Key Growth Factors

of The

Turkish Autogas Market

Yağız EYÜBOĞLU

CEO, AYGAZ

WLPGA Summit, Cartagena

29 January 2014

04.02.2014 2 / 23

We have the right size to benefit from economies of scale…

Who we are ? - A Proud Member of the Koç Group

Combined Sales / GDP* 9%

* As of year-end 2012

We continuously over perform the growth rates of Turkey…

Total Exports / Turkey’s Exports* 10%

Total Share in BIST Market Cap.* 16%

5 6

3 4

5

3

5

15

17

5 6

11

9

16

1980-851985-901990-951995-002000-052005-102010-12

• Aygaz is a member of Koç Group which is the only fortune 500 company in Turkey

(ranked 217th in 2012)

• Revenues of Koç Group $ 47.326 million

04.02.2014 3 / 23

Who we are? - AYGAZ

• 10th largest industrial company of Turkey

• Leading LPG distributor with 1.7 m tons sales, USD 3.1 billion revenues

• Generic brand for LPG since its foundation 53 years ago.

• #1 in Turkey, #5 in Europe

• Leader in every segment of LPG in Turkey with highest market shares

24,4%

15,7%

12,3% 8,7% 7,2%

6,2%

3,2% 22,3%

Autogas

Other

42,7%

24,2%

15,9%

4,7% 12,5%

Cylinder

Other

04.02.2014 4 / 23

Turkey’s Global Position in Autogas

Turkish Autogas Market is;

# 1 in Europe; 27% of Europe

# 2 in the world; 11% of world consumption

0,0

1,0

2,0

3,0

4,0

5,0

SouthKorea

Turkey Russia Poland Italy Thailand Japan Australia

An

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2006 2007 2008 2009 2010 2011 2012

04.02.2014 5 / 23

0

0,5

1

1,5

2

2,5

3

1997 2002 2007 2013

Sales Volume - Autogas

0

1000

2000

3000

4000

1997 2002 2007 2013

LPG Car Park

Num

be

r o

f V

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icle

s (

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An

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s (

mill

ion

to

ns)

Steady growth since 2003

LP Gas : Most widely-used passenger car fuel since 2009

With 3,9 million cars, 4 out of 10 passenger cars run on LPG !

Largest LPG Car Park in the world (17% of the world)

High number of already converted vehicles limit the growth rate.

Significant Growth in 16 Years…

9 % 16 %

04.02.2014 6 / 23

1999 2013 E

Autogas

2.7 million tons (%74)

Bulk

0,1 million tons (%3)

Autogas

0,4 million tons (%11)

Bulk

0,9 million tons (%27)

X 7

Total

3,4 million tons

Total

3,7 million tons

Cylinder

0,8 million tons (%23)

Cylinder

2,2 million tons (%63)

Market Dominance is Shifting from Cylinder to Autogas

04.02.2014 7 / 23

Why is Turkey so Successful in Autogas ?

Competitive Price

Wide Distribution Network

Product Quality and Image

Reliable Conversion Network

Availability of OEM Cars

Legislation of Supportive Laws

04.02.2014 8 / 23

Taxes on Fuels Deeply Impact the Growth of Car Park

• Autogas / Gasoline price ratio and net economic advantage of LPG is the most

important factor for growth.

• Currently the net price advantage against gasoline is ((1.76/1.05)/1.3 -1) = 29 %

DIESEL Pump

price (€/lt)

Tax

Ratio

U. Kingdom 1,69 56%

Sweden 1,62 55%

Italy 1,68 54%

Turkey 1,65 51%

Finland 1,50 51%

Ireland 1,50 51%

Denmark 1,55 49%

Slovenia 1,42 48%

Hungary 1,44 48%

Czech R. 1,42 48%

GASOLINE Pump

price (€/lt)

Tax

Ratio

Turkey 1,76 61%

Finland 1,64 59%

Netherlands 1,80 59%

Sweden 1,60 59%

U. Kingdom 1,64 58%

Italy 1,81 58%

Greece 1,73 57%

Germany 1,64 56%

Belgium 1,61 56%

Ireland 1,60 55%

LPG Pump

price (€/lt)

Total Tax

(€/lt) Tax Ratio

Turkey 1,05 0,49 47%

Denmark 1,23 0,51 42%

Lithuania 0,71 0,28 42%

U. Kingdom 1,03 0,34 40%

Hungary 0,85 0,31 37%

Poland 0,65 0,22 37%

Italy 0,76 0,28 36%

Bulgaria 0,63 0,20 31%

Latvia 0,72 0,16 30%

Slovakia 0,69 0,22 30%

*As of September 2013

04.02.2014 9 / 23

Price is the Main Motivator!

History tells us; the pump price of LPG should not be more than

65 % of gasoline in order to achieve healthy growth

04.02.2014 10 / 23

Why is Turkey so Successful in Autogas ?

Competitive Price

Wide Distribution Network

Product Quality and Image

Reliable Conversion Network

Availability of OEM Cars

Legislation of Supportive Laws

04.02.2014 11 / 23

• 10.000 LPG stations (77% of gas stations)

• Aygaz has the widest station network (1500 stations)

Wide Distribution Network Favors The Growth

04.02.2014 12 / 23

Why is Turkey so Successful in Autogas ?

Competitive Price

Wide Distribution Network

Product Quality and Image

Reliable Conversion Network

Availability of OEM Cars

Legislation of Supportive Laws

04.02.2014 13 / 23

• In the beginning, autogas was perceived as an inferior, unsafe and low

performance fuel in the minds of consumers.

It took several years with extensive communication to change this image.

2,85

3,59

2,47

3,69 3,93 3,9

3,33

3,92 4,07 4,15

3,71

4,18

3,79

4,25

3,57 3,77

4,4 4,44 4,25 4,32

4,47 4,47 4,37 4,46

Autogas is safe Autogas is environment-friendly

Autogas provides highperformance

I use it without any doubt

Perception Scores of Customers (Out of 5)

May-05 December-07 February-08 July-09 July-10 October-10

Solving The Image Problem

04.02.2014 14 / 23

We have solved the image problem!

Aygaz continously improved and differentiated its product.

2001 – First product complying with EN 589

2004 – First product special to winter conditions

2009 – 2010 First product with additives and Enhanced Formula

Product Quality and Image

04.02.2014 15 / 23

Why is Turkey so Successful in Autogas ?

Competitive Price

Wide Distribution Network

Product Quality and Image

Reliable Conversion Network

Availability of OEM Cars

Legislation of Supportive Laws

04.02.2014 16 / 23

The first contact point for LPG customers!

Quality of the conversion directly affects consumers experience.

Perception of those facilities is critical for market growth.

In Turkey: 1.000 registered conversion centers.

Reliable Conversion Network

04.02.2014 17 / 23

Why is Turkey so Successful in Autogas ?

Competitive Price

Wide Distribution Network

Product Quality and Image

Reliable Conversion Network

Availability of OEM Cars

Legislation of Supportive Laws

04.02.2014 18 / 23

Availability of OEM Cars

• 50% of the customers first decide on the brand, then decide on the engine.

• Availability of OEM LPG cars will also significantly impact customer perception.

Hyundai Fiat Chevrolet Dacia

04.02.2014 19 / 23

Why is Turkey so Successful in Autogas ?

Competitive Price

Wide Distribution Network

Product Quality and Image

Reliable Conversion Network

Availability of OEM Cars

Legislation of Supportive Laws

04.02.2014 20 / 23

Legal Support and Lobbying Efforts are Important

LPG has a dedicated law which defines the

operations and market environment in Turkey.

EMRA regulates the market.

I’ll switch to autogas if the

restriction is lifted

The main obstacle that is preventing further

development of the market is the ban of

underground parking.

It is expected to be lifted in 2014.

10% of petrol car users :

04.02.2014 21 / 23

As a Summary…

Conversion Network

Distribution Network

Price

OEM Car Production

Legislation

Product Quality &

Image

For a healthy autogas market we need a combination of all these :

Sustainable Communication

04.02.2014 22 / 23

Before Ending…

04.02.2014 23 / 23

Thank You!