Formosa Petrochemical Corp (台塑石化) is making further inroads into the domestic oil market by offering steep discounts on the wholesale price of petrol and diesel sold to service stations that ditch their old supplier, the state-run Chinese Petroleum Corp (中油).
Formosa, which entered the domestic retail oil market last September and supplies 435 gas stations around the country, reportedly offered wholesale discounts of over 2 percent to the National Petroleum Corp (全國加油站).
National, in turn, has reportedly been offering discounts of around 1 percent to stations supplied by Chinese Petroleum that join its chain of 53-stations nationwide.
Previously the maximum dis-count offered on gasoline or diesel by either Chinese Petroleum of Formosa to gas stations was 0.22 percent.
Formosa has also taken its aggressive sales tactics one step further and reportedly offered discounts of around 1 percent to customers who purchase large amounts of diesel directly from the company like the United Bus Co (統聯客運).
From this month, United will buy diesel exclusively from Formosa to fuel its long-haul buses.
Executives from Formosa and National were not available for comment, yesterday. However, Dai Wen-yan (
Although Chinese Petroleum has seen Formosa take a 25-percent chunk out of its domestic retail market since last year, Dai said his company would not likely match the size of their opponent's discounts, but would consider "some adjustment over 1 percent." Indeed since its over 50-year monopoly over the nation's oil market was broken by Formosa last September, Chinese Petroleum, which supplies 1,025 gas stations and directly operates another 605, has employed a totally reactive game plan in engaging its new competition.
"We're playing a defensive game -- Formosa is on the offensive," Dai said.
"We won't make any `first moves,' but we will instead wait for our competition to act and then consider our response," he said.
Formosa has recently clobbered the lumbering Chinese Petroleum on a number of sales and pricing moves.
Formosa started off by undercutting of Chinese Petroleum at the pumps last year in one of the first price adjustments after the retail market liberalized.
Another was Formosa beating Chinese Petroleum to the mark by three weeks in offering a big money nationwide giveaway promotion that station managers said at the time significantly increased their daily sales volume.
However, the biggest upset for Chinese Petroleum was National Petroleum's decision earlier this month to switch to Formosa for the supply of its gasoline and diesel.
Chinese Petroleum is still appealing National Petroluem's decision before the Cabinet's Fair Trade Commission for breach of contract despite receiving a payout of around NT$15.9 million from National.
Dai said National fulfilled its contractual agreement, which obligated them to pay NT$300,000 per station if it prematurely cancelled its contract with Chinese Petroleum. The contract was due to expire in October.
One area in which Chinese Petroleum maintains its dominance is a lucrative lock on supplying motorists along the north-south Chung Shan Freeway via its 17 stations dotted along the road.
But Dai fears this dominance may soon end as the 5-year lease Chinese Petroleum has on these stations will expire in two years, providing Formosa with another opportunity of realizing its goal of achieving a 50-50 split of the market.
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