Autogas Sales Are Available to All Retail Propane Marketers

Autogas is the term known around the world that denotes propane used to fuel motor vehicles. During the past five to 10 years, several innovative retail propane marketers have found a successful new profit center in selling propane for use by over-the-road fleets.

There have been hurdles and challenges with propane-powered vehicles during the past 40 years, but those who faced challenges in the 1980s with propane-fueled vehicles owe new developments in propane autogas technology a fresh look. Today’s liquid injection systems and vastly improved vapor systems offer major improvements over earlier vapor systems. The new models allow better drivability in all temperatures, improved start up and emissions, and equal horsepower and torque to gasoline engines.

Despite early challenges, propane has become the third most common engine fuel in the world, powering more than 25 million vehicles worldwide, according to the World LP Gas Association. Some of the key benefits center on economics, as well as environmental friendliness. Propane as a motor fuel is usually much cheaper than motor gasoline and diesel fuel, and compared to motor gasoline provides a 24% reduction in greenhouse gas emissions, a 20% reduction in nitrogen oxide emissions, and a 60% reduction in carbon dioxide emissions, according to Roush CleanTech, a Livonia-Mich.-based company that has been a key driver in expanding the use of propane as a motor fuel in the United States. Propane also has less greenhouse gas and total hydrocarbon emissions than diesel fuel and virtually eliminates particulate matter.

Todd Mouw, vice president of sales and marketing at Roush CleanTech, says despite all the new improvements in technology for using propane as a motor fuel, it has been a bigger hurdle to sell the propane industry on autogas than many end users such as commercial fleets and school districts, which quickly see the benefits. Mouw has seen many improvements since joining Roush CleanTech nine years ago. “Peer-to-peer communication among end-users has really sped up the sales process,” Mouw said. “We have reached a critical mass of believers in propane autogas who are spreading the word that this really works well.”

He notes that concerns about service and repair remain fair concerns, but adds that companies like Roush and Blue Bird Corp. are now in a much better position to take care of their customers. “We can help line up the service and support a fleet manager needs. We can provide the resources and answers that are needed for the fleet manager,” he said.

Mike Walters, vice president of safety and training for Superior Energy Systems (Columbia Station, Ohio), points out that one of the barriers for retail propane marketers to get involved in autogas is fear of the questions they cannot answer from potential fleet managers. Walters learned about some of the apprehensions retailers have in this area while hosting a breakout session at the 2015 Midwest Propane Gas Convention, where he pared back his MS PowerPoint presentation and asked why marketers were not getting into autogas. He points out that autogas isn’t a typical sale for propane retailers, in that there could be questions that a retailer may not be able to answer immediately. Therefore, having companies like Roush CleanTech and Superior Energy Systems at the table to answer those questions is key. Questions regarding everything from the fuel system on the vehicle itself to dispensing can be answered by representatives of those firms.

“There are three components to this,” Walters said. “The propane fuel systems, the dispensing, and the fuel supply. The retailer has to be able to answer questions about all three in order to build a customer relationship. Superior Energy Systems is willing to work with you to help your potential customer with regard to fueling infrastructure.”

Both Mouw and Walters agree that the sales process for the retail propane marketer will be longer and more involved than they are accustomed to for attracting and servicing a large autogas customer. They said they believe, however, the benefits from sales volume and the potential longevity of the customer relationship will make the investment in time, money, and effort worthwhile.

“We tend to work with retail propane marketers that are already working with autogas customers if we need to partner with a supplier in a certain region,” Mouw said. “Nonetheless, we are very happy to work with new retail propane marketers that want to reach out to fleet managers in their area and partner with us to sell them on the benefits of autogas.” Where is the opportunity? For starters, Mouw mentions the nearly 400,000 school buses serving more than 10,000 school districts in the U.S. Blue Bird Corp. is the largest school bus manufacturer in the nation and has worked closely with Roush CleanTech to produce propane-powered buses. Food and beverage trucks for companies such as Frito-Lay, Nestle Waters, Alpha Baking, Bimbo Bakeries, and H&S Bakery are another area on Mouw’s list, with many new success stories and tremendous growth potential. Mouw also cites public transit, airport transportation vehicles, and the energy market as areas with huge opportunity. These all represent vehicles that generally would fuel at one location and return to that location daily, so-called hub-and-spoke operations.

To be successful, Mouw suggests a retail propane company must dedicate people to the project and they must be trained thoroughly and be willing to work in partnership with others. “For the details of site plans, permits, infrastructure, and propane purchasing, the fleet manager will want to have a go-to person who has access to all the players to make the purchases of vehicles, installation of a dispensing station, site plan approval, and application for permits all happen seamlessly,” he said. Mouw emphasizes there would be a lot more retail propane sold in the U.S. if the nearly 3000 propane marketers partnered with companies like his to spread the word that propane autogas is the way of the future and learn how to get started.

In addition to fuel cost savings and environmental improvements, there are further incentives for autogas. The Propane Education & Research Council (PERC) recently expanded its Quick Connect Nozzle Incentive Program availability to fleets, doubling the incentive amounts for applicants. Effective in early March, private fleets and public refueling stations were eligible to apply for the incentive program, which will now provide $100 per tank-side connector and $1000 per hose-end connector.

Initially launched in November 2015, the incentive program had only been available to propane retailers, but now is expanded to fleets looking to replace their current refueling technology until the end of June 2017. In addition to financial support from PERC for research and development, as well as education and marketing, the government has provided a tax credit for companies to use autogas due to the benefits of cleaner emissions. The 2016 fuel credits worth 36 cents per gallon are currently in effect and users can retroactively take advantage of a credit designed to save propane autogas purchasers 50 cents per gallon of the alternative fuel used in 2015. Details on government and other subsidies available can be found at www.afdc.energy.gov/fuels/laws/LPG.

Further, an unlikely new funding source of nearly $4.9 billion, a portion of which could benefit autogas marketing, could result soon from a lawsuit against Volkswagen due to three criminal counts for a program to get around U.S. pollution rules. A guilty plea on March 10 has the company on track to spend more than $20 billion in the U.S. alone, plus lost sales and brand value. Of this amount, $2.9 billion will be spent on environmental mitigation and an additional $2 billion will go to promote zero-emission vehicles.

Propane autogas vehicle sales increased by nearly 8% in 2016 compared with 2015 sales figures, according to data compiled by PERC. The more than 14,000 vehicles sold in 2016, including light-, medium-, and heavy-duty autogas trucks—OEM dedicated or aftermarket conversions — constitutes the most vehicles sold in a single year since 2012. In fact, over the past four years, the total number of autogas vehicles on the road has grown by more than 35%. As of 2016, there were nearly 200,000 vehicles being driven by U.S. private and public fleets.

Although the sales cycle may be longer than the typical propane sale, consider the fact that fleet managers and school districts in a marketer’s area may already be hearing about the benefits of propane from their own industry peers. Closing the deal is getting easier, with testimonials from more and more satisfied customers and a major assist in setting up the infrastructure from companies like Roush, Blue Bird, and Superior Energy Systems. Adding a few fleets to a marketer’s portfolio could ultimately help make up for the loss of volume during warmer winters. It could also improve year-round revenue.

The past few months have seen a continuation in the movement toward autogas adoption. The San Diego Metropolitan Transit System (MTS) rolled out its new fleet of 77 buses. MTS CEO Paul Jablonski expects to save $5.8 million over the five- to seven-year lifecycle of the vehicles and reduce carbon intensity by 71%. KIPP Jacksonville Schools in Florida recently deployed its first fleet for transporting students to and from area campuses. This represented the first 100% propane-fueled school bus fleet for a U.S. charter school.

In addition, 26 new Blue Bird Vision propane buses have been purchased for use in South Carolina. “While the South Carolina Department of Education is a low-bid state, we had heard about the propane technology that Blue Bird propane buses possess from various sources,” says Mike Bullman, director of maintenance for the South Carolina Department of Education. “With aging diesel buses in our fleet, it was time to replace them and propane was the option we thought worked best financially and environmentally speaking over the long term.”

—Pat Thornton