tweets from Elon Musk reacting to the number of reservations (and the $300 million in cash they brought in to his coffers and the $13 billion in sales they represent) has said that they are re-evaluating and likely moving up their production ramp.

[2] http://www.bloomberg.com/features/2016-ev-oil-crisis/


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15 Responses to End Of Gas Stations III: Coming To A Corner Near You

  1. Kyle April 8, 2016 at 9:43 am #

    Regenerative braking takes maintenance, too. There’s room for new kinds of maintenance shops, or for maintenance shops to adapt.

    • Walker Angell
      Walker Angell April 8, 2016 at 10:23 am #

      Regen braking is simply using the motor. If the motor is good for a million miles (Tesla’s prediction and agreed to by motor engineers) or even a quarter of that then little or no maintenance should be necessary. The original Tesla motors did have some problems but those produced over the past three years have been quite solid. We’ll see if they continue to hold up.

      Yes, there will be new kinds of shops. Motor and battery pack rebuilding the most likely I think. Theoretically a BEV is much more reliable than an ICE so how much demand there will be for these is still a big question.

      • mister.shoes April 9, 2016 at 11:35 am #

        Regenerative braking is only part of the slow-down-the-EV process. Bringing the car to an actual stop requires regular brakes like any other vehicle. The Model S page on the Tesla site is clear about this. Not only can you see the red calipers in the picture at the very top of the page, but this is listed in the Safety specs: “Four wheel antilock disc brakes”

        • Walker Angell
          Walker Angell April 11, 2016 at 8:57 pm #

          That depends. Regen braking can bring it to a complete stop in some situations. However in just about all situations regen handles the majority of slowdown and calipers are only used for the last little bit. An exception is when you have to slow down very quickly such as an emergency stop.

          From a maintenance standpoint regen likely puts little extra wear & tear on the motor or gearbox. Also, I’m not aware of any Tesla or Leaf owner who has had to have any brake maintenance done though I’m sure there are some very aggressive drivers who may have. Tesla actually recommends intentionally using the brakes occasionally to keep them functioning well and the discs/pads clean.

        • Nathanael April 25, 2016 at 9:46 pm #

          In my Model S, I need to use the brakes to stop when driving downhill.

          I have extremely steep hills in my area. I may have to replace the brake pads when the car is, oh, 8 years old.

  2. Adam Miller
    Adam Miller April 8, 2016 at 10:00 am #

    Not so sure about the pricing predictions. Oil (and gasoline) supply is highly inelastic and, for a lack of a more scientific word, “chunky.” In other words, once you’ve built a refinery (or dug a well), your pretty much stuck running it at whatever price you can sell the output for, which is why we’re currently experiencing low gas prices.

    And, of course, those refineries are producing lots of non-gasoline products as well, so even when gas demand falls off a shelf (which I think it farther in the future than you think, but it’s still coming), I’m not sure the refineries are immediately closing shop.

    As for the stations themselves, they’ve been so ubiquitous that it’s hard to view any of them as having the market power to keep prices up, but that really could change when/if they start being a lot farther apart.

  3. Matt Steele April 8, 2016 at 11:08 am #

    If only the end of gas stations coincided with the end of cars.

  4. Adam Froehlig
    Adam Froehlig April 9, 2016 at 6:36 am #

    Walker: playing Devil’s advocate here, but no mention whatsoever of rural/agricultural needs. Are you expecting everyone to be living in a city in your fanciful timeline? How about agricultural production? Heavy vehicles (thinking agricultural and construction)?

    • Walker Angell
      Walker Angell April 9, 2016 at 11:50 am #

      My focus was purely on passenger cars. While electric trucks and farm equipment are starting to be seen outside of the U.S. I’d guess that we’ll lag behind. UPS and Fedex both do have PHEV and BEV trucks in their U.S. fleets however and I’d guess others are looking.

      In ag the one exception appears to be the migration from hydraulic to electric for implements though I think these systems are using an onboard generator rather than batteries so perhaps a hybrid of sorts. There was something a while ago about a partnership between IH and Electro-Motive to develop PHEV and BEV farm equipment but haven’t heard anything since. Cat have a growing group developing hybrid, PHEV, and BEV construction equipment.

      The farmers I know (mostly cousins) say that fuel is a very significant cost of their operations and aren’t at all opposed to BEV options in the future. A surprising number already have solar and wind power on their farms and they’ve used auto-pilot for years (and more than a few wonder why there’s still a cab though these comments are usually rebutted with a comment about peace, quite, beer, etc.).

      And that pretty much exhausts my limited knowledge of that.

    • Scott April 10, 2016 at 3:24 pm #

      So few people live in rural areas that, like it or not, they really don’t matter.

      That said, many trips would work fine on a BEV or a PHEV. My mother in law still lives on the farm, and her usual trips are about 50 miles round trip to the shopping and health care hub, about 18 miles round trip to church/senior center, and about 250 or 350 miles one way to visit her children, grandchildren, and great-grandchildren.

      Thus, a BEV would work fine for her for all of her trips except the one-ways to visit family. Both those long-distance trips pass by a Tesla Supercharger that’s within 200 miles of each destination, so she’s covered there, too.

      Farm equipment may be another story. That’s a mighty big battery to run a combine.

      • Adam Froehlig
        Adam Froehlig April 11, 2016 at 6:51 am #

        “So few people live in rural areas that, like it or not, they really don’t matter.”

        Far more than you’re giving credit for, Scott. And believe it or not, there are still some states that are majority rural.

    • Nathanael April 25, 2016 at 9:51 pm #

      Heavy vehicles are taking longer to convert to BEV precisely because they are niche markets.

      They’re all converting, though. All of them.

      Tractor-trailers:
      http://www.balqon.com/electric-vehicles/

      Farm tractors:
      http://www.valleyoaktool.com/electric-tractors/

      Excavators:
      http://www.ihicompactexcavator.com/electric-mini-excavators/

      You get the idea. We’ll probably see an electric pickup truck in roughly 2020, and everything else should follow within a couple of years.