Browse Publications Technical Papers 2000-01-3081
2000-08-21

Infrastructure Profitability Issues in NGV 2000-01-3081

All alternate transportation fuels require infrastructure to support widespread use of the new fuel. For example, in Canada in the mid-1980's, NGV markets were being developed in a number of urban settings in Canada supported by fuelling stations offering NGV and by conversion dealers who could install aftermarket conversions and maintain them. Canada's major NGV equipment supplier, CNG Fuel Systems, helped to create the infrastructure by co-investing in fuelling stations and creating a network of authorized dealers. Profitability issues arose for each. For refueling stations, the rate of buildup of fuel usage per station became the key financial performance criterion. For conversion dealers, initial pricing strategies (which reflected traditional margins in auto parts) created too large a markup for conversions, which limited sales prospects. Modified approaches to conversion pricing focused on constant “bay day” revenue for the dealer, with limited success. In each case, the objective was to develop an overall market infrastructure in which each component was sufficiently profitable to motivate ongoing investment. Failure to achieve profitability in the infrastructure components affects the growth in usage of an alternate fuel.

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