As fleet managers strive to find the lowest operating cost of their fleet, identifying opportunities to keep fuel expenses in line with projected budgets becomes difficult. With average national fuel prices fluctuating and in some cases projected to be greater than $3.50, it’s necessary for those who are in charge of fleet operations to create a strategy now to offset high fuel costs in the future.

The EPA states that driver behavior contributes to as much as 33% of a vehicle’s fuel economy. Driver behavior training in combination with telematics and GPS reporting provide the “one-two punch” that can reap the best benefits right now to reduce mileage consumption, increase productivity, and increase efficiency while reducing fuel consumption and spend. Some telematics devices can be easily installed into your existing vehicles, and training your drivers is perhaps the most cost-effective, short-term solution. Programs such as GreenDriver® and DriverPoint™ Telematics can help address these issues.

Optimizing your vehicle selection can lead to the most dramatic increase in overall fleet fuel economy and therefore reduction in fuel costs. Without jeopardizing business application, ensure your drivers are utilizing the most efficient vehicle to meet their job responsibilities. For instance, consider switching from a sport utility vehicle to an intermediate sedan. And while less dramatic a change, rightsizing a V6 cylinder vehicle to a 4-cylinder vehicle can also yield potentially large increases in fuel efficiency.

Consider the use of a hybrid vehicle when possible. Many popular vehicles today come in a similar hybrid version. For example, as Tom Sloan noted in his January GreenKey Blog, “The Ford Escape Hybrid and Mazda Trib­ute Hybrid both have fuel effi­ciency rat­ings over 30 MPG.” Hybrid vehicles are a great solution for fleets looking to reduce fuel spend and carbon emissions without relying on one energy source.*

Consider the use of alternative fuel vehicles when possible. A wide range of alternative fuel vehicles exist today in all segment classes. While there are pros and cons to each fuel, it’s important to evaluate each as an opportunity for your fleet. Existing infrastructure is being expanded all the time to meet the increasing demands of diesel, natural gas, propane, and electricity.

With current Corporate Average Fuel Efficiency (CAFE) standards, vehicle manufacturers are required to consistently increase vehicle fuel efficiency over the next five years. Simply replacing older, less efficient vehicles with new models can lead to an increase in vehicle efficiency. Most vehicles will realize an increase of 2-3 miles per gallon from 2007 to 2011. Work with your consultant to determine if vehicle cycling is an opportunity your fleet can benefit from.

Combining rightsizing, the use of alternative fuels, telematics, and vehicle cycling can help you hedge against increased fuel costs. Establishing a strategy to implement a change to fleet policy now can reduce increased costs in the future. If you’re a Donlen customer, contact your consultant to help you develop your comprehensive strategy for the future. One – or all – of these changes to your fleet will help you prepare for the future.

*Please note: given the recent supply chain disruption, there may be a delay in the production of some of the vehicles mentioned above. Please refer to our fleet update page, to identify any production delays.

With the release of the “State of Green Business Report 2011” GreenBiz provides an invaluable tool to help corporate fleets understand the current sustainability landscape. When looked at in conjunction with recent releases by McKinsey & Company and Cisco relating to the electric vehicle market, we see emerging changes on the horizon for the future of alternative fuel vehicles. Ford Motor Company’s partnership with ROUSH to design and build propane fueled vehicles, Nissan’s release of the fully electric Leaf, and General Motor’s release of the Chevrolet Volt, hydrogen fuel cells, and compressed natural gas (CNG) cargo vans are driving the near-term opportunities in this arena. However, trends speak to longer-term needs in this area.

So what is the state of green business?

In spite of the recent recession there has been a noticeable shift in corporate attitudes toward sustainability. Many organizations are foregoing their “incremental, short-term mindset” and adopting broader, longer-term strategies to address environmental and sustainability issues¹. Increasing investments in clean technologies and continued green innovation points to greater competitive emphasis on sustainability as a market differentiator. Efforts to green the workplace through more sustainable IT practices, green buildings, smarter energy use, and the recycling of waste products show how companies have shifted to look at sustainability as a means to increase efficiency and reduce costs. The areas where fleets may make the most impact may not be as prevalent right now, but there are signs of significant changes to the way business is done coming in the not-so-distant future.

Many of the leading consumer packaged goods companies, like Kraft, Proctor & Gamble, and SC Johnson, are beginning to focus on sustainable practices and are turning toward their suppliers to follow suit. Walmart − with its enormous retail influence − is using its market strength to push suppliers toward more environmentally friendly activities². In a business-to-business sales environment, organizations that have not yet encountered partners and potential partners adding sustainable practices as a prerequisite of business relationships should expect to see this more frequently as 2011 unfolds.

Moreover, while sustainability measurement and accounting is still in a developmental stage, greenhouse gas emissions (GHG) accounting has become an expected practice for large companies. Stakeholders and customers are applying pressure to organizations to measure, manage, and track the full environmental impacts of their businesses. A report by PricewaterhouseCoopers found that environmental reporting has “become critical to a company’s credibility, transparency, and endurance,” and the number of firms on the Standard & Poor’s 500 index publishing non-financial environmental reports increased by 17 percent over 2009, to 46 percent³. As companies implement these reporting procedures many find that sustainability information can be a valuable management tool to make sound business decisions and improve performance.

Within corporate fleets these trends continue to develop. Fleets have continued their move away from SUVs and large sedans to more fuel efficient four cylinder vehicles and more fleet organizations continue to look for ways to accurately report their emissions. These changes are encouraging, and more opportunities exist now than there were only a year ago. Through the Clinton Global Initiative, Fleets for Change—a collaboration between Environmental Defense Fund and Donlen to reduce corporate fleet GHG across the commercial fleet sector by 20 percent over the next five years—creates a structured and independent process to encourage more fleets to measure and track their emissions contributions.⁴ When looking at these trends in light of recent developments in the alternative fuel vehicle market there are indications that opportunities for fleets to truly drive change are opening up rapidly.

A consumer-focused approach to driving green vehicle technology

While 2010 will surely be remembered as the year of the electric car, there are more revealing signals about how quickly alternative fuel vehicles will enter the mainstream of fleet conversations and what is going to get them there. With many of these technologies still in their nascent state many fleets are hesitant to seriously consider alternative fuel vehicles until there is more supporting data. Some fleets are pushing early adoption for a variety of reason not unlike those driving the larger trends in sustainable business; however, these organizations can’t pull this new technology into the mainstream alone. The key will be to get these technologies into the retail mainstream to begin reducing the cost of production and mitigate the risk that fleet managers see in unproven technologies.

Across alternative fuel vehicle technology the lack of refueling or recharging infrastructure has been seen as the greatest stumbling blocks to a dynamic market. There are signs that this conventional wisdom may not entirely bear out and that companies have found innovative ways around these hurdles. For each of the alternative vehicle types—electric, CNG, and propane—to enter the mainstream each one has to represent about 10 percent of vehicles on the road.⁵ Natural Gas vehicles will require a newly developed refueling infrastructure before that can become a reality, but a basic charging infrastructure already exists for electrics that can provide a starting point. The main concern is whether or not the existing electric grid can handle the demand and optimizing charging times is the key.

Recently, networking technology giant Cisco announced plans to address these concerns. A partnership between ECOtality and Cisco establishes the technology for electric vehicle chargers to “communicate directly with utilities to determine off-peak and low-cost charging times” allowing consumers to “maximize energy usage and reduce costs.”⁶ By creating systems to optimize charging times, these systems will allow electric vehicle drivers to get the most out of the existing power grid for the lowest cost possible making these vehicles even more attractive to retail buyers.

The conventional wisdom, however, may not be entirely true. Research by McKinsey & Company has recently shown that there are clusters of potential buyers in large urban markets that didn’t see a dense public charging infrastructure as a prerequisite for purchasing electric vehicles. These buyers are swayed by the status of being on the cutting edge of technology and having a vehicle that fits their particular driving needs. Based on these projections, potential buyers in New York City alone could make up the almost one percent of the annual sales of electric vehicles needed for EVs to enter the mainstream.⁷

These trends, along with the strategies that are currently underway focusing alternative vehicle design to specific driving missions can open the doors for a more rapid adoption of alternative fuel vehicles in the mainstream market. As the recent announcement by Hyundai to publicly release the fleet average fuel economy for all vehicle sold each month shows there will be pressure on the Big Three automakers to push the development of their green vehicles. Hyundai’s results for January of this year already exceed the 34.1 MPG corporate average fuel economy standard set to be achieved by 2016⁸. By targeting specific driving applications, like CNG and propane service vehicles operating in a hub-and-spoke system, or small electric vehicles intended for short inner city trips, manufacturers can reap the rewards of a focused strategy and prove to fleets that these vehicles are not only viable solutions, but can significantly reduce their costs with little risk of buying vehicles that don’t have sustainable economics⁹. That will truly drive the integration of alternative fuel vehicles into fleet usage.

Within our own customer base at Donlen we are seeing more and more fleets testing the waters of alternative fuel vehicles. Clients have initiated pilot programs to understand the feasibility and costs of propane and CNG trucks and several organizations with strong corporate sustainability initiatives have looked at ways to add electric vehicles like the Volt and Leaf to their fleets. There are still a lot of questions out there that fleet managers have about how these vehicles will perform, what do these alternative systems mean for maintenance and repair, what can they really expect to get in terms of driving range, and how do these vehicles fit into existing fleet applications.

These are all important questions to answer, but the challenge will be for fleets to prepare for the fast approaching reality of a changed fleet vehicle landscape without getting caught up trying to address these questions on their own. Donlen’s environmental and Strategic Consulting resources can help fleet managers understand the costs of these vehicles, where they fit into their fleets, and how to lead in a future where sustainability and environmental stewardship is a critical business initiative across all functions of the organization, including fleet.

¹ Makower, et al. “Top Sustainable Business Trends of 2011”, State of Green Business 2011, GreenBiz Group, February 2011
² Makower, et al. “Consumer Giants Awaken to Green”, State of Green Business 2011, GreenBiz Group, February 2011
³ Craib Design & Communications, PricewaterhouseCoopers LLP, CSR Trends 2010: Stacking Up the Results, Craib Design & Communications, 2010
⁴ Makower, et al. “Fleet Impacts: More Hybrids and EVs are Around the Corner”, State of Green Business 2011, GreenBiz Group, February 2011
⁵ Hensley, Knupfer, and Pinner, “Electrifying cars: How three industries will evolve”, McKinsey Quarterly, 2009 vol. 3
⁶ Shankelman, “Cisco Drives into EV Market with ECOtality Deal”, Source URL: http://www.greenbiz.com/news/2011/02/02/cisco-drives-ev-market-ecotality-deal
⁷ Hensley, Knupfer, and Krieger, “The fast lane to the adoption of electric cars”, McKinsey Quarterly, February 2011.
⁸ Source URL: http://www.greenbiz.com/blog/2011/02/04/hyundai-heating-competition-fuel-efficiency
⁹ Hodson and Newman, “A new segmentation for electric vehicles”, McKinsey Quarterly, November 2009

Consumers often question what impacts the price they pay at the gas pump. Prices fluctuate on a daily, and sometimes hourly, basis with little known rhyme or reason. As gasoline prices have increased more than 95% in the last decade¹, companies are beginning to take a closer look at alternative solutions to offset what they are paying at the pump.

Technically speaking, the cost of gasoline is driven by the cost of crude oil and the cost of refined petrol and diesel. Supply and demand is a key factor to the price of gasoline. During the summer and around major holidays, when consumers typically drive more, the per-gallon price of gasoline rises. Natural disasters, such as Hurricane Katrina and the 2010 Deepwater Horizon oil spill also result in gas prices spiking as consumers fear that supply will be inadequate to meet demands. Political, domestic, and international factors may also affect the price of gasoline.

Let’s look at the past few years…

In the summer of 2008, retail gas prices hit an all-time high when consumer costs exceeded $4/gallon for regular-grade gasoline. This was a 29% increase from the 2007 monthly high, and a 140% increase from the 2003 monthly high. At the time, many analysts and consumers speculated that retail prices would continue to grow astronomically and maintain prices around $5/gallon.

However, the onset of the global economic crises in 2008 caused oil prices to sharply decline. In April 2009, the six-month average price of gasoline was $1.92, the lowest average since February 2005 – and prices held under $2.75/gallon until March 2010. As the world economy began to recover and global petro demand grew, prices rose over the course of the year.

Throughout 2010, the average price of regular-grade gasoline grew to $2.83/gallon, with prices reaching $3.00/gallon by the end of December. Annual average prices for diesel were higher than gasoline at $3.24/gallon due to the stronger demand for diesel over gasoline. (FYI: You can track historical pricing of fuel at the GreenKey Fuel Station™.)

…and what’s happening now and for the next couple years

According to the US Energy Information Administration, prices in the coming years should continue to rise. Projected regular-grade gasoline prices are expected to average $3.17/gallon in 2011, with a peak of $3.23 in August. Relief at the gas pump is not expected in 2012, either, with average gasoline prices expected at $3.29/gallon.

So what are your options?

As gas prices grow and remain an unknown commodity, a number of options exist to help companies reduce their fleet operating costs:

Look into alternative-energy vehicles. Diesel has higher fuel efficiency than gasoline, and can save costs despite being higher per gallon than gasoline. In the Volkswagen Jetta, for example, the four-cylinder automatic diesel engine has 37% greater fuel efficiency than the gasoline counterpart.² Additionally, the price of propane does not fluctuate as seasonally as the price of gasoline.  In the summer of 2011, propane is expected to cost 30% cheaper than gasoline. CNG (compressed natural gas) vehicles are also becoming more prevalent, with more than 100,000 in the United States.³

Trade in gas-guzzling SUVs for sedans. More often than not, similarly priced sedans have significantly better fuel-efficiency than their SUV counterparts. If the cargo room or seating provided by an SUV is a must, there are a number of hybrid SUVs that have recently hit the market. The Ford Escape Hybrid and Mazda Tribute Hybrid both have fuel efficiency ratings over 30 MPG.

If you don’t want to or are unable to downsize or switch to hybrids, talk to your consultant to look at take a look other vehicle options which will meet the needs of your fleet. There are a number of vehicles that get fuel economy ratings similar to hybrids, but are still gasoline-powered. A combined fuel-economy rating exceeding 30 MPG used to be a number only hybrids could achieve, but it’s becoming more commonplace in the gasoline-powered sedan market.

Driving behavior is one of the biggest contributors to fuel efficiency. It’s proven that vehicle idling time, overspeeding, hard acceleration, and quick deceleration all negatively impact fuel efficiency. By training drivers on how to operate their vehicle more efficiently, you can see significant gains to your bottom line. In addition, there are a number of telematics devices to help fleets track the ins and outs of their drivers’ green performance.

Realistic fleet introduction may be a few years off, but keep an eye on the electric vehicle market. The introduction of the Chevy Volt and Nissan Leaf, has caused interest in electric vehicles to hit an all-time high. A number of electric trucks have also hit the road in the past year. For drivers with short, set routes, it may be worth considering an electric vehicle.

While prices continue to rise at the pump, your operating costs don’t have to follow suit. Selecting vehicles with higher fuel-economy ratings, making informed decisions about your vehicle selection, and training drivers to improve fuel efficiency can significantly influence your savings opportunities.

¹ http://www.eia.doe.gov/oiaf/forecasting.html
² http://www.fueleconomy.gov/feg/findacar.htm
³ http://www.iangv.org/tools-resources/statistics.html

The Nissan Leaf, Chevy Volt, and Toyota Prius Hybrid are probably the most talked about vehicles to hit the road in decades. However, there is one aspect that stands out amongst these three unique vehicles; only one of them is truly an Electric Vehicle (EV). Although not a new concept, there have been immense advancements in electric vehicle propulsion that dates back to the late 1800s. Is it time for the EV to pave the way for the future, or will it yet again circum to the combustion engine?

The timely “comeback” of the electric vehicle is debatable. The economy remains in a fragile state and the concern of environmental degradation continues to grow. However, the history of the electric vehicle leaves me optimistic about its longevity in its “reboot.” The early developments of EV technology in the 1800s and early 1900s were overshadowed by the combustion engine which, even then, was significantly cheaper to operate. The more recent GM EV1 of the 1990s failed to thrive due to associated costs, recharging challenges, political and environmental involvement, and lack of interest by the general public.

The upcoming and highly anticipated Chevy Volt is powered by an onboard lithium-ion battery pack to propel the vehicle for the first estimated 40 miles. Afterward a 4-cylinder internal combustion engine takes over to create electricity to power the Volt. If you remain under a 40-mile range, all the driver has to do is recharge the battery. After the federal tax credit, the average consumer vehicle cost is between $33k-$35k.

The Nissan Leaf is truly an EV. It is powered solely by a 50KW AC synchronous electric motor with an estimate 99 miles per charge range, based on government testing, and 100 miles based on California regulators. After some at-home assessments and power station installation, the Leaf can be charged by the average family energy supplier. Consumers should anticipate a price tag around $32k. With the set-backs of the technology, range, infrastructure, environmental degradation through electricity generation, etc., it is still difficult to anticipate the Leaf’s impact.

The Toyota Prius — and currently the most readily cost efficient — operates on a parallel hybrid powertrain which utilizes a power split device, which means it utilizes both the gasoline engine and battery power at the same time while the onboard generator automatically maintains the level of charge in the battery. This is why the Prius never needs to be plugged in; however, a Plug-in Hybrid (PHV) is in the pipeline for following model years. The Prius has been a trendsetter for hybrid technology in recent years and proves to be the most economical of the three vehicles with prices ranging from $22-27k.

The U.S. market has been in crisis for several years now with market crashes, oil spills, gas hikes, and monetary sector troubles, but is the EV about to make its stamp on the market again? With the increasing fuel efficiency and environmentally friendly combustion engines hitting the market today, will the cost/benefit of owning an EV again be overshadowed by the powertrain that has led the market for well over a century?

Whether it is cost associated, lack of infrastructure, capacity, or range, current battery technology may still fall short. Until lithium-ion batteries are widely used and newer technologies are developed, the fleet industry and the consumer may still be a long way off from fully embracing EV technology.

Donlen recently conducted a survey amongst fleet managers to better understand their application, utilization, opportunities, and concerns about plug-in electric vehicles (PEV). In addition to the key findings of the survey, which can be viewed in the July 7 issue of Donlen's GreenKey News, a lack of data surrounding operating cost, emissions, vehicle specifications, pricing, resale values, and fuel efficiency still linger among fleet managers. 

Electric batteries continue to be one of the most expensive components of the electric vehicle. While the cost of battery manufacturing may be seen as substantial today, increasing returns of scale continue to drive down costs. Since the late 1990’s, advances in battery technology have been largely driven by consumer demand for mobile phones and laptops, with the weight and extended battery life seen as driving forces behind their research and development. The electric vehicle marketplace has reaped in the benefits of these advances, and continues to refine and develop additional technologies suitable to application. 

Most of today’s production model EV’s are utilizing lithium ion, or lithium ion variants, as a preferred power source. While battery technology varies per manufacturer, general strategies have been seen on a broad-base scale to provide enhanced power density, fire resistance, environmental friendliness, rapid charges, and long life spans. For electric vehicle applications, individual batteries are strategically arranged into larger battery packs to achieve the desired energy capacity. In some cases, it may be possible to replace an individual battery rather than incur the expense of an entire battery array. 

Electric vehicle range depends on a number of factors, including the weight and type of vehicle, battery type, weather, terrain, and driver behavior. Finding an economic balance between range, weight, performance, and battery capacity continues to challenge electric vehicle manufacturers. According to the most recent statement published by General Motors¹, the electric range of the Volt measures between 25 and 50 miles on a single charge. The latest test results of Nissan’s all-electric Leaf² report a single charge range of 62 to 138 miles. The differentiation between these results proves that, in addition to the limited mileage on a full charge given a fleet application, the variability in range is still a question fleet managers are looking to substantiate. 

In an effort to address the 60 percent of survey respondents who felt they lacked adequate data to make an informed decision on the utilization of PEV’s, Donlen developed the Electric Vehicle Cost Calculator™. Let us know what you think! 

For more information, or to provide feedback on our Electric Vehicle Cost Calculator, contact Brad Jacobs, Client Consultant, at 847-412-5443 or by e-mail at bjacobs@donlen.com. 

¹ – http://media.gm.com/content/media/us/en/news/news_detail.brand_gm.html/content/Pages/news/us/en/2010/Oct/1011_volt 

² – http://www.nissanusa.com/leaf-electric-car/faq/list/technology#/leaf-electric-car/range-disclaimer/index