The Autogas boom in Greece – a success story!
The experts say that a financial crisis often produces financial opportunities. And in the Greek LPG market, the opportunity is Autogas.
From the early months of the financial crisis in Greece, which burst into life in November 2009, motorists started to recognise the benefits of Autogas, which began to regain its position in the Greek transport-fuel market. And demand has continued to soar, driven by the fuel’s competitive price.
The use of Autogas in Greece is an old story that started in the 1980s, when the majority of the country’s taxis were converted to run on the fuel. And at that time too, cost was the main driver. In reality, if there is a single factor that puts enough pressure on the whole economy and forces it to crumble under its own weight, it’s the amount of money that an average citizen pays for fuel. In previous oil crises in the 1970’s and early 1980s, the high cost of oil as well as the growing problem of pollution caused by expanding vehicle fleets encouraged experimentation with alternative fuels. And Autogas proved to be an effective answer.
Initially, the Autogas business was handled by LPG companies that initially invested in the construction of stand-alone Autogas stations selling in most cases only Autogas; smaller volumes of the fuel were sold within bigger gasoline/diesel refuelling stations. Until 1995, it proved to be a profitable activity. But then the government decided to modernise the taxi fleet and offered subsidies to replace taxis with new diesel-powered vehicles. As a result, the Autogas market started to decline quickly and investment dried up.
Matters were not helped by the fact that the use of Autogas in private cars remained illegal. After lengthy lobbying efforts by the LPG industry, the use of Autogas in all types of vehicle was finally legalised in year 2003.
Initially, this breakthrough did not have much impact on demand for Autogas. Up to 2008, demand was stagnant, with only 42 autogas refuelling stations remaining in operation, servicing a very small number of customers. Their business was not profitable, but the retailers nonetheless tried to keep pace with advances in vehicle technology, offering retrofit conversions and maintenance services to their clients in parallel to selling the fuel itself.
However, the foundations for expanding the market were put in place as early as 2004, when the LPG companies and the fuel retailers started to develop an informal plan aimed at creating a suitable environment for Autogas consumption to take off, including persuading government officials about the benefits of Autogas and the need to encourage its use.
The strategy, which ultimately proved highly successful, was built on 6 pillars:
- Intensive activities to increase awareness of Autogas and its benefits among public officials.
- Improve regulations to make it easier and safer to build Autogas refuelling facilities.
- Complying with European rules on safe distances between fuel pumps at service stations, making it easier to establish new refuelling facilities all over Greece.
- Making it easier to establish car conversion workshops.
- New legislation aimed at increasing the number of qualified and registered technicians for conversions.
- Raising awareness of the environmental and financial benefits of switching to Autogas among the public at large.
A great effort also was given to persuading the owners of existing Autogas stations to keep their business going in a difficult financial environment. This was very important for launching the new era of Autogas in Greece.
The critical factor in kick-starting the market was the decision by the government in March 2010 to increase the excise duty on all fuels so as to give a price advantage to Autogas at the pump. Currently, the excise duty for Autogas is 200 Euros per metric tonne, compared with 412 Euros per 1 000 litres for diesel and 670 Euros per 1 000 litres for gasoline. This translates into a price per litre at the pump for Autogas that is 50% lower than gasoline and 40% lower than diesel. At an average conversion cost of 900 to 1 200 euros, it takes less than a year to payback the cost of switching to Autogas. The government is again thinking of reviewing the excise-duty regime for all fuels.
The introduction of a fiscal incentive combined with long period of recession in the Greek economy has increased the sensitivity of the public to the potential for saving money on running a car and increased the use of Autogas tremendously. When the Autogas market started to expand in March 2010, the number of stations increased simultaneously with a number of workshops doing conversions, covering all regions of Greece. The number of Autogas-powered vehicles jumped from 15 000 in January 2009 to over 200 000 in September 2012 – an important milestone in the history of the sector – with an estimated 300 cars being converted to Autogas every day. The fleet is forecast to double within next two years.
Autogas consumption has soared in parallel with the fleet – from 8 000 tonnes in 2009 to 80 000 tonnes in 2011. In the absence of other incentives for the moment and based on conservative assumptions about conversions, fuel use in 2012 is expected to exceed 150 000 tonnes. The number of refuelling stations has also grown rapidly, from just 42 in 2009 to 300 stations at present. In addition, around 150 stations are in the process of being licensed to sell Autogas alongside other fuels. When they are up and running, there will be a widespread network covering all regions of Greece.
The relative price of Autogas will remain dependent on tax policy, and so is largely outside of the control of the Autogas industry. So the industry is focussing its attention on other factors that can contribute to creating a sustainable market:
- The support of car importers. The good news for the Autogas market is that the car importers are offering more and more factory-fitted Autogas models.
- Good product quality to avoid complaints about poor engine performance.
- Filling station infrastructure and wide availability of refuelling facilities. Worries about the availability of the fuel can influence the motorist’s decision about whether to switch to Autogas.
- Qualified conversion infrastructure and skilled/trained technicians. Attention should be paid to the quality of conversions as well as follow-up and maintenance in order to build customer confidence in safety and performance.
There is still work to be done. The Autogas industry is continuing to strive for the adoption of supportive laws and incentives, and to advertise the advantages of Autogas to the consumer and educate the public generally about the financial, safety, environmental, technology and economic aspects of the fuel.
Autogas is back in Greece and, this time, it is here to stay.
For more information about how the market in Greece is expanding, you can reach George by email at: firstname.lastname@example.org, or: email@example.com