It's never simple

Feb. 1, 2006
It's pretty clear that hybrid powertrains combining a gasoline or diesel engine with an electric motor for cars and trucks can help reduce fuel consumption and tailpipe emissions. But do they make economic sense? I talked to Brett Remington at Runzheimer International about this very point and he summed it up in two words: It depends. Remington recently wrapped up a study for Runzheimer, an employee

It's pretty clear that hybrid powertrains — combining a gasoline or diesel engine with an electric motor — for cars and trucks can help reduce fuel consumption and tailpipe emissions. But do they make economic sense?

I talked to Brett Remington at Runzheimer International about this very point and he summed it up in two words: It depends. Remington recently wrapped up a study for Runzheimer, an employee travel management firm, comparing the 2006 Lexus RX400 hybrid SUV to the non-hybrid RX330. His task was to determine how long it would take to recover the premium paid for the hybrid model via gasoline savings.

Remington told me that Runzheimer used the Lexus SUV so it could get an “apples to apples” comparison between hybrid and non-hybrid models.

The price tag on the RX400h is $48,410, compared to $37,770 for the RX330. But since both come loaded with all sorts of amenities the average light-truck fleet manager is never going to see (leather seats anyone?), Runzheimer factored those pricier options out, resulting in a premium for the hybrid of $8,370.

The hybrid SUV gets about 30 mpg in city driving and 26 mpg on the highway, versus the 18/24 split the non-hybrid model achieves. So on average, that's a 7 mpg fuel advantage for the hybrid. What does this mean for the balance sheet?

Assuming annual mileage of 15,000 and the price of gasoline at the current level of $2.29/gal., it would take more than 20 years to recover the hybrid premium. At $2.65/gal., that drops to just over 17 years, and at $3.10/gal., to about 15 years.

“But given the simplistic nature of the assumptions, it's likely these costs are understated,” Remington told me. “The typical fleet driver is usually moving goods or tools around, so I'd expect fuel efficiency to taper off.” In addition, hybrid technology is exceedingly more complicated, which could have an impact on maintenance costs over the long run. “At this stage, we don't know what… it will cost to keep it in service.”

But Remington emphasized that hybrids should not be dismissed because of this study. On the contrary, he believes that by establishing a baseline to accurately compare the fuel savings between hybrids and non-hybrids, fleets can find the “tipping point” at which the technology becomes more affordable.

“The bottom line is that hybrids represent new vehicle technology, which is always more costly at the outset,” he said. Hybrid vehicles are currently in low-volume production, but as demand rises this will change and economies of scale should come into play, leading to a decrease in the premium and a shorter payback cycle.

“This technology is still at an embryonic stage, but the fuel savings have been established. And no one expects fuel costs to drop in the future,” Remington added.

“Don't forget, too, that the type of driving you do really impacts the fuel savings,” he pointed out. “If you are driving over 20,000 miles a year in stop-and-go city operations, you'll see a lot more fuel savings because in-city driving is the ideal environment for a hybrid vehicle.”

Although hybrids are probably too costly for light-truck fleets now in terms of achieving payback from fuel savings, the point at which they become cost-effective is probably a lot closer than most people think, said Remington. “Hybrids are doing what they say they'll do: reduce fuel consumption and harmful emissions,” he noted. “It's emerging technology and there's still a lot of potential for it in the future.”

About the Author

Sean Kilcarr | Editor in Chief

Sean reports and comments on trends affecting the many different strata of the trucking industry -- light and medium duty fleets up through over-the-road truckload, less-than-truckload, and private fleet operations Also be sure to visit Sean's blog Trucks at Work where he offers analysis on a variety of different topics inside the trucking industry.

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