Enter the dragons

2012 could be a lucky year for this pair of auto gas conversion entrepreneurs.

A strong brand is valuable in most industries, but not many people believe this to be an important issue for automobile gas conversion kits despite the number of outlets offering installation spiralling.

Surasak and Surachai Nittiwat, the twin presidents of Energy Reform Co, think creating a strong brand in the auto gas conversion business will lead to customer loyalty.

But Surasak and Surachai Nittiwat, the twin presidents of Energy Reform Co Ltd, think differently. Perhaps this is the main reason this company has become the top brand in the mind of customers in Thailand.

"It [the brand] is the asset with high added value. We need to build a brand that is recognised by the customers. Otherwise, newcomers will be able to take our market share," said Mr Surasak.

But brand-building over the past seven years was not an easy task for the company to grab its current lead position. Word of mouth has mainly helped to establish Energy Reform in the mind of new customers.

"More than half of our new customers came to know the company through word of mouth, especially our safety standards and service quality, although the price is slightly more than our competitors," said Mr Surachai.

The 36-year-old twins entered the conversion kit business in 2005 after retail oil price rose quickly from 22 baht a litre to 26-27 baht a year ago. The government during that period decided to promote compressed natural gas (CNG) and liquefied petroleum gas (LPG) as alternative fuels while the oil price was unlikely to go down. During that year, the government spent nearly 90 billion baht on fuel subsidies.

Given such circumstances, the twins begun to search for the best CNG conversion kit technology available and found that Italian brands were accepted the most in the energy and automotive sectors.

Initially, they started by importing Italian products to distribute at outlets owned by other operators and competed with brands from China and Japan. At first, the business grew slowly due to the fact that the infrastructure and most gas outlets were operated by PTT Plc.

While waiting for the number of gas outlets and transmission lines to expand, there were a number of gas explosion cases and fires occurred almost every month because motorists rushed to installed conversion kits of both CNG and LPG systems. As a result, there were almost 100 conversion kit installation operators over a period of just two or three years, and they provided different grades of products from various sources.

"The market was turbulent from 2006-08. Many people wanted to installed auto gas systems when the oil price was so high but at the same time were afraid of explosions, fire or damage to the car engine," they recalled.

Most important for ensuring customers' confidence is good-quality products and services provided by skilled technicians. They concluded that premium products were all made in Italy.

"Compared to China and India, we concluded Thai consumers will have no doubt about quality if our product is made in Italy," said Mr Surachai.

"The company also offers a two-year guarantee with a sum of 200,000 baht. If the car engine breaks as a result of Energy Reform's conversion kit installed at our outlets, it will return the full amount they paid to us."

Last month, Energy Reform launched a new product called Energy 4.0, which can use regular petrol and both LPG and CNG. This is suitable for hybrid cars, helping to save as much as 6,000 baht a month on fuel expenses.

At present, 1 million cars are equipped with conversion kits, 200,000 units of which use Energy Reform products, meaning it has 20% market share.

Although the government plans to float LPG and LNG prices to reflect actual global prices, Mr Surasak said this sector will face only a limited impact as the price of gas is still cheaper than that of petrol.

LPG price will increase by 40.4% from 11.54 baht a litre to 16.20 baht, while will CNG rise 37.4% from 10.55 baht a kilogramme to 14.50 baht.

"The auto gas installation kit market will continue to grow substantially over the next five years. This gives us enough time to build our brand in mind of the Thai customers," he said.

In the past, Mr Surasak used to sell Lexus cars, while Mr Surachai was a lawyer with a British consultant firm. Both quit their jobs in order to operate their own company full-time.

Mr Surasak said the auto fuel kit market is expected to grow by 20% a year, and the company plans to open 20 outlets nationwide this year, aiming for 200 outlets by 2014.

On average, 17,000 cars installed the conversion kits each month from January-August this year compared with 7,000 a month in 2008.

Because the twins were born under the sign of the Dragon in the Chinese horoscope, the company's employees believe Energy Reform will be a success in 2012, the Year of the Golden Dragon.

About the author

columnist
Writer: Yuthana Praiwan
Position: Business Reporter