Jacob Schram, senior advisor, McKinsey & Company, and former group president of European operations at Circle K, explored the future of mobility at the NACS Convenience Summit Europe (CSE) in London in June and urged convenience retailers to see the opportunities within mobility as a consequence of the four drivers: electric, autonomous, connected and shared.

“You should not look upon it as a threat in fuel and convenience retail but an opportunity,” he said. “There’s no doubt that you will lose a hell of a lot of fuel volume, but what you have to consider is how do you replace that.”

According to Schram, the industry is on the cusp of a second inflection point—by 2030 there will be developments that may be as profound as the first inflection point 100 years ago when automobiles replaced horses as a means of transport. Radical changes are coming even faster this time and across multiple dimensions, Schram said. He asked CSE attendees if they wanted to embrace it, or sit back and believe that it’s not going to happen now. “If you think that, then you are in the same situation as the people back in 1900 who did not believe in the car,” he warned.

For Schram, electric cars, connected cars, shared cars and autonomous cars are the future, and he outlined why they are good for people, the planet and profit. Globally, one million people die as a result of motor vehicle crashes every year and even more are injured. Transportation is the biggest source of emissions, while removing congestion can free up new opportunities and productivity, which increases gross domestic product.

Big investments are afoot in mobility, too, Schram told the audience. Since 2010, $210 billion has been invested in mobility start-ups, while original equipment manufacturers spent $125 billion on R&D in 2017 alone. “When you see how much capital is being put into mobility, you start to understand that the making of a revolution is happening within transportation. Nobody would be pouring that much money into it if they don’t believe in it, and they do,” he said.

Rapid EV Adoption

Schram suggested electric cars would become standard within 10 years, and a new mobility space will emerge to provide new opportunities for operators and fuel retailers. “You need to pay attention as you will lose money on fuel volume,” he advised.

Schram shared projections for electric car sales in the United States, China and Europe but reported that every year the numbers change upward, and he urged delegates to consider when there will be price parity between electric cars and conventional cars with internal combustion engines (ICE). “That’s when you will see a shift,” he said.

Retailers should have a plan, Schram recommended. While they will still sell fuel beyond 2030, 2040 and probably 2050, retailers will begin to lose same-store fuel sales, and the losses will be incremental.

Schram highlighted his native Norway as a market where EV adoption has been rapid: It took seven years for Norway to go from almost 0% EV of new car sales to 60% in March this year. “Nobody believed that seven years ago,” he said. “Norway has proven that, when it is price parity, consumers prefer electric cars.”

Circle K Norway is now the laboratory for the whole of parent company Couche-Tard, Schram revealed. “It’s a fantastic weapon,” he said. “They have positioned Circle K as the fuel brand that is turning toward electricity. Everywhere you go now people perceive Circle K as the most progressive brand, on charging. People love the brand, and they see it as being modern and thinking about the future.”

The new positioning also opens doors to more suppliers—another bonus.

Why are fuel retailers not pushing the agenda and letting others take this space? You own it—take it.

Push and Pull

Schram presented the push and pull factors that are driving EVs. Push elements include a growing list of countries indicating target dates for banning ICE vehicles, plus stricter European Union regulations to develop zero-based-emissions technology. Car manufacturers will be penalized for excess CO₂ emissions and forced to pay 95 euros ($108) for each g/km of target exceedance. In the case of Volkswagen, Schram said that would lead to a €1 billion premium if the car maker went one gram over the target, based on the number of new cars registered per year.

Schram also highlighted Volkswagen’s new electric vehicle platform, MEB, and the automaker’s plans for eight production sites to be established by 2022. Volkswagen is investing €30 billion in the project by 2023 and aims to produce 15 million vehicles in the first wave.

Pull factors include customers’ preference for electric cars when price parity is reached, plus range and charging locations. On the former, Schram said markets like the U.S. are already close to price parity: The average price for a new vehicle in the U.S. is now more than $34,000, while Tesla’s Model 3 is available for $35,000. The range of new EV models also is improving, even though the average daily drive in the U.S. is just 45 kilometers (28 miles), meaning 87% of the country’s entire fleet could, in fact, be electric today. “Norway has proven that you can get over range anxiety,” Schram said. Still, there is a strong need for substantial charging infrastructure investments, even in Norway, where charging capacity is the biggest issue, said Schram, who encouraged retailers to step up to the plate. “Why are fuel retailers not pushing the agenda and letting others take this space?” he asked. “You own it—take it.”

Wireless and Autonomous

Schram showcased the wireless power-transfer business WiTricity and suggested future charging will be wireless, and he urged convenience retailers to get in on the act. Currently there are three barriers to charging, Schram said: driver forgetfulness, lack of standardized plugs and scarcity of charging locations. “Everyone in this room should own this business, and it’s made for women, who hate to fill up cars where there’s petrol and diesel involved but also plugs; so, when it comes to wireless charging, it’s all taken away.”

Autonomous cars also could deliver massive public benefits, exceeding $800 billion per year in the U.S., for example. In addition to saving lives by preventing crashes, autonomous cars will free up parking spaces and enable businesses to develop their real estate in other directions. Schram presented the five different levels of focus for autonomous cars: no feet, no hands, no eyes, no focus, no brain. Take note: “It’s not science fiction, it is happening,” he warned.

Chinese customers have the biggest appetite for autonomous cars, he added. They are not as skeptical and view cars in the same way as their mobile phones, each with its unique ecosystem. For this group, cars will become just another cool gadget, Schram said.

Schram presented the McKinsey Connected Car Customer Experience framework, which describes five levels of user experience in connected cars, ranging from the most basic to the highly complex, and he suggested that by 2030, 45% of global new car sales could be at level 3 or above in terms of connectivity.

Connectivity also will drive new services, such as advertising and insurance, much as the latter did in the 1920s. As with autonomous vehicles, Chinese customers versus Europeans and Americans are most ready for connected cars, Schram said.

The making of a revolution is happening within transportation.

Shared cars also are a tremendous opportunity, compared with the cost of a human-driven ICE, but they are likely to be focused on city locations versus rural areas. Again, it’s not the future, it’s now, he added. Autonomous shuttles already operate in Oslo, for example. Additionally, younger people are less concerned about owning a car. This generation accepts shared vehicles, which are about mobility, not ownership.

Bright Future

Schram said his key message is for the industry to grab the EV opportunity. “You have a bright future, if you embrace it and grab the opportunity before everybody else,” he said. “Don’t lose your focus on selling fuel—continue to develop fuel because it is cash flow, but at the same time think about EV.”

Schram pinpoints three opportunities: Circle K has decided to be the best total charging experience in town, offering workforce, on-the-go and home charging. One month ago, the retailer introduced a home-charging solution. At the same time, the retailer is focused on retaining customers via its Circle K app to promote offers such as coffee, carwash and sandwiches.

Connected cars will radically transform the car experience, transitioning a vehicle from a transport role to a space for sleeping, eating and drinking or working, etc. This will feed demand for new services, including charging and cleaning.

The number of forecourts will decline, but sites will be centered on key corridors and around cities. Schram advised operators at these sites to buy land and make the locations three times as big as they are today to create relaxation and charging hubs—where retailers could ask a premium for on-the-go charging. “There’s a fantastic opportunity to take back the cities and create urban mobility hubs,” he said.