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Industry Comment: Autogas Infrastructure with No New Cars?

It’s easy to imagine a situation with cars but no fuel.  But how could it possibly come to pass that one country would have a well-established LP Gas infrastructure but no new cars to use it?

While many countries are currently working to build up their Autogas infrastructure, a lack of LP Gas cars is not a problem.  In a perplexing reversal, Australia has world class Autogas infrastructure but no one is selling LP Gas cars to take advantage of it?

In fact, there are a number of reasons why this makes absolutely no sense at all:    

1. Vehicle supply void
2. Ample Autogas infrastructure

3. Self-sufficient in LP Gas

4. DOM (Delayed Original Manufacturing) capable facilities available

5. Established and stable national Autogas standards

6. Trained support personnel and training facilities

7. Favourable tax treatment

8. Attractive price differential

9. Missed marketing opportunity

Vehicle Supply Void

Based on the status quo, within about two years there will be no new OEM LP Gas cars available to purchase in Australia.  The current limited offer will vanish when Ford and Holden cease all manufacturing in Australia.  Currently, there are also no DOM (Delayed Original Manufacturing) cars available. Even now the current Ford and Holden LP Gas models are limited to full size vehicles, like the Falcon and Commodore.  These are both excellent cars.  However, consumers are no longer buying full size cars the way they once did.  There are no new OEM or DOM LPG 4-cylinder cars available in Australia.

Ample Autogas Infrastructure

Australia has one of the most established Autogas supply networks of any country.  With a population of only 23.5 million and over 3,000 Autogas outlets, it would have to be one of the best supplied countries in the world, on a per capita basis.

Self-Sufficient in LP Gas

Australia is a net exporter of LP Gas.  Most of the LP Gas is sourced from substantial in-ground gas reserves, being separated from the produced natural gas stream after extraction. Upstream infrastructure is also well established.  In addition to the gas pipelines, there are import and export facilities and an extensive bulk storage network.

DOM Capable Facilities Available

Australia already has small scale DOM capable facilities available.  The DOM option would be one way to fast-track entry into the Australian market, using DOM on a transitional or permanent basis. For example, Orbital Autogas Systems and Sprint Gas would both be capable of fulfilling the DOM role and both are located in major port cities (Sydney and Melbourne, respectively).  Both are capable of supplying engineered conversion systems of their own or installing OEM supplied gear.  In fact, Orbital supplies Ford with the LPI system used on the current Ford OEM model. These Australian companies are also intimately familiar with the Australian Standards, can conduct testing and do any required submissions.  This knowledge and capability would further reduce the time to market.

Established and Stable National Autogas Standards

There are no issues with having to deal with moving targets when it comes to standards and testing.  The Autogas market in Australia is mature and the standards are stable. Australian Standard AS/NZS 1425 covers specifications, installation and maintenance.  Emission testing is also applicable, with testing in accordance with either the ADR 79/00 Type I test or the IM240 exhaust emissions test.

Trained Support Personnel and Training Facilities

Autogas technicians must be trained and licensed to work on a LP Gas vehicles in Australia.  TAFE (technical and further education) government run technical schools provide the required training. Thanks to an extensive aftermarket network, there is an ample supply of qualified and licensed technicians to support a large LP Gas vehicle population.   Do-It-Yourself (DIY) conversions are illegal in Australia.

Favourable Tax Treatment

Autogas receives favourable tax treatment in Australia.  The current excise tax rate for Autogas is A$0.075.  This is scheduled to go up to A$0.10 in July of this year and top out at A$0.125 in July of 2015. In contrast, the excise tax on gasoline and diesel is A$0.38143, which is more than five times the current Autogas tax.  Even after 2015, the taxation on Autogas is still less than one third that of gasoline or diesel.

Attractive Price Differential

Petrol (gasoline) pricing in Australia follows an unusual price cycle.  The cycle is currently about two weeks long and the prices have ranged from A$1.59/L, at the high point, to A$1.42 at the low point during the most recent period (figures for May 2014).  Over time this range varies with international benchmark prices. Diesel prices do not follow the petrol cycle. They are relatively stable, albeit at an average price of A$1.57 for the same comparable period.  Diesel would also vary with international benchmark pricing. Autogas prices are also not part of the petrol price cycle.  Autogas pricing has been around A$0.76 for the same time period.  Over time, LP Gas pricing roughly follows the Saudi Contract Price benchmark.  So, on average the price of LP Gas is currently less than half that of either petrol or diesel.

Missed Marketing Opportunity

How can it be that a major marketing niche goes unfilled?  Automobile manufacturers and importers are clearly missing a marketing opportunity.  It is said the nature abhors a void.  It is time for LP Gas car manufacturers to do the natural thing and supply this unsupplied market.  Australian consumers and the manufacturers would both benefit from this initiative. Written by Eric Hahn, Elgas.