For several years Norway has been the leading country with regard to EV development and charging. The driving force behind this has been the government’s ambition that all passenger cars sold in 2025 should be electric, an ambition that is shared by most parties in the parliament.
Leading the Charge
In Norway in 2022, 79.3% of new passenger cars sold were 100% electric. As of the end of year, 20% of all cars on the road were electric, even higher at 30% around the capital of Oslo. Miles driven in EVs is probably even higher than that. The average lifespan of a car in Norway is 19.2 years, and the average age of cars on the road is 10.5 years, so even though fuel retailers are experiencing a gradual decline in sales, the time has really come to face the challenges that the next years will bring for the industry in Norway.
Where’s the Energy?
Currently around 80% of all charging takes place at home and almost 10% at work. For the remaining charging occasions, gas stations compete with players such as dedicated charging spots, hotels, grocery stores, shopping malls and fast-food chains. As of December 2022 there are more than 20,000 public chargers in Norway, out of which almost 1,800 are fast (50-149kw) chargers and 3,800 are flash (150kw+) chargers. Only 9% of all charging options are fast charging.
Who’s in Charge?
In the beginning, the main players within EV charging were the utility companies who initially established themselves at fuel retailers as a pure service. Later these contracts were developed into profit-split arrangements between the fuel retailers and the charging companies—mainly Recharge, Mer and Eviny. As the charging volumes and knowledge grew, retailers’ commitment to and investment in charging grew too. Circle K was the front-runner in this development and the first to introduce its own charging network. So far, the Reitan Group through its Uno-X company is the only other gas station player to do so.
Charging With the Times
Let’s face it: The consequence of the rise of EVs is not just putting a charger where the pump used to be.
There are several reasons why the rise of EVs will force us to rethink our business models and change our traditional way of thinking.
Only a minor part of all charging will take place at a current gas station. The fact that 80% of all charging in Norway takes place at home does not mean this will be a representative figure for other markets. This percentage will also fall as EV ownership spreads to lower income groups living in apartments where they have few to no charging opportunities. As the percentage falls, the need for charging facilities in residential areas will increase.
Despite the ability to offer fast charging, EV charging at gas stations will not be the largest part of all charging, so this is where the “convenience” nature of the new business model will become more clear. The most frequent fast charging customers at fuel retailers (of those who also charge at home) are the ones who work or travel along the road and need fast charging to get to where they are going.
More important is the fact that charging can easily be provided by other players. There is logic for grocery stores to provide charging, for example. Putting chargers at a grocery store is much simpler than putting fuel pumps at the same location. This brings us to what is probably the most important issue here.
Let’s face it: The consequence of the rise of EVs is not just putting a charger where the pump used to be.
The key issue is that charging takes time. Even though fast chargers and flash chargers have reduced the time needed for charging, the size of car batteries has also increased, and customers will still need to kill a better portion of an hour. Depending on the charging behavior of the EV owners, their key concern is how to make that 20-40 minute stop a meaningful one.
While traditional motorists will often fill up their cars only when they need to, EV owners tend to charge when they can. So, the stop to charge the car may not be the main shopping mission but rather something they do since they will already be spending time at that location. An alternative to stopping for a shopping mission may also just be the need to use the restroom or to take a break to go through email. Observations made at Tesla Superchargers parks confirm that a high percentage of those charging along the road are just sitting in their cars reading their email or making phone calls.
The length of the charging session may, based on the above, be defined by the time the main shopping mission takes and how much power you need to get to your next stop, rather than how long it will take to get a full or mostly full battery. Just think about how you have learned to charge your own mobile phone. Do you always have the time for a full charge or do you sometimes just want a boost to get you through until you can fully recharge?
To become a good future site for charging, offering a meaningful experience during the charge will be key to attract those charging on the go. You simply need to make EV owners want to spend the 20-40 minutes at your site.
Some of our old ways of looking at the business may also change. The old conversion rate from pump to store may not be the right way of looking at this. Where we previously attracted customers by advertising promotions at pumps to bring them into the store for a quick snack, the opposite conversion rate from store or restaurant to charger may be a strong indicator that you are providing the right solutions for facilitating a meaningful 30 minutes.
How to Go Forward
So, how can the existing players manage to have a profitable “energy station” business going forward?
So far in Norway sales have not seen too dramatic of a change. Part of the reason for this is changed travel and shopping patterns during COVID, when the fuel retailing business actually got a temporary boost.
Now things are getting to be more challenging, and not only for the traditional convenience store. A substantial part of fuel sales in Norway come from unmanned stations. To believe that these two segments can replace all the lost fuel sales revenue with charging revenue is not realistic.
Key questions for the players are: • How can existing stations stay relevant? • What kind of new locations will meet the potential demands of EV owners? • Which existing stations have long-term potential? • What kind of investment strategy for charging is best?
To account for potential shifts in the market, the key will be to increase the overall relevance of the site. During the last few years, we have seen a lot of upgrades to convenience offerings, like a wider selection of fresh foods. We also saw an increase in services at the stations. Five to six years ago, almost no c-stores with gas stations had any seating; now most players have introduced this. EV owners will also need car washes and other services that gas stations offer. With this trend, we have seen substantial improvements to the car wash services offered at many stores, including subscription-based services.
We are also seeing that the new sites that have been built along the highways by Circle K, Shell (St1) and Esso (DCC)/Deli de Luca tend to be bigger, include more services and have become true one-stop locations. We have seen everything from playgrounds, dog parks, fast-food restaurants and increased space for eating at the convenience store.
As for the long-term relevance of existing stations, consider these factors:
While traditional motorists will often fill up their cars only when they need to, EV owners tend to charge when they can.
• Charging for long-distance travelers and those working along the road could mean large, new stations but could also mean simple upgrades to existing locations.
• The neighborhood charging point is also a type of location that may work in neighborhoods of a certain size where the charge at home opportunities are scarce. Stations that are currently unmanned could play a role here.
• Don’t forget the current locations that already have a wide mix of customer categories, like people just stopping in for lunch. As long as c-stores can continue to remain marketable and attractive to all types of customers, they will have a place in the future market, wherever it goes.
• In some cases, the alternative use of a location may offer a higher return than the current fuel retailing business. The number of fuel retailers in Norway will go down. Real estate values that are currently “hidden” may be a future upside for some players.
As long as c-stores can continue to remain marketable and attractive to all types of customers, they will have a place in the future market, wherever it goes.
If the market continues to shift more toward EV consumers, c-stores will need to decide whether to remain (or become) an “energy company” in the long run or be a convenience company partnering with a charging provider. Choosing to become an energy provider may mean a strategy to establish charging at locations other than current fueling sites, such as grocery stores or unsupervised charging outposts.
Additional Key Takeaways
Here are some other things we have learned during the last five to 10 years:
• Being a frontrunner is not necessarily the only path to success. On the one hand, you can position yourself among EV owners as the place to go by investing in early technology. On the other hand, later entrants can invest in newer technology and benefit from “free learning” from those frontrunners.
• Loyalty is key. If you already have an established loyalty system, you could continue nurturing it by offering other advantages to EV owners. Norwegian Circle K has provided solutions for home charging as a part of its loyalty offers.
• Even though the quality and capacity of the local grid will always be important when planning for charging at a current or new location, we have seen ways to solve the problem of low-capacity grids. Circle K has tested some interesting pop-up type solutions for this.
The old conversion rate from pump to store may not be the right way of looking at this.
• To build a charging network fast enough, many corners were cut in Norway. The current network therefore has certain challenges from a customer’s point of view. Payment has mainly been done by RFID cards and subscription models. Otherwise, paying must be done over apps or on the home page of the operator. The first charger where you could pay by card was introduced in 2023 by Uno-X, which was also the first player to show the price on the totem outside the station and on the charger, thereby introducing a price competition that has been absent until now.
• Another thing that was overlooked was universal design concerns. The charging spaces and chargers were not designed with disability needs in mind. This is gradually changing.
• Fast charging margins have been high so far. Charging at home is significantly cheaper than charging along the road. The absence of price information has contributed to that. It has been interesting to watch. Whereas fuel retailers might change their price signs several times a day, charging businesses may change the charging prices as infrequently as once a month. We may even see a future differentiation of charging margins between convenience charging along the road and local neighborhood charging.
One Final Recommendation
If you would like to know more about these developments and see the newest sites and the latest solutions, consider joining Insight EV Market Focus on September 19-21.
Here, you will engage with global leaders and innovators in this space, including Circle K, DCC Energy, NorgessGruppen, Deli de Luca, St1 Norge, Uno-X Norge, Reitan Convenience Norway, NIO and others. More information is available at: globalconveniencestorefocus.co.uk.