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Moving beyond established markets

Editorial by Trevor Morgan, Editor, Autogas Updates

Autogas use is forging ahead worldwide, but remains highly concentrated in a few key markets. That is the picture that emerges from the latest data on autogas use for 2012 – summarised in an article by Nick Black in this edition of Autogas Updates.

Autogas consumption globally continued to rise, by 2.5% year on year, maintaining the steady upward trajectory of the past several years. But growth was far from even, with demand in some markets barely increasing and falling in others. Autogas remains minimal in many countries with just four countries accounting for close to half of global autogas use.

The reason for the wide divergence in the success of Autogas is quite simple: differences in government incentives. Because the simple fact is that Autogas cannot exist without them. It costs money to convert a gasoline-powered car to run on Autogas, whether in the factory or later, so the cost of the fuel has to be cheaper to make it financially attractive to the motorist.

You have to bear in mind always that the end-user of Autogas – whether he is a private motorist or a fleet vehicle operator – doesn’t buy the fuel for what it is but rather for what it does, i.e. provide mobility. Diesel, gasoline and some other fuels do that just as well. So essentially the only reason for choosing Autogas over those other fuels is cost: in other words, the Autogas market will not take off and grow in a sustainable manner unless motorists can save money using the fuel while getting the same performance out of their car or van.

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Ensuring that the fuel is cheaper means the fuel has to been taxed favourably compared with conventional fuels. They are other ways governments can incentivise people to switch to Autogas, including grants for vehicle conversions, vehicle tax exemptions, public vehicle purchase mandates and traffic measures. But it is the tax on the fuel itself that is the key: the tax on Autogas has to be lower than on diesel and gasoline to make the fuel cheaper at the pump. The money saved on fuel has to be big enough to cover the cost of converting a vehicle to run on autogas or the extra cost of a factory-built Autogas vehicle over a gasoline or diesel car and ensure a quick payback – usually less than two to three years to encourage commercial vehicle owners to switch and even less for most private individuals.

In many countries, governments have decided to tax Autogas favourably to provide an incentive for people to use the fuel – for good environmental reasons: Autogas is less polluting and emits less carbon dioxide too. Many studies have proved that. And an extensive database of vehicle testing information recently supplied by car manufacturers to the German government, which Dr Eric Johnson of Atlantic Consulting presented at the recent World LP Gas Forum in London and discussed in an article in this edition of Autogas Updates, provides evidence that the green credentials of Autogas are even more convincing than previously thought. In particular, replacing diesel cars with Autogas-powered ones would bring huge health benefits and reduced health costs through lower particulate emissions which are known to cause respiratory problems and cancer.

So why have other countries not done the same? As Eric suggests, I think the answer lies in a failure on the part of the green lobby and the LP Gas industry to convince policy makers that Autogas really is a cleaner fuel and has a role to play in the transition to a low carbon and truly sustainable transport sector. Let’s not kid ourselves: Autogas is not the long-term solution to meeting the world’s insatiable demand for mobility. But it can make a significant contribution to reducing urban pollution – and curbing the rise in greenhouse-gas emissions – in the medium term, while economically viable sustainable alternatives are developed. For now, no such alternative exists. My impression is that policy makers, in many cases, believe that such alternatives are just around the corner, so they do not think it is worth bothering to promote switching to Autogas.

All this suggests to me that the Autogas industry needs to work harder at selling the case for Autogas and to work with the policy makers, as well as the vehicle and equipment manufacturers and the installers, to ensure that autogas is an attractive alternative for motorists. All the evidence from around the world demonstrates very clearly the strong link that exists between the efforts of the LP Gas industry to promote the benefits of Autogas on the one hand and the supportiveness of government policies and the size of the Autogas market on the other. A lot can be learnt from countries where Autogas has been a success, such as Korea, Turkey, Poland and – more recently – Germany.

One thing is for sure: there will be no shortage of LP Gas to meet any plausible rate of growth in Autogas sales worldwide in the coming few years. Gas production prospects have never been brighter, and the liquids associated with rising gas production will ensure an expanding source of LP Gas supply. Demand for LP Gas in other uses is set to grow as well. But Autogas is a far better use of the fuel than using it as a feedstock in the petrochemical industry, where alternatives exist. It is for governments to ensure that LP Gas is diverted to sectors such as transport where the environmental, social and economic benefits are greatest.

Disagree? Agree? Either way, Trevor would like to hear your reaction and any thoughts you might have about Autogas Updates! He can be reached by email at trevor.morgan@menecon.com.