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Lotus Car Rental Alternative Fuel Assessment Essay

Introduction

The creation of a fleet of alternative fuel sourced automobiles would be a wise decision for the Lotus Car Rental Company. There are two major issues that are on the minds of people these days, the environment and money. By creating a fleet of alternative fuel based automobiles the Lotus Rental Care Company can help ease the fears of people in both categories.

By having the ingenuity to have a fleet of alternative fuel automobiles; the Lotus Car Rental will set themselves apart from the rest of the rental car companies. Lotus Car Care will be the leaders in environmentally safe car rentals. The following research paper will discuss the background of this topic, the costs of working with alternative fuel automobiles, the technical aspects of alternative fuel, the environmental aspects of alternative fuel as well as discuss some recommendations for the Lotus Car Rental Company.

Background

The Lotus Car Rental Company is looking into adding a fleet of alternative fuel sourced vehicles to their supply. Alternative fuel sourced vehicles are classified as being resources other than petroleum. A few of these sources are produced here locally and some are derived from renewable sources. They often produce less pollution than does gasoline. (“Alternative Fuel Vehicles”, 2012). Hybrids are also considered to be an alternative sourced vehicle. A Hybrid vehicle is one that utilizes more than one form of onboard energy to achieve propulsion (“Edmunds.com”, 2009).

Financial Feasibility

Several factors influence the financial feasibility of adding alternative fuel vehicles to the fleet: vehicle cost, maintenance, advertising, and return on investment. Additional considerations include: market share, future growth, and implementation cost. The first consideration is the cost of adding hybrid vehicles to fleet inventory. Individual vehicle cost ranges from $23,000 to $37,000 and the models available include Honda Civic, Volkswagen Jetta, Lincoln MKZ, and Lexus ES300H (Almeida, 2009). Fleet costs would be less depending on number of units purchased and vehicle upgrades. Lotus Rental Car’s rentals fall into three categories: economy, mid-size, and luxury. Based on a cursory review of Lotus Rental Car’s primary income producers, the number of hybrid vehicles added should fall within the three to five percent range for each category.

The initial outlay should equal or be less than the number of vehicles within each specific category that will be retired within the purchase year. For instance, if ten percent of economy vehicles will be retired then five percent of the new vehicles purchased will be hybrid. By timing the introduction of the new hybrid vehicles with inventory retirement the initial cost outlay will be mitigated. The anticipated maintenance costs will be similar to the previous year’s cost and no change is expected. Income from vehicles retired is expected to equal the same percentage as non-hybrid automobiles and will not constitute a negative financial impact.

Advertising is a major consideration, although the cost is not expected to increase. Target markets will be in major cities where Lotus Rental Car’s already has a large presence. Urban centers with environmentally conscious drivers are the best place to begin a new hybrid product line. Adding information regarding the new line to existing websites provides maximum exposure with minimal cost. Other markets include environmentally conscious corporate businesses that already have a corporate account with Lotus. Market share and future growth is connected to advertising and return on investment. The implementation costs are minimal. The monthly return on investment is tied to advertising, environmental activity, and rental cost.

Advertising includes national campaigns and local markets. The rental market incorporates online sales and local customers. The majority of travelers will book a rental vehicle prior to arriving at the rental company. Pricing will play an important factor in a rental commitment. Up-sale will increase income potential. Economy vehicles rentals begin at $9.99 and increase, depending on the current sales program. The cost may decrease, depending on the number of days booked, special pricing, and additional sale of navigation, XM radio, and infant seats. However, the average rental price for an economy vehicle is $29.99 per day and hybrid vehicles rent from $65.99 to $159 per day. The return on investment per day would range from $35 to $129.

It is clear the automotive industry is offering a variety of hybrid vehicles in response to customer demand. The future of the automotive industry includes alternative fuel vehicles of all models. As the automotive industry embraces hybrid sales that increase their market share, so should the vehicle rental industry. Entry into a new product line will have higher costs than non-alternative vehicles until the product becomes well immersed into the market.

In the case of hybrid vehicles it is prudent that Lotus Rental Car adds hybrid vehicles to their urban centers and joins the environmental movement along with major vehicle manufacturers. It is clear that as time passes, a portion of new business will gravitate toward rental car companies that offer alternative fuel vehicles. Lotus Rental Car company will lose future market share and the expense of entering the hybrid market will increase if Lotus Rental Car company enters the market after its competitors (Schueneman, 2009).

Technical Aspects

One of the many advantages of owning a hybrid vehicle is saving money at the pump. Unlike your standard gas running car, this on average would do about 21 mpg highway and city driving. Hybrids on average are doing 30 mpg highway and city. An article written on nationalgeographic.com it shows the actual fuel saving over a year span “The average American driver between the ages of 34 and 55 drives 15,291 miles annually. Divide this annual mileage figure by 21 miles to the gallon for the standard model, and you will find that you would buy about 728 gallons of gasoline a year. In contrast, if you divide the annual miles figure by 30 for the hybrid, you would determine that the annual gas purchase would be of about 510 gallons.

You would save 218 gallons of gas a year with the hybrid. Multiply this by a conservative $3.50 a gallon for a dollar savings of $763. By selecting the hybrid over the standard model, you would make up for the $5,560 difference in sticker price in seven to eight years. Subtract the maximum tax incentive and you could recoup the $2,160 difference in less than three years. Thus, in this example, you would save money either by paying full price and driving your hybrid for more than eight years, or by driving it for more than three years with a tax credit.”(Nationalgeographic.com by Lynne Haley Rose).

So although the price tag is little higher on hybrids you will easily make your money back in the gas savings. Most people may think,” Yeah, you save on gas, but don’t get the as much horsepower when you purchase a hybrid vehicle.” The idea of combining electric and gas does seem to leave much room for speed and maneuverability. This assumption is not true; yes hybrids do have smaller gas engines, but they make it up with their electric engine. Coupled with the gas engine, the electric engine can send power to various parts of the car, mainly the wheels. This is a very good advantage over standard horsepower, because it could actually supply more power to the car; which increases its speed.

With all this talk about horsepower and speed, we begin to think about maintaining a hybrid car. Once again, just because it’s a hybrid doesn’t mean it’s more expensive. Most of the basic normal maintenance requirements like oil changes and tune ups cost about the same as standard cars. They even have their own perks. A standard car requires an oil change every 3,000 miles; whereas hybrids are every 6,000 miles. One of the most expensive items on a hybrid is the car’s battery; which can run you up to 3,000 dollars. Don’t let this number scare you, because these batteries have no real recorded life expectancy “a long time” is what I kept seeing in my research.

As said in (8 Reasons to Buy a Hybrid Car) “There’s no difference between a hybrid and the gas-powered car parked in your garage — it can accelerate just as quickly and cruise just as fast on the highway, and it handles just as smoothly. Most important, hybrids are just as safe to drive.” (By Alan Rider Parents.com). Hybrids have come a long way since the first Prius 10 years ago.

They’ve excelled in mpg, horsepower and style. There are a number of hybrids out there now and many styles to choose from in the standard and luxury lines. As far a comfortable ride, hybrids and standard cars are the same. Now, of course, if you go out and get a Lexus hybrid you’re going to have more luxuries than if you purchased a Toyota hybrid. Most cars you get know have all of the technical capabilities available and if they don’t they can be added. Technology will not stop growing and with that so will the new age of hybrids.

Environmental Aspects

Petroleum based fuels can create harmful emissions like carbon dioxide; nitrous oxides, and particulate matter, all of which degrade the environment
(“5 things you need to know about alternative fuel vehicles,” 2008). These methane, carbon dioxide, nitrous oxide and other gasses are known as greenhouse gases. When these gasses build up they contribute to global warming. HybridCar.org claims that Hybrid vehicles produce 80 percent less greenhouse gases than conventional fuel based vehicles (“Hybrid Cars And Pollution”, 2005).

Toxicity is another problem with petroleum fuel based vehicles. The producing of some forms of alternative fuels can create fewer toxins than those produced by traditional fuel vehicles. For instance, biodiesel is a fuel that is created from leftover vegetation like corn stalks. Biodiesel is biodegradable and non-toxic which makes it safe for the environment.

Noise pollution is also a form of pollution. Car engines can produce 110 decibels of noise, which is twice as loud as a normal conversation.. The noise will come from the fuel pump, pistons and compressors that create the combustion and cycle the fuel. Vehicles with alternative fuel sources such as hydrogen fuel cells will produce no sound or vibration as they require no moving parts to produce fuel.

Recommendations

The research has shown that a fleet of alternative fuel sourced vehicles would be the best idea for everyone involved. The positive feedback generated by offering this fleet of vehicles would be astounding. The market for rental cars with alternative fuel capabilities is very small and the Lotus Car Rental Company would have the market cornered. The cost of maintain a fleet of these vehicles are no different than that of petroleum fueled vehicles.

The consumer that is able to rent these vehicles will also benefit by being able to save more money on energy for the vehicle. The environment will also benefit from this addition to the Lotus Car Rental fleet. The amount of pollution and emissions that can be cut back will be helpful to the surrounding community and the future generations to grow up in the community.

Conclusion

The creation of a fleet of alternative fuel sourced automobiles would be a wise decision for the Lotus Car Rental Company. After conducting much research, the decision to incorporate a fleet of alternative fuel sourced automobiles would be in the best interest of the public as well as the company.

The research has shown the monetary benefits, the technical benefits as well as the environmental benefits of acquiring a fleet of alternative fuel sourced automobiles. The benefits of having a positive company reputation are enormous. Having an environmentally friendly car rental company has the potential of being a lucrative decision. Living a green lifestyle has become an important thing in this day and age. The Lotus Car Rental Company will have cornered the market by having an entire fleet of environmentally friendly automobiles.

References
Alternative fuel vehicles. (2012). Retrieved from http://www.fueleconomy.gov/feg/current.shtml Edmunds.com. (2009). Retrieved from http://www.edmunds.com/fuel-economy/what-is-a-hybrid-car-how-do-hybrids-work.html Almeida, A. (2009, August 13). Average Cost of a Hybrid Car. Retrieved from CarsDirect: http://www.carsdirect.com/car-pricing/whats-the-average-cost-of-a-new-hybrid-car Schueneman, T. (2009, February 12). Enterprise Rent-a-Car Adds 5000 Hybrids to its Fleet of Fuel Efficient Cars. Retrieved from sustainablog: http://sustainablog.org/2009/02/enterprise-rent-a-car-adds-5000-hybrids-to-its-fleet-of-fuel-efficient-cars/ 5 things you need to know about alternative fuel vehicles. (2008, July). greencar.com, (), . Retrieved from http://www.greencar.com/articles/5-things-need-alternative-fuel-vehicles.php Hybrid cars and pollution. (2005). Retrieved from http://www.hybrid-car.org/hybrid-cars-pollution.html

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