California EV Mandate Worries Independent Operators

The state has over 5,000 single-store operators, and entering the EV landscape isn’t feasible for many.

November 01, 2022

ALEXANDRIA, Va.—California independent gas station owners told the Los Angeles Times that California’s zero-emission vehicle mandate will expedite the demise of their businesses. According to NACS data, there are more than 5,000 single-store operators in the state of California.

“Most of the independents will be put out of business—completely out of business,” Charles Khalil, who owns two gas stations in the Los Angeles area, told the Times. “We are all going to suffer through it.”

In August, the California Air Resources Board passed a plan that requires all new passenger cars and light trucks sold in the state to be electric vehicles or plug-in electric hybrids by 2035. Currently, 16% of all new car sales in California are zero-emission vehicles.

NACS, along with other stakeholders, filed a petition in a federal court in Washington, D.C., challenging the Environmental Protection Agency’s waiver that would allow California to implement a zero-emission vehicle mandate.

The cost to install an electric vehicle fast charger can be up to $150,000, and there are space limitations that prevent independent owners from installing EV chargers. Single-store operators in California believe that eventually they will have to sell their properties to developers or larger convenience store chains that can afford to install chargers.

“When the gas [cars] go away, I don’t know how many customers I would lose,” Adnan Ayoub told the Times. Ayoub operates a station in Glendale, California, and has been in the business for 33 years. “I’m kind of on the way out, looking for something else to do,” he said.

Still, most passenger vehicles on the road today, even in California, are gasoline-powered, so demand for traditional fuels—and gas stations—will persist for decades to come. Only 3% of all new cars sold in 2021 were EVs, but a NACS survey conducted earlier this year found that consumers tend to overestimate the number of EVs on the road.

Electric vehicle industry consultant Loren McDonald calculated that half of California’s 5,081 mom-and-pop gas stations would close by 2035. McDonald’s model assumes stations will begin closing at a rate of 3% annually, increasing to 6% a year, but over the next 13 years the loss of stations is unlikely to be linear.

“It will be steady for a few years,” McDonald told the Times. “But … in the last five years, as we start to approach the 2035 deadline, these owners are going to start bailing.”

The number of single-store operators has continued to decline in recent years, even before the California EV mandate, due to acquisitions by big chains and operators deciding to exit the business. There were 3.1% fewer single-store operators at the end of 2021 than there were at the end of 2020, according to the 2022 NACS/NielsenIQ Convenience Industry Store Count. Single stores account for 60.4% of all U.S. convenience stores, or about 90,000 sites. Industrywide, 148,026 convenience stores operate in the United States—a 1.5% decrease in the number of stores from a year earlier. Of these, 116,641 convenience stores sell motor fuels (78.8% of all convenience stores).

In California, independent gas station owners will not only impacted by the state’s zero-emissions mandate, according to McDonald, but also the increase in fuel-efficient gas-powered and hybrid vehicles, causing drivers to fill up less frequently.

Ayoub said he has considered installing EV chargers, but in the end, it was not economical for his business. According to Carl Pancutt, chief executive of San Pedro-based Cleantek, a high-powered DC charger can cost from $70,000 to $100,000 for the equipment and an additional $30,000 to $100,000 for the construction, depending on existing infrastructure. Pancutt told the Times it could cost more than $500,000 to add four DC dispensers to a site.

Pancutt, who heads EV Range, said the company has worked with some small gas stations to add chargers.

Helping independent gas station owners “provide an amenity to the new wave of drivers is important,” Pancutt told the Times. “And it’s important to them for the next phase of their business.”

However, EV chargers are not profitable right away. It may take two to five years for EV chargers to become profitable, according to McDonald, because of their infrequent use and throughput. Also, demand charges for electricity usage greatly impact profitability.

A fuel dispenser has more throughput than an EV charger, but the extra time it takes for EV customers to fill up means more time spent at the gas station. This could mean increased in-store sales; however, some businesses may need to upgrade their facilities to meet this need, which is another expense.

“Smaller, local ones—if they see their business is going to be dying in 10 years—they are probably not going to spend the capital to add seating for 10 people inside and outside,” McDonald told the Times.

Some small operators simply don’t have the space to install an EV charger. The additional electrical infrastructure warrants about three parking spaces in size, and the first charger installed must comply with Americans With Disabilities Act standards, which is a 12-foot-wide parking stall with a 5-foot-wide aisle. From there, additional stalls would be 9 or 10 feet wide.

Independent operators may have an advantage if they are located in a prime area, which would be easy to sell to real estate developers if needed. Ronnie Givargis, investment sales broker at commercial real- estate services firm Northmarq, told the Times that there is strong demand for these sites, as many of them are “located on irreplaceable corners.”

“If your site is located in a desirable area, repurposing the property will be simple and profitable,” he added, noting that the locations could be ideal for drive-thru restaurants, banks and high-volume retailers.

“The reason we are holding tight to those locations is just because of the real estate,” Khalil told the Times. “Gas stations are on the best corners, no matter what town, what area. Those people are holding on a bit so they could sell it to developer. That’s what I would do.”

The Convenience Matters podcast, “Where Do EVs Make the Most Sense?” examines the findings from a Fuels Institute study looking at life-cycle emissions for EVs and fuel-powered vehicles. NACS also has a topics page on electric vehicles.

Join the Fuels Institute’s John Eichberger and Jeff Hove for a webinar on November 16 as they review and discuss two recent reports, EV Charger Deployment Optimization and A Best Practice Guide for EVSE Regulations. Register now for the 1 p.m. ET webinar, Reality of EV Transitions.

NACS created an EV Charging Calculator to help retailers assess the cost and profitability of offering EV chargers at their sites. The calculator focuses on what retailer utility costs associated with EV recharging are and what the corresponding revenue must be to recover those costs after allowing for potential ancillary in-store visits and purchase profitability.