Assessment on the Feasibility of Adding Alternative Fuel Vehicles to the Fleet of Lotus Rental Cars - Term Paper Example

Assessment on the feasibility of adding alternative fuel vehicles to the fleet of Lotus Rental Cars Thesis ment The demand for alternative fuel cars was necessitated by the declining of oil which pushed gas price up. Besides, the use of oil has had an adverse effect on the environments. To survive in the competitive and changing business of car rental, Lotus Rental Car has to come up with the appropriate ways to reduce their operational costs, conserve the environment, and increase customer experience and profitability. With the increased depletion of oil resources and increased gas prices, Lotus Rental Car will gain from adding alternative vehicles to its fleet of cars. The alternative fuel vehicles will not only save the company from gasoline crunch it will save the customers too. This will make the company pocket friendly and in return increase business. Based on these, the CFO of Lotus Rental Cars should consider adding fuel alternative vehicles to the fleet. The introduction of alternative fuel vehicles has proved efficient and has had immense benefits to the environment. The addition of alternative fuel cars to the fleet, will enable Lotus Rental Cars will be complying with the Energy Policy Act of 1992 (EPAct) that called for reduced consumption of gasoline and diesel in automobiles in America. Coupled with the hard economic times, the addition of alternative fuel cars to the company’s fleet makes economic sense. Alternative fuel vehicles have become popular because of rising fuel costs and toxic gas emissions. Alternative fuel vehicles help in the reduction of pollution and toxic gas emissions. There have been legislative policies in the U.S that have been instituted to help in reducing pollution and increase fuel efficiency. When fully implemented, these laws will affect the car rental industry especially companies that are not compliant. Besides the Energy Policy Act of 1992, the Clean Air Act of 2002 has also played a pivotal role on the need to include alternative fuel cars to the fleet of Lotus Rental Cars. The Clean Air Act advocates for the production and use of new and alternative fuels that burn better than gasoline. The increased demand for alternative fuel vehicles has also been compounded by the effects of global warming. People are getting more concerned about the environment and the need to conserve it (.Augustine, Sandidge, & Williams, 2011). To this end, consumers want to be associated with more proactive companies; companies that comply with regulations and care about the environment. By including alternative fuel cars to the fleet, Lotus Rental Cars will be adhering to new legislations, protecting the environment and addressing consumer concerns all at the same time. During the global financial crisis, consumer travel went down mainly because of the cost of travelling. The economy is on its way back to recovery but consumers are still weary of the high costs of travelling. The inclusion of alternative fuel cars to the fleet of Lotus Rental Cars, will make them attractive to consumers looking to reduce their travelling costs. When cutting down travelling costs, the mode of transport to be axed by consumers is always car rental. But the thought of alternative fuel cars is has helped in changing the perception of consumers about travelling during hard economic times. Consumers have turned to alternative vehicles because it enables them to not only save on costs but also save the environment. Alternative vehicles mainly run on hydrogen, biodiesel, natural gas, and ethanol. With the consumers, the government and the environment all in agreement for the need of alternative fuel vehicles, it would be the opportune moment for the company to include alternative fuel cars to the fleet. The increased pace of globalization is taunted as one of the major reasons why alternative fuel vehicles are set to become the dominant mode of transport in the U.S. (Federal Energy Management Programme, 2003). However before Lotus Rental Cars adds alternative vehicles to its fleet of Cars, it has to consider the financial impact it would have on the company. The company also has to look at the merits and drawbacks of the various sources of alternative fuels used by these vehicles. The available sources of alternative fuels are Biofuel which is got from biomass. Bio alcohol and biodiesel are the main types of biofuel used. It has fewer emissions as compared to gasoline, can be used as an additive or in its pure form and is a renewable source of energy. Its drawbacks include its contribution to environmental degradation like deforestation and soil erosion. It is less efficient as compared to gasoline and competes for food with humans. This puts a strain on the global food supply chain. Flex fuel on the other hand makes use of a combination of different fuels. The mixture of fuels is normally methanol or ethanol and gasoline. It is friendly to the environment, attracts tax benefits, the fact that it uses fuel mixture makes it an alternative to gas. Though less efficient than gasoline and also causes engine corrosion it is still an affordable source of alternative fuel that Lotus Rental Cars should consider. Another alternative fuel is the electric battery. It has negligible or no emissions, easy to maintain and does not need gasoline. However batteries are expensive, take longer hours to charge and have a limited range. With the constant traffic jams in today’s cities, electric battery vehicles might not be the best addition to the fleet. The other alternative source of energy that the company should look into is the hybrid electric. It combines internal combustion engine with an electric motor and a car battery. Though its cost of production is high it highly efficient. Hydrogen is also an alternative source of energy. It is readily available; it is efficient, environmentally sound and has no harmful emissions. It is however costly to produce, highly flammable making it hazardous and has a high cost of maintenance (Buzzle, 2011). Natural gas on the other hand is readily available, costs less, has low emissions and is easy to maintain. The production of natural gas vehicles is costly; it needs large fuel tanks to be effective and is highly flammable. The underlying factor in alternative fuels is cost. The cost of producing and maintaining alternative sources of fuel is high but then they are relatively easy to maintain; a factor that give them an edge over gasoline. They are environmentally friendly and emit less toxic gases to the environment a factor that makes them feasible. The initial investment in alternative fuel vehicles is high but their benefits by far outweigh their disadvantages. The introduction of alternative fuel efficient vehicles to the fleet of Lotus Rental Cars will make it attractive to consumers who are looking for a greener way to save on transport costs and will also make Lotus Rental Cars an industry leader in the provision of alternative fuel cars. The maintenance of vehicles that use alternative fuel is also on the higher side but this is negated by their guarantees. A case in point is it the hybrid batteries which have a guarantee of 8 years. By the lapse of this time, the battery shall have earned the company enough money not only to replace it but also to purchase more. The popularity of alternative fuel vehicles has made it possible to get them from almost every vehicle manufacturer under the sun. There are a variety of models of vehicles that use alternative sources of fuel (Ellen, 2006). The use of vehicles that use alternative fuel is being promoted in America mainly because the bulk of cars on American roads are owned by fleet owners like Lotus Rental Cars. If all fleet owners in America include vehicles that use alternative fuel sources to their fleets, the emission of toxic gases will be reduced considerably, consumers will save on travelling costs and the environment will be safer. Lotus Rental Cars can therefore contribute to clean air by adding alternative vehicles to their fleet of cars. Apart from the benefits that alternative fuel vehicles bring to the environment it also saves the economy and contributes to energy security since fuel imports will be replaced by domestic fuels. As of 2012, 40 percent of the petroleum used in the U.S was imported. 75 percent of this was used in the transportation sector. This scenario makes the country vulnerable to price increases and supply decreases. Given that the global petroleum reserves are in politically turbulent countries it therefore pays to move to alternative fuel sources. The use alternative sources of fuel will go a long way in reducing the country’s reliance on gasoline. As stated earlier, the use of alternative fuel vehicles will increase the country’s energy security and negate the country’s vulnerability to fuel supply shortages. The use of alternative fuel vehicles also helps in saving fuel for the country as compared to conventional vehicles that depend on petroleum. Apart from the fact that alternative fuel vehicles are efficient they are also just as safe as the conventional cars. Despite the fact that the costs of alternative fuel vehicles are high, these prices are expected to go down with the increased production and popularity of such vehicles. The federal government has come up with a tax credit that has been availed to PHEV and EV buyers. The incentive is valid through 2014. It gives a tax credit of between $2,500 and $7,500 for new buyers (U.S Department of Energy, 2013). The amount of tax credit is dictated by the capacity of the battery and the size of the vehicle purchased. Conclusion Lotus Rental Cars therefore ought to include cars that use alternative fuel sources to the fleet of vehicles because it will make it a green company which is what the 21st century customer is looking for. The addition of alternative fuel vehicles will also reduce the company’s reliance on petroleum and its related by products. The addition will also reduce the company’s operation costs as the alternative fuel sources are not as costly as gasoline. The use of alternative sources will also reduce the emission of toxic gases to the environment. By including cars that use alternative fuels to the fleet, Lotus Rental Cars will be contributing to the nations move towards energy security and having clean air free of toxic emissions. Recommendations After a thorough assessment on the benefits and drawbacks of the alternative fuel vehicles, it is highly recommended for a rental car company like Lotus Rental Cars to add alternative fuel vehicles to the fleet. The company will be able to get federal and state tax incentive of up to $7,500 for every new car bought. The addition will increase the company’s profitability and survival in the competitive industry of rental cars in the long term. Alternative fuel cars will also attract more clients to the company since they will view it as an environmentally responsible company. References Augustine, K, L., Sandidge, S. A., & Williams, T. N. (2011). Alternative fuel vehicles which shall win the race to commercialization, 2-21. Retrieved from: http://www.techcast.org/Upload/PDFs/634478024047181613_alternativefuelvehiclesresearchpaper.pdf Buzzle (2011). Hydrogen cars pros and cons. Retrieved from: http://www.buzzle.com/articles/hydrogen-cars-pros-and-cons.html Ellen, G. (2006). Cleaner air on campus. Reporter, 28-(3), 23-46. Federal Energy Management Programme (2003). Alternative Fuel Vehicles, 1-15. Retrieved from: http://www.nrel.gov/docs/fy03osti/26066.pdf. U.S Department of Energy. (2013). Benefits and considerations of electricity as a vehicle fuel. Retrieved from: http://www.afdc.energy.gov/fuels/electricity_benefits.html Read More