Hybrids – Vehicles, Battery & Hydraulic Technology

How Much Green Does It Take to Go Green? Preparing & Understanding AFV Lifecycle Costs

May 2011, Green Fleet Magazine - Feature

by David Wurster

Whether it’s due to concern for the environment, America’s reliance on foreign oil, corporate mandates, or any other reason, it is important for those in the fleet industry to understand and consider alternative-fuel vehicles (AFVs) as a potential fleet vehicle. As with any business decision, the financial impact needs to be part of the decision process. To help with that process, Vincentric evaluated the lifecycle costs of the more commonly used alt-fuel choices, including E-85 (85-­percent ethanol, 15-percent gasoline),­ hybrid, diesel,­ compressed natural gas (CNG), and mainstream electric vehicles. These were evaluated with a comparable set of gasoline-powered vehicles. All comparisons assume 20,000 miles per year over three years. The results may be surprising.

The Chevrolet Silverado’s fuel costs were significantly higher when running on E-85 versus running on gasoline (nearly $4,000 over three years). Although E-85 fueling costs are lower, reduced fuel economy led to higher fuel costs.
The Chevrolet Silverado’s fuel costs were significantly higher when running on E-85 versus running on gasoline (nearly $4,000 over three years). Although E-85 fueling costs are lower, reduced fuel economy led to higher fuel costs.

E-85 May Mean Higher Fuel Costs

E-85 has been an available alternative for those concerned about America’s dependence on foreign oil. It is produced domestically from corn and other crops. An additional advantage is the reduced amount of greenhouse gas emissions it produces compared to conventional fuels. Recent pricing for E-85 across the U.S. was $2.80 per gallon versus the cost of regular grade gasoline of $3.427 per gallon.

E-85, however, is not without its disadvantages. A key drawback to E-85 is that ethanol contains less energy per volume than gasoline, resulting in reduced fuel economy for flexible fuel vehicles compared to their gasoline counterparts. In addition, some are concerned that use of a food source as fuel is not appropriate. 

In the comparison in Chart 1, the 2011 Chevrolet Silverado’s fuel costs were significantly higher when running on E-85 versus running on gasoline, resulting in an overall lifecycle cost that was about 10 percent higher for the E-85 vehicle.

The total cost of ownership (TCO) for a Toyota Prius hybrid is less than that of the Camry, but the Corolla’s lower acquisition cost caused it to have the lowest TCO of the three vehicles.
The total cost of ownership (TCO) for a Toyota Prius hybrid is less than that of the Camry, but the Corolla’s lower acquisition cost caused it to have the lowest TCO of the three vehicles.

Hybrid TCO Hovers in the Middle

The top-selling hybrid vehicle in the U.S., the Toyota Prius, has been sold in this country since 2000. By most accounts, if its form and function meet the needs of the fleet, it’s an excellent vehicle. At 51 miles per gallon, it has impressive fuel economy. However, as fleet managers know, fuel is only one component of total cost of ownership (TCO). Whether or not the hybrid is a better financial choice depends largely on what it is compared to. Keeping this comparison in the Toyota family, Chart 2 looks at lifecycle costs for the Prius versus both the Corolla and Camry.

In spite of having a Vincentric fleet price more than $6,000 greater than the Corolla, the TCO for the Prius is only $1,700 greater. Although its superior fuel economy helped close the TCO gap, the Corolla still has 7-percent TCO advantage over the Prius. On the other hand, in comparing the Prius with the Camry, it is shown that in spite of the Prius having a higher acquisition price, its TCO is actually 7 percent less than the Camry.

Although Toyota, Lexus, Honda, and Ford hybrids no longer receive tax credit, hybrid customers can still receive tax credits for purchasing hybrids from other brands. Oftentimes, these credits can help make the hybrid a financial winner.

Despite a higher purchase cost, the Mercedes-Benz 350 diesel vehicle has a 10-percent lower total cost of ownership than the gasoline-powered 350.
Despite a higher purchase cost, the Mercedes-Benz 350 diesel vehicle has a 10-percent lower total cost of ownership than the gasoline-powered 350.

More Expensive Diesel Fuel Still Results in Lower Vehicle TCO

Clean diesels have been gaining popularity among some consumers thanks to offerings from Audi, BMW, Volkswagen, and Mercedes-Benz. Additionally, the U.S. government has been helping this market segment by providing generous tax credits to diesel buyers.

The new clean diesels have much to offer: They hold their value better than gas vehicles, have good track records for durability, and burn cleaner than previous generation diesels. When these benefits are combined with tax credits, we’d expect their popularity to soar, but at this point, that would be an overstatement. The major obstacles are incorrect perceptions of clean diesels as dirty and foul-smelling, and more importantly, the price of diesel fuel in the U.S. Recent prices peg diesel fuel at $3.776 per gallon versus $3.427 per gallon for regular grade gasoline. However, the key is to identify the difference in overall lifecycle cost of diesel compared to a similar non-diesel vehicle. (See Chart 3.)

In spite of a higher Vincentric fleet price, the Mercedes-Benz E350 diesel vehicle has a 10-percent lower TCO than the ­gasoline-powered E350. This is primarily due to the stronger residual values for the E350 diesel, resulting in lower depreciation, better fuel economy that offsets the higher-priced diesel fuel, and a $1,550 tax credit from the federal government.

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