The Last Gas Station

As the world shifts towards electric vehicles becoming increasingly popular, the era of gas-powered transportation is slowly coming to an end. And with it, the last gas station is becoming a relic of the past.

The shift towards electric vehicles is having a significant impact on the future of gas stations in America. For nearly a century, gas stations have been a staple in American society, providing drivers with a convenient location to fuel up their cars and grab some snacks. However, as more electric cars hit the roads, the demand for gasoline is declining, which is causing profit margins at retail gas stations to shrink.

According to the National Association of Convenience Stores (NACS), more than 57% of gas stations in America are operated by a single owner. These independent owners are particularly vulnerable to the decline in gasoline demand, as they lack the economic scale to negotiate favorable prices for goods. In contrast, 40% of retailers are larger companies that operate 50 or more gas stations that can benefit from economies of scale, allowing them to better weather the shift towards electric vehicles.

Gas Stations Don’t Profit on Gas

The price of gasoline is a subject of frequent disruptions, but what many consumers don't realize is that gas station retailers operate on slim profit margins. As of 2021, for a single gallon of gas, retailers typically markup about 10.5% from the wholesale price to cover the operating expenses of the station, such as rent, utilities, freight, labor, and credit card fees according to NACS. After accounting for these costs, retailers are left with only about 1.4-2% of profit per gallon sold.

To put this in perspective, other low-margin industries, like grocery stores, make about 2.5% of profit, while car dealerships make 3.2%. Despite these thin margins, gas station retailers face a high degree of competition and price sensitivity from consumers.

When disruptions occur in the wholesale market, such as price increases, retailers often attempt to hold off increasing their retail prices for as long as possible to avoid turning off price-sensitive customers. However, eventually, the increased costs must be passed on to consumers, resulting in a spike in prices at the pump.

On the other hand, when wholesale prices drop, retailers may be slow to decrease their prices to make up for previous losses. This can cause tensions with customers who may feel that retailers are not passing on savings quickly enough.

Gas station owners face significant challenges in maintaining their businesses, given the slim profit margins and fierce competition in the industry. Consider a gas station that pumps about 4,000 gallons of gas a day, with an average price of $3.50 per gallon. Assuming that drivers fill up 11 gallons per visit, the retailer must serve about 275-400 cars per day just to break even on gas sales. After accounting for expenses, the retailer will only profit about $200-$300 per day from gasoline sales.

This means that even a slight decline in demand can have a significant impact on the gas station's bottom line. For example, if there is a 25% decrease in demand, it could take as little as six months for the operator to be forced to close the pumps. In addition, gas station owners are vulnerable to fluctuations in the wholesale price of gasoline, which can eat into their already slim profit margins.

In the highly competitive gas station industry, larger operators that hold about 40% of the retail market tend to focus on high-volume locations at freeway exits and on-ramps. These locations are prime spots for drivers to fill up their tanks and stock up on snacks and drinks, and the operators benefit from the economic scale to negotiate favorable prices for goods.

However, the remaining operators that fill in "inland" commercial and residential areas face significant challenges in maintaining their businesses. These stations typically have only one location to generate their profits and are unable to increase prices without losing customers to the station across the street, which is also feeling the same stress.

While the gas and the price on the sign may get the consumer into the station, it's the other offerings that keep them coming back. According to the NACS, 44% of consumers go inside the store to buy something, with those chips, energy drinks, and candy bars accounting for about 30% of the station's revenue and bringing in over 70% of the profits.? For example, candy is typically marked up 100% and ice 262%.

However, as the demand for gasoline continues to dwindle due to the rise of electric vehicles and other factors, the convenience store sales that gas stations rely on are also at risk. If people don't need to stop for gas, they may not be as likely to stop for snacks or other items, leading to a further decline in revenue for gas station operators.

Gas Cars Will Be Gone

In 2020, car sales in the US exceeded 13 million, with Toyota, Ford, Chevrolet, Honda, Hyundai, Kia, Jeep, Nissan, and Subaru leading the pack, accounting for 70% of all sales. However, all auto manufacturers have publicly committed to transitioning to 100% EVs on varying schedules. By 2030, just six years from now, these top manufacturers plan to reduce gas car production to 40%. By 2035, only 13% of new cars on the road will be gas-powered. And by 2040, no gas-powered cars will be mass-produced.

Consumers keep cars on average 8.4 years.? So new cars bought today will have no choice to be replaced by an EV in 2030.? That same car in 8 years will be worthless.? No one is going to purchase a used car that cannot be used without gasoline.

Your Gas Station Will Be Gone

By 2027, only 3 years from now, there will be 30% less cars on the road needing to fill up and buy energy drinks from gas stations.? Before then, those inland, single operated local gas stations that gas powered cars routinely go to will be vacated.

That station across the street will increase their prices due to the loss of competition, cost to produce and transport gas will increase and those candy bars will increase to offset gas sales losses.? Those too will fold due to the sheer volume of less gas cars driving up to the pump.??

As gas stations become scarcer and more expensive, consumers will have fewer places to service their gas-powered cars, and more will be forced to convert to EVs earlier than they expected. This, in turn, will only accelerate the decline of the gas station industry, as fewer and fewer drivers rely on gasoline to power their vehicles.

So Just Install EV Charging Stations

While many gas stations are facing closure due to the shift towards electric vehicles, the installation of charging units can be costly and is often beyond the means of single-station owners. It can cost upwards of $100,000 to install a single charging unit, a significant investment for a small business. Furthermore, the traditional model of gas stations as quick pit stops is not conducive to the time it takes to recharge an EV, which can take 20 minutes or more.

However, there are opportunities for profitable EV charging infrastructure. Malls, entertainment venues, and other destinations where consumers stay for extended periods of time present potential locations for charging stations. Additionally, long trip recharging will continue to be located at freeway exits, similar to gas stations.

While the majority of EV charging occurs at home or in office settings, public charging infrastructure is crucial for the wider adoption of electric vehicles. The federal government has recognized this need and has invested in the development of charging infrastructure across the country as well as the recent licensing of Tesla networks to non-Tesla auto makers that will be widespread in the next couple of years.

Junk Your Gas Car

As we move towards an EV future, there will be a critical juncture that could leave many consumers in a bind. For those with reliable gas-powered cars that have plenty of life left in them, the sudden disappearance of local gas stations and the skyrocketing price of gas elsewhere could be a shock to the system.

In addition to the scarcity of gas stations, the cost of gas will likely increase, pushing consumers towards purchasing a new EV. This issue is compounded by the fact that the resale value of gas-powered cars is expected to plummet in the coming years, leaving many with no option but to go into further debt to purchase an expensive EV because the trade in value is significantly less. The hope is that EV expansion will drive competition and decrease prices for consumers by that time.?

Don’t Be The Last To Pump

The movement from gas powered cars to electric powered cars is inevitable.? All of the car manufacturers have announced a total conversion to electric by 2035.? However, those hoping to hang on to their gas happy cars will find it ever increasingly hard to keep pumping due to the fact that there just won't be any gas station around to pump from long before the last gas powered car is retired.??

Best advice is to purchase an EV in the next 2-3 years before filling up your current gas guzzler becomes prohibitive and the trade in value of your car adds no value to the purchase price.