Icom expects to fuel growth through propane conversion
The University of South Carolina Upstate has partnered with Blossman Gas to lease two propane.
Icom North America L.L.C.'s CEO expects to double revenue this year to at least $16.5 million, driven by the New Hudson-based company's new aftermarket sales strategy to convert fleets of gas-powered vehicles to its liquefied propane fuel system.
Targeting vehicle fleets for aftermarket sales is part of a broader strategy at Icom to increase business in North America.
About 80 percent of the propane fuel system components will be manufactured locally in the coming years, half of that at Icom and half sourced to suppliers. Components are currently manufactured by Icom's parent company, Icom S.p.A., in Italy.
CEO Ralph Perpetuini said the company, which posted about $8 million in revenue last year, is already in talks with municipal departments, utilities and companies to convert gasoline-fueled vehicle fleets to Icom's bi-fuel system, which enables vehicles to be fueled by either gasoline or propane.
Icom is also building a distribution network throughout the U.S. that will install the systems to convert fleets that buy Icom's conversion kits.
The system is new to the U.S. market, but Icom's global operation, which posted revenue of about $50 million in 2008, has already supplied the system to about 100,000 vehicles worldwide.
“The fleets are really interested in using the propane system on their vehicles because of the convenience,” Perpetuini said, adding that propane is less expensive than gasoline for fleet owners.
Since its 15-employee operation opened in the spring of 2008, Icom North America has supplied liquid propane conversion systems consisting of patented liquid propane fuel tanks, pumps, lines and injectors ? to Livonia-based Roush Industries Inc. and Georgetown, Texas-based CleanFuel USA.
Those companies integrate and install the fuel systems on vehicle engines and market the propane systems to customers.
Roush uses Icom's sub-system to convert a series of Ford Motor Co. trucks like the F-150 pickup and other heavy-duty trucks to propane, which Roush then markets for sale.
He said the company is on track to increase sales to Blue Bird, Roush and Clean Fuel by $2.5 million in 2010.
There are about 5,000 vehicles in the U.S. on the road using Icom's liquefied propane system, and Perpetuini expects to convert 1,500 to 2,000 fleet vehicles by year's end.
The national average cost per gallon of propane was $2.69 per gallon while regular gasoline cost an average of $2.64 per gallon, according to the Clean Cities Alternative Fuel Price Report from October 2009, the most recent report available.
Clean Cities is an industry-government coalition that includes the U.S. Department of Energy and more than 80 companies to promote clean technology.
Don Hillebrand, director of the Center for Transportation Research at the Argonne National Lab in Illinois, notes that a gallon of propane has less energy content than a gallon of gas.
The federal rebate on the price of fuel also expired at the end of 2009, making the cost at the pump higher now than just a few months ago, without the tax credits.
But that's what a consumer would pay, and Venezio noted that fleet owners generally pay about $1.50 to $1.80 per gallon of propane, about 30 percent to 40 percent less than the cost of gasoline for fleets, he said.
Fleet owners can also receive federal tax credits of 50 percent of the cost of installing propane fuel systems for passenger vehicles and light trucks.
Heavy duty vehicles, like the Blue Bird school bus, are eligible for an 80 percent federal tax credit for the conversion cost, which is about $14,000 per vehicle.
About 22,300 liquefied propane vehicles were on American roads in 2008, or roughly 13 percent of alternative fuel vehicles, according to a 2009 presentation by Clean Cities.
That number could grow by 10 percent ? 15 percent annually from 2012 to 2020, the report said ? by targeting niche markets and pursuing other strategies like extending tax credits to lower the cost of the fuel and the cost to convert vehicles to propane.
Icom is pursuing what the Clean Cities report called a key part of that growth, targeting fleets of school buses, taxis and police vehicles.
Perpetuini said his operation is beginning to develop fuel systems for Ford's 4.6-liter V-8 engine, which powers the Crown Victoria sedan, which is popular with fleet owners and commonly powers police cruisers and taxi cabs.
“That's probably the better market for LPG,” Tim Standke, director of automotive operations for Santa Ana, Calif.-based Impco Technologies Inc., said of targeting fleet sales by designing a 4.6 liter V8 engine conversion system.
The market for propane fueled vehicles is only now starting to truly emerge, he said, and fleets can achieve a number of benefits from converting to propane.
“The biggest advantage is that they're going to save money” with propane compared with the cost of gasoline, Standke said. Another benefit is that nobody can steal a fleet's fuel supply.
“In areas where you just plain run out of LPG, you can run on gas until you get to a station,” he said.
Roland Kibler, manager of technology development at Detroit-based NextEnergy, said it's unclear if propane-fueled vehicles will take off.
Kibler also downplayed claims that propane systems reduce engine maintenance costs because propane is a cleaner-burning fuel.
“The fuel is a little bit cleaner in terms of exhaust emissions, but I don't know if that would be a huge differentiation issue for the fleet managers,” he said.
- Ryan Beene
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