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Alternative Fuel Vehicles Offer Fleet Operators Lower Total Cost of Ownership, Hedge against Future Fuel Price Shocks

Many fleet managers in North America and Europe are facing increasing pressures to “green” their fleet operations. At the same time, budgetary pressures are driving fleet operators to look at new ways to reduce costs, including by 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 total cost of ownership (TCO) over the lifetime of the vehicle can be lower than conventional internal combustion engine 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 $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,” says senior analyst Lisa Jerram. “With $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 $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 compressed natural gas (CNG). The compact 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, flex-fuel 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’s report, “Total Cost of Ownership of Alternative Fuel Vehicles for Fleet Operators”, provides a comparative TCO analysis across various alternative fuel vehicle categories including biodiesel, ethanol/flex-fuel, propane/autogas, compressed natural gas, stop-start, hybrid electric, plug-in hybrid electric, battery electric, and fuel cell vehicles. The primary focus is on fleet vehicles as they would operate in North America, with additional coverage provided for Western European vehicles and operations. Because each fleet is experience is different, this report also includes a spreadsheet that can be customized with the fleet operators’ own data. An Executive Summary of the report is available for free download on the firm’s website.
Contact: Richard Martin
+1 303 997 7609


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