Edit
Fuels

South Korean Gas Stations’ Choice: Evolve or Go Extinct

To stay relevant, fuel retailers add EV chargers, delivery services and more
Photograph: Shutterstock

SEOUL, South Korea — Disruption in the fueling industry is playing out at different paces across the globe. In the U.S., where gasoline and diesel are entrenched and will continue to dominate transportation for years to come, disruption is partly a predictive exercise. On the other side of the globe in South Korea, the transition away from the traditional gas-station model is happening faster.

To avoid being among the more than 170 gas stations that go out of business each year in South Korea, operators are adding electric-vehicle (EV) charging, delivery pickups and more to stay relevant.

South Korea has about 11,500 gas stations today, after peaking at more than 13,000 sites in 2010, according to Korea Joongang Daily, citing data from Korea National Oil. Beginning in 1995, the number of gas stations grew quickly after the South Korean government lifted site-density restrictions. In 2011, the government approved "altteul" gas stations—a format that prices aggressively—to help control fuel prices. (In Korean, "altteul" means "frugal.") That only further amplified the level of competition, which pressured fuel retailers’ margins.

A 2015 study by the Ministry of Trade, Industry and Energy found that from 2008 to 2013, the operating profit for the average South Korean gas station was 2.9%, compared to 8.3% for the average South Korean retailer. According to the Korea Oil Station Association (KOSA), the average annual operating profit of a gas station is 38 million won, or about $32,000.

“It cost 1 billion won to set up and manage a gas station,” gas station owner Kim Jin-cheol told the paper. “Yet our monthly income is less than 3 million won.” Higher lease and labor costs have further eaten into profits. An average of 173 gas stations have closed each year of the past decade.

Meanwhile, fuel demand in South Korea is slipping. Annual average gasoline consumption per vehicle has dropped to about 306 gallons, its lowest point in 12 years, according to the Korea Automobile Manufacturers Association.

“Even if the number of gas stations is reduced to 8,000, it is still unclear if gas-station profitability would improve,” Shim Jae-myung, an official with KOSA, told the paper. “That’s why gas stations, starting by those owned and run by refineries, are trying to transform to attract more customers.” 

New Businesses

Some refiner-operated gas stations are tapping into the alternative fuel, car-sharing and delivery services to diversify, the report said.

Alternative fuels are another opportunity, with South Korea the fifth-largest EV market and third-largest hydrogen fuel cell vehicle market in the world, according to government figures. GS Caltex Corp., a South Korean refiner jointly owned by Chevron Corp., has seven EV charging stations at locations in Seoul. Other South Korean refiners installing EV charging at their company-ops include S-Oil Corp., Hyundai Oilbank and SK Energy. Hyundai Oilbank is also adding hydrogen fueling to some locations. 

Car sharing is another new business; GS Caltex hosts vehicles for rent from Green Car, a car-sharing service, at its GS25 c-stores. Some sites are adding fast-food restaurants, coffee shops, maintenance centers and parcel delivery.

Locations for GS Caltex and SK Energy offer parcel delivery services and a smart locker service, QBoo. Customers can store personal items in the lockers, items for trade or even dirty clothes for pick up by laundry services.

Hyundai Oilbank, meanwhile, offers a parcel delivery drop off for women at five gas stations in Seoul. One gas station owner said the monthly income from parcel delivery drop-off is modest, but it ensures foot traffic at his site.

Tougher environmental regulations and improved vehicle fuel economy are also pressuring South Korean gas stations to evolve—or go extinct, said the report.

“The gas stations are changing their portfolio appropriate for the changing times and technological advances,” Kim Hyung-gun, professor of economics at Kangwon National University, told Korea Joongang Daily. “As it is with other businesses, change is no longer a choice but a necessity.” 

 

Related Content

Trending

More from our partners