Ampol has told investors it expects fuel demand to remain strong in Australia well into the next decade, despite EV uptake doubling over the past 12 months.
The fossil fuel distribution and retailing company updated investors on the performance of its core fuel business, as well as the progress being made on its AmpCharge EV charging network, during its 2023 full year results call on Monday.
“The on-the-go public fast charging network rollouts are progressing in both Australia and in New Zealand. And we’ve established our first major agreement with Mirvac to provide fast charging at their shopping centres.” said Ampol CEO Matt Halliday.
“We’ve also entered our first back-to-base charging arrangements with b2b customers. In both cases, we’re expanding off our forecourts to extend the strength of our e-mobility network for the future and in turn connecting customers back into our on-the-go network.
“It’s early days but the stats we’re seeing are encouraging in terms of both average charge time and duration.
“You can see the dwell time is circa 25 to 30 minutes, even for fast chargers and we continue to work on the convenience offering to benefit from the opportunity this presents for our retail businesses.” Ampol’s results show it made a 36 per cent margin on its convenience store retailing during the year.
Ampol says it now has 82 charging bays across 36 sites in Australia and these have delivered around 935,000 kWh of charging in the year.
At the current price of $0.69 per kWh, that volume of charging represents total revenue of under $1 million, a tiny fraction of the 28 billion litres of fossil fuels sold and the $1.8 billion of earnings before interest and tax.
The company says it aims to expand its charging network to around 300 bays by the end of 2024.
“You can see the increase in EV adoption as supply chains have freed up and more affordable models are entering the market. Despite this EVs remain a very small proportion of the total fleet.” said Halliday referring to Australia’s EV uptake rate.
“As our scenario analysis presented in the climate report showed, we expect fuel demand to be robust well into the 2030s.”
While Australia’s overall EV fleet size is currently very low in comparison to fossil fuels vehicles, that could start to change quickly once EV uptake in Australia hits rates similar to the current rates in countries like Norway and others.
According to the ABS, the average vehicle age in Australia is just 10.6 years meaning that once EV uptake hits 100%, EVs as a proportion of the total vehicle fleet would be increasing by about 5% each year.
Once EV uptake starts approaching 100%, the fuel industry will start to see a significant and consistent decline in its addressable market each year. Ampol won’t say it publicly, but rapid EV growth is in fact the only major threat to its core business.
A business which is based on controlling the supply chain of transport fossil fuels. Something it will be unable to maintain with decentralised renewable energy generation for powering electrified transport.
Technology researchers such as Tony Seba, believe EV uptake will happen much faster than Ampol anticipates. In May last year on The Driven podcast Seba predicted EV uptake would hit 40% in China by the end of 2023. A prediction that was scarily accurate.
Ampol also says that the bulk of its sales are for heavy transport and aviation.
“It’s important to note that in 2023, just under 75% of our Australian fuel volumes were jet or diesel, where the bulk of demand is for heavy transport, and it’s fair to say transition options to be pushing out as the complexity and cost of this challenge is becoming clearer.” said Halliday.
EV charging infrastructure lagging EV uptake says CEO
“We can see from international experience that fast charging infrastructure is lagging the uptake in EVs reflecting many of the grid, real estate and capability related challenges in the build out of this capacity.” Halliday told investors.
“We also know that experience globally indicates that EV customers spends 20 to 30% more in store given the longer dwell time. This reinforces our belief that building out this capability, as we’re doing, will generate attractive returns over time with speed and reliability of charging, the quality of network and convenience offer all been critical success factors.”
According to research by myself and fellow writer for The Driven Riz Akhtar, while EV charging has been lagging EV uptake, that appears to have changed in Q4 2023 as the Australian DC fast charging installed capacity grew from 150,000 kW to 200,000 kW representing 33% growth in the network in just 3 months.
Ampol not worried about governments vehicle efficiency standards
The CEO was asked about the impact the government’s New Vehicle Efficiency Standard would have on Ampol’s business.
“That [the NVES] is designed to encourage the uptake of electric vehicles and put Australia are in line with the US in terms of carbon emissions per vehicle, by the end of this decade. That’s kind of in line with what our modelling had anticipated.” said Halliday
“EVs, as uptake increases, there’ll be quite a delay through the penetration of the fleet. So it doesn’t have any meaningful impact in terms of our assessment of the refinery upgrade.”
“The investment that you can see going into Linton [refinery] would be in anticipation of the site likely to run longer, given it’s a strategic asset for the country and the importance of its role in the broader supply security and fuel security for the country.”
Daniel Bleakley is a clean technology researcher and advocate with a background in engineering and business. He has a strong interest in electric vehicles, renewable energy, manufacturing and public policy.