Alternative Cars

Alternative Cars for Lotus Rental Car Company Team A Mazi, Dutch, Amanda, John University of Phoenix Comm/215 Dawn Foster March 9, 2005

Alternative Cars Alternative Cars for Lotus Rental Car Company The benefits realized from adding alternative fuel vehicles (AFVs) to the Lotus Rental Car Companys fleet are numerous both to the environment and its economic growth. Research shows several benefits to purchasing or leasing AFVs, as well as

displaying to the community benefits that would follow such a bold undertaking. There could be health benefits, financial gain, and the respect of the communities in which your satellite facilities operate. The benefits of conversion to alternative fuel, or the purchase of electric cars will be observed by many companies in the present and the future. Since the Industrial Revolution, human beings have depended on using energy to fuel their economies and to make their lives easier. Regrettably in doing so, there have been numerous unexpected environmental and physical side effects. With the cost of fuel rising, alternative fuel vehicles are becoming more attractive to the public. After thorough research, it is determined that the Lotus Rental Car Company should invest in the purchase of a small fleet of alternative fuel vehicles. The Lotus Rental Car Company can reduce their expenses and increase their customer base by adding alternative fuel vehicles to their stock. To operate at a higher efficiency with less spending, alternative types of energy are being sought after for use. For the last few decades, there has been a drastic search for alternative fuels to operate automobiles. This research began from governmental concerns with the levels of carbon dioxide and other greenhouse gases that have increased in the atmosphere, which may lead to global warming and the damage of many ecosystems. The electric car cuts carbon dioxide by 63 percent, fulfilling our nation's

Alternative Cars pledge under the International Climate Change Convention to reduce greenhouse gases and the risk of global warming(Benson, 1999, para. 4).

Alternative fuels, as defined by the Energy Policy Act of 1992 (EPAct), include ethanol, natural gas, propane, hydrogen, biodiesel, electricity, methanol, and p-series fuels. Using these alternative fuels in vehicles can generally reduce harmful pollutants and exhaust emissions. In addition, most of these fuels can be domestically produced and derived from renewable sources (Alternative Fuels Data Center, 2005). One of the most focused areas for alternative measures in automotive fuel is that of electric vehicles. While some have interest in these vehicles, many of the vehicles do not meet the needs for most people. For example, the electric version of Toyota's RAV4 has a stated range of 126 miles, which is one disadvantage. The typical person in America only drives an average of 27 miles a day, which would be fine for an electric vehicle. However, when one needs to run errands or wants to take a weekend trip out of town, an electric vehicle might not suit many customers needs. Reduced acceleration is another downside to this particular product. The use of electric vehicles in the rental industry is setting the stage for the popular trend as well as being environmentally supportive for the future. For the majority of the rentals, the electric car would suffice a lessee who is commuting within the city. This is just another reason why the use of electric cars would be beneficial to the Lotus Rental Car Company. Electric vehicles emit no harmful gases such as carbon monoxide, which makes them environmentally friendly.

Alternative Cars The good news about electric vehicles to our environment is their lack of emissions and omitted gasoline. The benefits of electric powered cars to the environment are enormous. Electric cars cut air pollution (volatile organic compounds, nitrogen oxides, and carbon monoxide) by 97 percent compared to a gas car (Benson,

1999, para.2). The electric motor is powered by a system of batteries inside the car which need to be recharged frequently. Driving an electric car will result in a 95 percent decrease in pollution compared to a conventional modern car. With no fuel injectors, exhaust systems, or radiators, fewer repairs are needed because there is no internal combustion engine in an electric car. Companies and communities are realizing the dangers associated with gasoline powered automobiles. Meyer suggests the following: The principal source of carbon monoxide in outdoor air is motor vehicle emissions. Outdoor concentrations of carbon monoxide vary depending on how and where and when the gas is produced. For example, in urban areas, carbon monoxide levels are greatest in downtown areas where motor vehicle density is high, during peak commuting times, and in the passenger compartments of motor vehicles (2003, para.13). Carbon Monoxide (CO) is becoming a serious health risk as levels rise in cities across the country. CO exposure can cause permanent damage to the nervous system. At lower concentrations CO is still harmful, particularly for people with heart disease. In some areas, cars and trucks can create enough CO to cause health risks outdoors (American Council for an Energy-Efficient Economy, 2003, para.13). CO is particularly concerning when it comes to outdoor activities such as running, bicycling, or children at play. Carbon monoxide interferes with the ability of the blood to carry oxygen to tissues; the most sensitive of these tissues are in the heart and brain. The health effects of

Alternative Cars carbon monoxide poisoning range from impaired mental alertness and performance, headaches, nausea, fatigue, and dizziness to coma and death (Meyer, 2003, para. 13). Large amounts of CO are produced when a vehicles engine is started and cold. Poorly designed and malfunctioning engines and emission controls systems are also

responsible for excess CO pollution. Motor vehicles are responsible for about 60 percent of CO emissions nationwide (American Council for an Energy-Efficient Economy, 2003, para. 13). Another form of an alternative power is propane-powered vehicles. Propane, or Liquefied Petroleum Gas, is a by-product of natural gas processing and petroleum refining. When in use, it emits far less pollution than regular gas, and there is plenty of it accessible here in the U.S. Propane vehicles get about the same mileage as conventional cars, and propane is actually less expensive than regular gas. There are over 10,000 propane filling stations throughout the U.S. and Canada. Lotus Car Rental Company can increase its market share by meeting the financial needs of its customers. Since fuel prices have been high, many areas have faced up to $2 or 3 per gallon. The average business and vacation traveler can benefit from the increased fuel mileage that a hybrid vehicle offers. Toyota claims that their hybrid vehicle can gain 55 miles per gallon; that is over 650 miles per tank (Ford, 2004). With the alternative fuel vehicles added to their fleet, Lotus customers will reduce their fuel costs during the term of their rental and Lotus can advertise the low fuel costs as part of the overall value of renting. This exciting market with few competitors could be developed to educate the consumers about the savings that a fuel-efficient hybrid vehicle from Lotus could give

Alternative Cars

them. Interest in such vehicles is increasing. With proper marketing, Lotus could attract more people interested in paying less for their fuel as well as being one the first individuals to drive an AFV. The fuel savings will be passed on directly to our customers, as the customer is responsible for all fuel charges during the rental period. The Lotus Rental Car Company will be able to demonstrate, in its advertising campaign, that the total cost to rent a hybrid vehicle from Lotus will be less than from its competition. According to the Internet, the Honda Civic Hybrid: Fuel availability is not a problem and range is good in this four-door hybrid electric sedan, Price: $20,000. The Toyota Prius: at 51/60 miles per gallon city/highway, this hybrid electric vehicle is the most fuelefficient passenger car sold in America, Price: $20,000. The Ford Taurus Methanol Flexible Fueled Vehicle: This four door runs on a blend of 85% methanol and 15% unleaded gasoline. It can also run exclusively on gasoline when methanol-refueling options are limited, Price: $19,000. Ford Crown Victoria: This natural gas sedan comes equipped with a 4.6-Liter overhand cam Sequential Electronic Fuel Injection V8 engine and has a driving range of approximately 240 miles, Price, $29,000 (www.pricequotes.com). If two of these are purchased at the three locations mentioned, the initial cost to the company would be approximately $174,000. With a $2000 tax deduction for each hybrid purchased, that would take the price down to $162,000. Whether any discounts may be available through any special deals with dealers or the manufacturer is yet to be determined. Assuming that maintenance costs would be no higher and very possibly may be lower than the equivalent gasoline powered vehicles, and adding $100,000 for

Alternative Cars

marketing and $5,000 for the education of personnel in the operation of the vehicle and any special policies that surround it, the initial investment comes out to be approximately $265,000. In 1996, President Clinton signed into legislation an executive order which requires federal agencies to incorporate AFVs into their respective fleets rotation. Further, metropolitan areas with populations surpassing 250,000 were offered financial compensation for the lease or purchase of electric vehicles specifically. In addition, most state governments offer tax exemptions for private companies who incorporate AFVs into their fleets. Initially the cost of converting Lotus Car Companys entire fleet could prove to be financially impossible, but by converting one city or region at a time based on availability of refueling stations could yield an effective approach to ultimately converting its entire fleet. State tax breaks coupled with federal incentives could greatly offset the initial cost of purchasing, leasing or converting to AFVs (Ward, 1998, p.3-9). Both federal and state governments offer incentives in the form of tax exemptions and other compensations to private companies who incorporate the use of AFVs as a functional part of their business vehicle fleet. For example, the Alabama Department of Economic and Community Affairs will contribute up to $25,000 to a company who converts its vehicle fleet to that of alternative fuel consumption. Many other states offer rebates to individuals who purchase AFVs or convert gasoline powered vehicles to AFVs. California offers between $1,000 and $1,500 in rebates for the purchase of certified ultra-low emissions vehicles. Colorado not only offers between $1,500 and $6,000 per AFV, it also offers a 50% state tax credit (Ward, 1998, p.6-8).

Alternative Cars

By studying which states currently offer rebates, tax exemptions, and tax credits, the Lotus Car Company can effectively pinpoint which regions offer the best cost-tosavings ratio. Air quality problems and recent tensions in the Middle East have brought AFVs back to the local government front burner. Finding the money to pay for them is the next big step (Ward, 1998). Through tax credits, grants, and lower annual fuel bills, the Lotus Car Company can set the standard for reducing the pollution its fleet causes, while effectively lowering its annual fuel bills. Lotus is venturing into largely uncharted territory, but this investment, if planned strategically, can be very fruitful. Petroleum is not getting cheaper or more plentiful. The trend must be in the direction of alternative fuel vehicles. To be a leader in the car rental business, taking a chance could prove to be much more than a small financial investment. With precise timing, this competitive business venturing on this new playing field could very well give the Lotus Rental Car Company an advantage over its competition for years to come.

Alternative Cars References Alternative Fuels Data Center. (2005). Fuels. Retrieved February 21, 2005, from http://www.eere.energy.gov/afdc/altfuel/altfuels.html American Council for an Energy-Efficient Economy.(2003). Automobiles Cause Air

Pollution. Retrieved February 23, 2005 from the University of Phoenix Opposing Viewpoints Resource Center (para. 23). Benson, R. W. (1999). Electric Cars Reduce Air Pollution. Conserving the Environment. Retrieved February 23, 2005 from the University of Phoenix Opposing Viewpoints Resource Center. Ford, R. (2005, February 24).Toyota can't keep up with the hybrid demand. Boston Globe, Retrieved on February 21, 2005 from http://www.carsdirect.com/research/ford/taurus/2002/lx_ffv_standard/features Johnstone, B. Research & Innovation: Stepping on the Gas. Far Eastern Economic Review, 90 Meyer, P. (2003). Air Pollution Threatens Human Health. Every Breath We Take, Retrieved February 23, 2005 from the University of Phoenix Opposing Viewpoints Resource Center.

Pyle, J. (1993, May). Low Cost Coating Stands Up to Alternative Fuels. Applied Science and Technology, 77-79 Ward, J. (1998, March). Financing your AFV fleet. American City & County, 113(3), 3-9. Retrieved February 21, 2005 from InfoTrac OneFile database.