Petrol Stations to Launch Large-Scale Sales Promotion Again?
In recent years, the competition in China’s gasoline and diesel retail market continued intensifying because of high profits. In order to seize market shares, petrol stations often carried out sales events to promote sales. In Q2 and Q3, 2019, the sales promotions at petrol stations became national wide, and the price cut at some petrol stations even reached RMB 2.5/L.
However, from the beginning of 2020, few petrol stations carried out sales promotions. SCI reckons that there two reasons leading to that. First, due to the breakout of the COVID-19 issue, China’s refined oil consumption volume in Q1, 2020 slumped, and the sales volume at most petrol stations declined by around 50%. Though in Q2, 2020, China’s refined oil consumption volume continued reviving, most petrol stations were unwilling to cut their prices, because they wanted to maintain high profits to offset their loss in Q1, 2020. Second, the international crude oil prices dropped to low levels in Q1, 2020, while in China, curbed by the price floor, the National Development and Reform Commission maintained the retail ceiling prices of gasoline and diesel unchanged from March 17 for a long period. Therefore, petrol stations were reluctant to carry out sales promotions.
Recently, SCI learned that some petrol stations began to carry out sales promotions. For instance, a few petrol stations in East China cut their prices of 92Ron gasoline by RMB 1.2/L. However, SCI found that the number of the petrol stations that carried out sales promotions were limited, and among those limited petrol stations, the mainstream price cut was only RMB 0.3-0.5/L. Moreover, most of these petrol stations were private petrol stations, and only a few state-owned petrol stations carried out sales promotions via their online APP.
According to SCI’s statistics, up to July 31, the price spread between 92Ron gasoline wholesale prices and retail prices at state-owned refineries was RMB 1,698/mt, and the price spread between 0# diesel wholesale prices and retail prices at state-owned refineries was RMB 740/mt. Meanwhile, the price spread between 92Ron gasoline wholesale prices and retail prices at Shandong independent refineries was RMB 2,152/mt, and the price spread between 0# diesel wholesale prices and retail prices at state-owned refineries was RMB 1,335/mt. Accordingly, the overall price spread between refined oil wholesale and retail prices was at a relatively high level, and petrol stations were capable of carrying out sales promotions.
SCI reckons that in the short term, the future wholesale prices of refined oil in China will not increase to and stay at high levels, and the overall wholesale market may get stuck in a stalemate. Therefore, participants are likely to focus on the refined oil retail market, resulting in fiercer competition in the refined oil retails. Carrying out sales promotion is an effect method to seize market shares, but the profits at petrol stations will drop. Therefore, the sales promotion will not exist for a long period. Nonetheless, considering the serious refined oil oversupply, some petrol stations may frequently carry out sales promotions in spite of profit decrease.
