EVs face growing threat from cheap autogas

From the newsletter

Nigerian energy firm Tetracore has commissioned the second Compressed Natural Gas (CNG) refuelling unit at a Dangote Cement factory. The Dangote Group has converted 4,000 diesel trucks to use CNG and plans to convert an additional 6,000 trucks. Autogas is helping motorists in Africa cut their fuel costs by about half, potentially slowing down EV sales.    

• CNG is an especially attractive choice for motorists in countries that have it in abundance such as Egypt, Nigeria, Tanzania, Algeria and Mozambique. Many thousands of fuel vehicles in Africa are being converted annually to run on CNG. In countries without CNG, vehicles are being retrofitted to run on LPG (Liquefied Petroleum Gas), also saving motorists up to 50% in fuel costs.  

• Autogas is a viable and affordable alternative for motorists not yet ready to switch to electric, particularly where charging infrastructure is not fully developed.

More details

• Nigeria has one of the highest fleets of CNG vehicles in Africa, totaling more than 100,000. Nigerian President Bola Tinubu seeks to utilize the country’s abundance of natural gas to increase the number of vehicles that use CNG to 1 million by 2027. Through a presidential initiative, the West African country is already deploying 5,500 CNG buses along major transit corridors.

• Egypt also has one of the largest CNG fleets in Africa, boasting over 643,000 CNG vehicles, with the government aiming to convert a further 165,000 vehicles in the 2025/26 fiscal year. Like Nigeria, the North African country is actively expanding its CNG infrastructure, adding new fueling stations and dual-fuel conversion centers. 

• It is however Algeria that leads in the number of Autogas vehicles on the continent. The country has more than 1 million that run on either CNG or LPG. Other countries like Tanzania and Mozambique, which have significant natural gas reserves, also have thousands of vehicles that have been converted to run on CNG.

• The main reason why CNG is cheaper than traditional fuels in Africa is because it's often domestically sourced from abundant natural gas reserves, reducing reliance on costly imports and strengthening local economies. In Nigeria for instance, a kilogramme of diesel costs about ₦1654 ($1.07), while CNG costs only around ₦230 ($0.15) per kilogramme.

• In countries that lack natural gas like Kenya, LPG is the main alternative to petrol and diesel. There are an estimated 20,000 vehicles in Kenya that use LPG, and this number is growing rapidly. One of Kenya’s leading LPG companies, Proto Energy, seeks to establish a wide network of Autogas filling stations across the country to meet growing demand.

• Some factors favour the viability of autogas as the preferred alternative to fuel vehicles. In Kenya for instance, the government has waived the majority of taxes on LPG to encourage adoption, making it way cheaper than fuel. Should these taxes be reintroduced, the cost savings would be way less, thus discouraging the use of LPG to power vehicles.

• Autogas also comes with some disadvantages. Retrofitting requires large tanks to store the gas, while it poses risks related to flammability, potential for explosions, and health effects from exposure. These risks can however be minimized with proper handling, storage, and ventilation.

• In the long term, EVs are likely to prevail as prices continue to decline and charging infrastructure grows. Another advantage of EVs is that they are increasingly software-defined. This means that their functionality and features are primarily controlled and updated through software rather than solely relying on hardware, giving motorists a better user experience. They also do not have carbon emissions.  

Our take

• Given the significant cost savings and government initiatives, the conversion of petrol and diesel vehicles to CNG and LPG is likely to accelerate across Africa, particularly in countries with abundant natural gas reserves or supportive policies. This will further solidify autogas as a dominant alternative fuel in the short to medium term. 

• To meet the growing demand for CNG and LPG vehicles, further investment in autogas fueling stations and conversion centers across Africa is expected, especially from the private sector. This infrastructure development will be crucial for sustaining the growth of autogas use. 

• The affordability and established infrastructure of autogas, coupled with the currently underdeveloped EV charging infrastructure in many African nations, will likely continue to slow down the widespread adoption of EVs on the continent. EV sales may remain modest until significant advancements in charging networks and further price reductions occur.