The need for LNG to power the vehicles will increase to 18 billion cubic meters, from 1.8 billion last year, Neil Beveridge, a Hong Kong-based analyst at Bernstein, said in a report Monday.
“While there are some minor government policies to encourage conversion to use LNG, we feel that one important incentive is interest-free loans for the purchase of LNG vehicles, which could be tempting given the cost savings,” Beveridge wrote.
The payback period for conversion to LNG vehicles has climbed to 16 months from one year before the government raised wellhead gas prices last month by 0.4 yuan (seven cents) per cubic meter for LNG plants, according to Beveridge.
The payback period may widen to two years if the price is increased by one yuan in a “worst-case scenario,” he said. “Before the price increase, we estimated that truck drivers would save almost 8,930 yuan per month on conversion to LNG,” said Beveridge.
“Following the latest price increase, we expect the monthly saving to have been reduced to 7,282 yuan and the payback time has been increased to 16 months.”