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Market Insight: LPG runs low on gas – for now

Struggling: The phasing out of federal government rebates and a new excise on LPG at the pump is creating something of a perfect storm for gas-powered vehicles.

LPG vehicle sales dip to less than one per cent of market ahead of Falcon LPI debut

8 Aug 2011

LIQUID petroleum gas (LPG) new-vehicle sales are at an historical low, trapped between a lack of gas-equipped cars in the showroom, an impending new tax on the fuel and the phasing out of LPG installation rebates by the federal government.

Last month, only 162 vehicles with dedicated factory-fitted LPG fuel systems were registered in Australia – just 0.2 per cent of the new-vehicle market – according to official VFACTS data.

As recently as three years ago, registrations of factory-fitted LPG vehicles were running at almost four times that rate, with 7851 LPG vehicles sold in the seven months to the end of July 2008 compared with just 2015 in the same timeframe this year.

As the VFACTS figures capture only new factory-fitted dedicated LPG vehicles, most of the latest sales will be Falcons – either the remnants of the old run-out E-Gas Falcon sedan and ute range that went out of production last year, or the advance guard of the new Falcon EcoLPI model being registered in readiness for its new-model assault that starts in earnest in showrooms from August.

The figures do not include after-market conversions or – more importantly – Holden’s LPG-petrol Commodore. Under the VFACTS system, these dual-fuel Holden cars and utes are registered as petrol vehicles, so they are absent from the LPG tally.

128 center imageLeft: Ford Falcon EcoLPi, including shallower boot floor. Below: Holden Commodore dual-fuel gas tank and LPG badge.

Holden says just under 10 per cent of its current new Commodores are LPG-equipped Omegas, Berlinas or Omega Utes, meaning that, as Holden shifted about 4000 Commodores and Utes in July, a little under 400 could be expected to be dual-fuel.

This would bring the July LPG new-car tally to about 560 units – about 0.7 per cent of volume, but still trailing even hybrid registrations (654 in July).

Ford and GM Holden hope the hiatus is temporary as both companies are bringing to market their new dedicated LPG models that they say will remove any stigma attached to the ‘taxi gas’ image of LPG by lifting both performance and fuel economy.

Ford has led the way with its new EcoLPI Falcon that makes a 16 per cent fuel-efficiency gain over its old E-Gas model while matching the petrol engine for power – all on a fuel that is less than half the price of petrol.

Holden’s new LPG system is still about six months away, but Holden is also promising a new start for LPG buyers that will even remove the boot space penalty – an advance over the current dual-fuel models.

These promising new models are being launched into an increasingly unhelpful environment created by a federal government that clearly does not include LPG among its favoured alternative fuels, despite claims that it slices greenhouse gas emissions by 13 per cent compared with petrol.

The government is phasing out LPG installation incentives – now at $2000 for factory-installed units and $1250 for aftermarket conversions – by 2013, and the number of rebates handed to motorists will be capped at 25,000 vehicles a year on a first-come basis.

And in what amounts to a perfect storm for the LPG industry, an excise on fuel at the pump is being introduced, starting at 2.5 cents per litre on December 1 and rising in annual installments of 2.5 cents each July to 12.5 cents per litre by mid-2015 – a 20 per cent impost at today’s LPG prices of about 55-60 cents a litre.

The excise – which also applies to natural gas in liquefied and compressed gas forms for vehicles – is a first for Australia and, despite protests focused against the Gillard government for introducing it, was originally proposed by the Howard government, which had intended introducing it on July 1 this year.

The legislation passed through parliament at the end of June with the help of independent MPs and will now apply from December 1.

Even though LPG cars use more fuel than petrol variants – 12.5 litres per 100km for the new EcoLPI Falcon versus 9.9L/100km for the ULP version – the impost on LPG will still cause far less pain than the 38.1 cents a litre paid to the government by petrol and diesel buyers.

Based on the fuel consumption of the Falcon EcoLPI, the fuel cost increase wrought by the 2.5-cent excise that commences on December 1 can be expected to add just $60 to the fuel bill of a driver covering 20,000km.

When the excise rises to 12.5 cents per litre in 2015, that extra pain at the pump will add up to about $300 a year.

Of course, high-mileage drivers such as taxi operators are going to be hardest hit, especially those with older, less efficient gaseous systems.

However, with both Ford and Holden promising major fuel efficiency gains, the damage might not be a dramatic as it could have been if taxi owners change to new models over the next few years.

And, if the price of oil spikes, LPG will be back in the game with private buyers, just as it has been each time there is a petrol price crunch.

Ford traditionally has dispatched about a quarter of Falcons from its Broadmeadows factory with LPG systems, and it hopes to regain that business as the new model comes on stream.

Holden also hopes to lift its LPG share with its new model in the New Year, expecting the new dedicated system to be more popular than the dual-fuel set-up.

It says the LPG-equipped Holden models can be expected to rise above the current 10 per cent share of Commodore production, though it is too early to say by how much.

The question for LPG fuel suppliers and retailers is whether the attractive new LPG vehicles with their sparkling performance will overcome the hurdles put in place by Canberra.

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