The global Autogas sector has been dominated by a few countries for many years, but these countries experienced mixed fortunes in 2011, according to the latest annual Statistical Review of Global LPG, compiled for the first time by UK-based Argus Media.  Argus editor Nick Black discusses the findings.

Autogas as a sector is well used to surviving tough conditions. Competition from ever cleaner competitor fuels can be relentless, threatening the sudden contraction of consumption without the necessary market conditions for growth. But with the right set of conditions markets can expand suddenly. Normally, Autogas depends on a mix of government tax and subsidy support, interest from automobile manufacturers and a vibrant conversion and equipment sector. But what happens when the entire economic and legislative landscape changes? Will Autogas consumers have sufficient loyalty to the fuel when competitor fuels are almost as cheap? These are some of the on-going challenges that the Autogas sector had to deal with in 2011. 

Autogas consumption in the top 10 countries, 2011

The year 2011 brought some unexpected developments across the globe for Autogas. Overall global Autogas demand reached 23.7 million tonnes (mn t) in 2011, a welcome 3% higher than in 2010. But a closer look at the statistics shows some potentially worrying trends among the top Autogas markets: South Korea, the world’s largest autogas market, saw demand drop to 4.3 mn t in 2011 compared with 4.5 mn t in 2010 — and the same pattern of slight decline was seen in Australia, Poland and Germany.

 
Autogas consumption by region, 2000-2011 (million tonnes)

The South Korean Autogas story has been one of remarkable success over many years despite the fact that the fuel remains mostly restricted to various sub-sectors, such as taxis, vehicles for the disabled and vehicles for the country’s war veterans. Autogas, which in South Korea is almost entirely made up of butane rather than propane, still makes up around 50% of the country’s overall LPG demand, and a massive 83% of butane demand.  But the key problem facing the country is the narrowing price advantage of Autogas over other fuels at the pumps as distributors pass on the high import costs of LPG onto consumers, as well as the ageing of the Autogas vehicle fleet. The data for 2011 also points to a trend of consumers not automatically replacing old Autogas models with new ones.

Compressed Natural Gas (CNG) is also becoming a serious competitor to Autogas, especially in South Korea’s taxi market, even though the government intends CNG to be only used in urban bus fleets. But the taxi fleet still makes up around 35% of the overall South Korean Autogas market, even though the actual taxi vehicle fleet size only makes up around 10% of the country’s overall Autogas fleet. 

The EU Autogas sector faced major uncertainty in 2011 in the form of changes to EU tax legislation proposed by the European Commission, which could at a stroke apply one rate of minimum fuel excise duty, removing the different levels applied by EU member states and leading to major price increases in some cases. In Poland, for example, this could lead to a four-fold increase in excise taxes on Autogas by 2018 according to local experts.

The three key European markets of Poland, Italy and non-EU member Turkey experienced different fortunes in 2011, with demand contracting in Poland but growing robustly in Turkey.

Turkish Autogas demand saw continued growth, rising from 2.5 mn t in 2010 to 2.6mn t in 2011. The country’s autogas sector is well established and competitive, and enjoys high brand awareness among consumers. Turkey is one of the few countries in the world to feature autogas in TV and media commercials.

Italy also saw growth in Autogas demand as the sector carefully rebranded itself as a clean alternative fuel and found a good response from consumers. Italy’s Autogas demand reached 1.3 mn t in 2011 compared with 1.2mn t in 2010.

By contrast, Polish Autogas demand eased to 1.6mn t from 1.7mn t. This slight drop occurred despite growth in new vehicle conversions and a rise in the size of the overall autogas vehicle fleet. The relatively high price of diesel and gasoline in 2011 saw a rise in demand for Autogas conversions, while car manufacturers also provided strong support in the form of new models. The narrative about Autogas in the country appears to be changing.  Previously, Autogas tended to be associated with poor fuel quality and as a fuel for the poor. But Autogas has earned a far healthier reputation, especially with the support of automobile manufacturers.

Overall European Autogas demand reached 8.8 mn t, just 2.1% higher than in 2010. Some markets look particularly promising for the future, such as Romania, Lithuania and non-EU member Ukraine. But the uncertainties over EU tax changes have persisted into 2012 and could impact full year figures for 2012.

Europe’s prolonged economic crisis brought some unexpected benefits for Autogas. Greece, the country most severely hit by fiscal chaos, saw Autogas demand surge from 18 000 t in 2010 to 78 000 t in 2011 as cash-strapped drivers opted for the cheapest fuel available.

But hopes of continued strong growth in the German Autogas sector were dashed. The country’s Autogas sector had hoped to see demand reach over 700 000 t in 2011 after several years of brisk growth, but demand instead slipped slightly to 505 000 t – despite record gasoline prices, which in previous years had been a strong encouragement for motorists to switch to Autogas. The German Autogas sector is set to reconfigure its efforts, including targeting more rigorous training and certification of the country’s installers of Autogas conversion kits.

Regional breakdown of global Autogas consumption, 2011

Japan’s Autogas sector has struggled to keep government support, but it was able to demonstrate its value as a readily available emergency transport fuel after the March 2011 earthquake and tsunami. Overall demand rose relatively strongly in 2011 to 1.1 mn t compared with 946 000 t in 2010.

Autogas demand in Russia reached 2mn t in 2011, making it the world’s third-largest Autogas market. Price is the major driving factor behind Russia’s Autogas market, which is mostly centred in urban areas, especially Moscow.

India’s Autogas market is one of the best organised in the world. Yet demand growth slowed in 2011, reaching 366 000 t compared with 351 000 t in 2010. The year 2011 saw some innovative thinking by Autogas suppliers, with attention shifting to the two-wheeler market – a huge untapped source of demand in the country (see the story on India’s Autogas-powered two-wheelers in the July 2012 edition of Autogas Updates).

Meanwhile, in Australia, Autogas is fighting for market share in a highly competitive market amid growing uncertainty about government support. Vehicle conversions peaked in 2008 and continued dropping in 2011 to their lowest levels since 2003. The country’s consumer base also shifted in 2011, with drivers travelling shorter distances and using less fuel. But the country has attracted support from two vehicle manufacturers, making up for the withdrawal of Ford, which stopped making an Autogas-powered car in 2010. The country’s Autogas industry has a long and successful history of engagement with policymakers, and still sees opportunity to reposition Autogas as a clean, immediately available fuel that can make a contribution to meeting the country’s greenhouse-gas reduction goals.

One of the potentially most promising markets is the United States, which saw renewed efforts by the industry in 2001 to establish Autogas as a viable alternative fuel and competitor to CNG. The results in 2011 were not stellar: consumption dipped to 297 000 t from 320 000 t in 2010 with continuing limited federal government support. But the United States could prove to be a surprise success story over the next few years, as interest in low-cost, clean alternatives to gasoline grows.

A number of smaller Autogas markets are also emerging across the world, including Thailand and the Dominican Republic — now established as Latin America’s largest Autogas market.

For more information about the Statistical Review of LPG 2012 and how to order a copy, please go to: www.argusmedia.com/mkting/snip/global-lpg-review