EVs are set to become the new loss leader for supermarkets

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(07) VAUXHALL OFFERS NEW CUSTOMERS ONE YEARS FREE EV CHARGING CREDIT IN PARTNERSHIP WITH TESCO - Copy

Source: Vauxhall/Tesco

In February, Vauxhall branding began to appear across Tesco car parks, as part of a media partnership targeted at electric vehicle drivers

The supermarkets have had an interesting history with petrol stations. Whilst the first petrol station was in 1919, it wasn’t until 1967, when Asda opened its first petrol station in Halifax, that supermarkets got into the action.

As time went on, there was little demand for standalone sites from the supermarkets – but the past few years have changed this.

One of the main reasons probably relates to the largest petrol station owners becoming supermarket owners. In May 2021, EG Group announced the acquisition of Asda, followed in October that year by CD&R – the owners of MFG – acquiring Morrisons.

These new owners seem to have brought a new emphasis on fuel to the supermarkets. Since then, Asda has acquired the entirety of The Co-op’s petrol station portfolio, along with the majority of the Euro Garages portfolio. In latest news, Euro Garages has announced it is going to franchise some of its remaining sites with the Co-op, in what is fast becoming a branding merry-go-round.

Meanwhile, Morrisons has gone the other way and disposed of all its petrol stations to MFG, but continues to concentrate on increasing the Morrisons Daily franchise. Sainsbury’s and Tesco have been quiet in the market, but there is a chance this movement from rivals will bring them back.

One part of the market where there has been little activity has been with the discounters. Neither Aldi nor Lidl have shown any indication they are looking to move into fuel retailing in the UK.

Aldi has opened petrol stations on some sites in Germany and has a tie-up with an unmanned sites group – under the Diskont branding – in Austria. But in the UK, there are few opportunities on Aldi’s existing sites to add a petrol station.

Given the growth of electric vehicles (EVs), we expect EV charging is the only likely growth of refuelling options on both the traditional and discount supermarket sites.

The EV market seems to have some inherent synergies with the supermarket operators, in that customers can shop while they charge. Just as fuel was a loss leader, EV charging is being offered free to customers. Now circa one in 10 supermarkets has EV charging facilities [RAC].

We must be mindful that it’s a lot easier to convert existing parking spaces to EV charging in supermarkets than convert income-producing space at a smaller standalone forecourt. The likelihood is that the impact on any electric substation for supermarkets is less because their supply is already higher than a forecourt, which may need further infrastructure to boost supply.

We have already seen a number of operators partner up, such as Shell with Aldi and VW with Tesco. Asda recently uninstalled a number of charging points, but this may have been due to its previous tie-up with BP, and it may look to install its own branded chargers going forward.

In the future, refuelling – whether petrol or electric – is going to remain a key component of traditional supermarket sites. And we’ll likely see more demand for sites from some of the operators as the market continues to change and adapt.