How California’s 2035 gas-powered car sales deadline will affect gas station owners

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It was hailed as a landmark decision for the environment: The California Air Resources Board voted in August to require all new cars and light trucks sold in the state to be zero-emissions by 2035.

The move, aimed at addressing climate change, was welcomed by many. Just not moms and gas station owners.

Independent gas station owners told The Times in interviews that the state mandate would hasten the demise of their businesses. And they make up a significant part of the state’s fueling infrastructure: There are a little more than 5,000 such stations scattered across California, according to the National Assn. data on convenience stores.

“Most of the independents are going to be out of business — completely out of business,” said Charles Khalil, who owns two gas stations in the LA area and is bracing for an upheaval before 2035. “We’re all going to suffer. .”

He and other owners predict that many mom-and-pop operators will sell their properties in the coming years to developers or large gas station chains that can afford to upgrade the sites with electric car chargers. Space limitations and the high cost of installing chargers—a high-capacity version can cost $150,000, including all associated expenses—make it unfeasible for some homeowners to update their properties for an electric future.

Charles Khalil owns this station on Santa Monica Boulevard.

Businessman Charles Khalil owns two gas stations in LA, including this one in Westwood.

(Christina House/Los Angeles Times)

Another local independent gas station owner, Adnan Ayoub, said the zero-emissions mandate “will not be fun for many of us”.

“When gas [cars] go away, I don’t know how many customers I would lose,” said Ayoub, who runs the Glendale station and has been in the business for 33 years. “I’m on my way out looking for something else.

Electric vehicle industry consultant Loren McDonald said the move by the resource board, a powerful department within the California Environmental Protection Agency, may not have too obvious an immediate effect. But a significant number of closures will eventually come.

“It’s going to be steady for a few years,” said McDonald, who advises electric car charging companies and chain stores, among other things. “But … in the last five years, as the 2035 deadline starts to approach, those owners will start bailing.”

How many mom-and-pop gas stations can California lose in the next few years?

Using five years of annual data from the National Assn. of Convenience Stores, McDonald’s estimates that nearly half of the state’s 5,081 mom-and-pop gas stations are expected to close by 2035. NACS defines these stations as those that include self-service and are owned by a single store owner — hence the “mom-and -pop” label. (Caveat on the estimate: McDonald’s model assumes that stations close at a rate of 3% per year to begin with, increasing to 6% per year – but over the next 13 years, station loss is unlikely to be linear.)

CARB’s mandate calls for reductions in gas car sales over the next 13 years: 35% of new cars must be zero-emissions by 2026, 68% by 2030, and 100% by 2035. (The mandate allows 20% of what (What the state calls “zero-emission vehicles” are plug-in hybrids that can run on either battery electrics or fossil fuels.)

However, owners of vehicles with internal combustion engines will still be able to operate or sell them after 2035. With the average life of a car in the US at about 12 years, gasoline will be needed for decades to come. Yet this demand will drop dramatically. CARB predicts that the 24 million fossil fuel cars and light trucks registered in California will drop to just under 16 million by 2035.

McDonald expects gas station owners to be affected not only by the new state rule, but also by the proliferation of increasingly efficient gas and hybrid vehicles that achieve ever-higher mpg ratings. Simply put, some consumers will need to fill up gas less often and others not at all.

Gas station owners grimly point to unresolved issues related to CARB’s new rule amid unrest. For example, how would California generate the electricity needed for the millions of new electric cars sold here? (There are already 1.13 million zero-emission vehicles registered in the state, according to council sources.) And yet, even as they raised this and other questions, owners said they support changes that help the environment.

Not every gas station operator intends to go out of business. Take Bob Reed, 80, of San Mateo, California. It has operated the same station and service center on Palm Avenue in the San Francisco Bay Area since 1973. “I’m never going to sell this because it took me a while to get this,” he said.

Reed knows big change is coming to the industry, but it’s one his descendants will have to deal with, he said, lamenting, “My son and grandson will feel it.”

Reality game

For gas station owners worried about their prospects: location, location, location, there’s a saving.

Because the stations are typically in high-traffic areas, many are located on land that would be coveted by property developers if the owners decide to sell. Ronnie Givargis, commercial real estate sales investment broker for Northmarq, said there is strong demand for these sites, much of which are “located on irreplaceable corners.”

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

Khalil’s stations are on Santa Monica Boulevard in Westwood and on Beverly Boulevard across from the Beverly Center, an area known for high gas prices. And the 52-year-old business veteran is leaning toward eventually selling to a developer.

“The reason we stick with these locations is because of the real estate,” said Khalil, who also runs a Torrance-based general merchandise consulting firm. “Gas stations are on the best corners, no matter what city or area. Those people are holding on a bit so they can sell it to a developer. I would do that.”

A gas station on Santa Monica Boulevard owned by Charles Khalil.

A gas station on Santa Monica Boulevard owned by Charles Khalil.

(Christina House/Los Angeles Times)

Ayoub said he also sees development potential where his station currently sits — but he can’t move until his contract with the gasoline distributor expires in 2025.

“My options are to either sell to someone else and let them take care of it, or wait until my current contract expires … and develop the property into something else,” he said.

Not all operators own the parcels on which their service stations are located, and those owners who rent out their properties may find themselves in an even weaker position than their landed counterparts, who may reap a windfall when sold.

Givargis said he noticed that “individual owners now want to sell their stations more than in the past” and attributed this increase in part to the 2035 mandate. However, there are environmental contamination issues that can arise when repurposing a former gas station.

“It may need to go through a remediation process to clean up the site and make it livable for future businesses,” Givargis said.

Real developers or large gas station chains that would equip the properties with electric car chargers could covet such land. One local chain is Long Beach-based United Pacific, which owns more than 500 gas stations and also distributes fuel.

“Larger groups can scale more efficiently and therefore make better profits than a single operator,” Givargis said.

Electric future

Many mom-and-pop gas stations will play a role in an EV-only environment – ​​they may just have new owners.

It’s not like some independent owners aren’t trying to move with the times. Ayoub said he considered adding electric vehicle chargers to his station, but that the bid for the work was not economical.

For a mom-and-pop owner, McDonald said it typically costs about $150,000 to install a DC fast charger, including construction and infrastructure work, while a large chain could add chargers with lower unit costs due to economies of scale.

Carl Pancutt, CEO of San Pedro-based Cleantek, an electric vehicle charging and civil engineering company, said adding a high-power DC charger can cost $70,000 to $100,000 for the facility, with another $30,000 to $100,000 for construction , depending on it. on existing infrastructure. Pancutt, who also heads EV Range, a company that owns and operates an electric vehicle charging network, said it can cost more than $500,000 to add four DC dispensers to a site.

There are limited local, state and federal subsidies that gas station owners can draw on to defray the cost of adding chargers, but accessing the incentives can require navigating a byzantine bureaucracy — an effort that some hire consultants to manage. More help is about to flow from the federal government — as a result of the $1 trillion infrastructure bill signed by President Biden in November.

Despite the high cost, EV Range has worked with some independent gas station owners to add chargers, including one in Walker, California. Helping independent gas station owners “provide convenience to the new wave of drivers is important,” Pancutt said. “And it’s important to them for the next phase of their business.”

Rendering of an EV charging station in Walker, California.

A rendering of the EV charging station, right, planned to be developed by EV Range at the Walker Country Store family gas station in Walker, California.

(EV range)

Still, after installation, EV chargers can take two to five years to become profitable, McDonald said. This is partly due to their occasional use. McDonald said gas station EV chargers are typically only used 5% to 10% of a 24-hour period.

Then there’s the issue of “throughput,” which is the industry term for the number of customers that can be served by a single dispenser. A gas pump has a much higher throughput than an electric car charger, as a gas vehicle can be filled in 10 minutes or less, while charging an electric vehicle to near full capacity using direct current can take upwards of 40 minutes. charger.

However, the potential benefit of long waits for EV refills is that customers spend more time at the gas station. While there, customers may be inclined to shell out more money at the convenience store, perhaps tempted by fresher coffee and tastier pastries than are commonly offered today.

However, to accommodate such visits, owners may need to upgrade their facilities – an additional cost.

“Smaller, local — if they see their business dying in 10 years — they’re probably not going to spend the capital to add 10-person seating inside and outside,” McDonald said.

Aside from the question of cost, there’s another potential problem — one that Khalil ran into when considering adding chargers to his station near Beverly Center: lack of space.

A few years ago, he became curious about the possibility of converting some of his gas stations into a roughly 14,000-square-foot station in Beverly. “I said I would have a head start before the game,” he said.

But an EV consultant who visited the station had bad news. “They tell me, ‘You don’t have enough room to convert your property,'” Khalil recalled.

Pancutt confirmed that EV chargers require a significant amount of real estate. For starters, there’s additional electrical infrastructure that alone can take up a lot the size of three parking spaces, he said. Also, the first charger installed must meet Americans With Disabilities Act standards, which requires a 12-foot-wide parking space with a 5-foot-wide aisle. From there, the next stall would be 9 or 10 feet wide.

“That’s another hurdle,” Pancutt said.

Despite their outrage, some gas station owners recognized that environmental realities demanded action.

“If the experts say the environment requires us to do it, then we go ahead,” Khalil said. “I’m a little melancholy about it for now.

But Khalil — who has spent more than half a century in the gas station business — is already prepared for the electric future, at least personally.

He drives a Tesla Model X.

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