Alternative Fuel Vehicles to Lower TCO for Fleet Managers: Pike Research

Taipei, May 4, 2012 (CENS)--Alternative fuel vehicles might offer fleet operators lower total cost of ownership (TCO), helping the operators against future fuel price shocks, according to Pike Research.

In a recent report released by the market research and consulting firm, many fleet managers in North America and Europe are facing increasing pressures to "green" their fleet operations, while budgetary pressures are driving them to look at new ways to reduce costs, including cutting fuel consumption and maintenance.

One way to achieve these goals is by switching from conventional gasoline or diesel vehicles to alternative fuels and propulsion systems. Fleet operators have a wide range of alternative vehicle options available to them, including battery electric, hybrid electric, plug-in hybrid, fuel cell, compressed natural gas (CNG), and other models, all of which offer different emissions, operational, and cost characteristics.

While these alternative fuel vehicles carry an up-front cost premium (and can require additional infrastructure investments), the TCO over the lifetime of the vehicle can be lower than conventional internal combustion engine (ICE) vehicles. According to a new report from Pike Research, the lowest alternative fuel option for fleet operators in the United States is the battery electric vehicle, assuming that the operator is able to claim the US$7,500 federal tax credit.

"Mid-size hybrid, plug-in hybrid, and battery electric will have a lower TCO over a vehicle lifespan of 120,000 miles, but not at mileage levels that are well under that figure," said senior analyst Lisa Jerram. "With US$3.50 per-gallon gasoline, alternative fuel vehicles will provide payback in fleets that do a lot of driving. As gas prices continue to rise over US$4, the equation will tilt further toward options like hybrids and plug-ins that reduce gasoline usage."

Pike Research's TCO analysis also reveals the benefits of moving to a smaller vehicle, no matter the fuel type. The lowest TCO vehicles are the compact options, whether hybrid, gasoline, or CNG. The compact battery electric vehicle (BEV) and hybrid electric vehicle (HEV) models have lower TCOs than the small gasoline model, while the plug-in hybrid, mid-size HEV, diesel and CNG all have lower TCO than the mid-sized gasoline sedan.

By comparison, flexible fuel vehicles (FFVs, which are specially designed to run on gasoline or any blend of up to 85% ethanol) and stop-start vehicles are unlikely to pay off their higher sticker prices. This is primarily because there is limited number of models available and these are in the higher price range of their vehicle segment, Pike Research said.