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Viability of Adding Alternative Fuel Vehicles to Lotus Rental Car Fleet
The focus of this paper is to estimate the importance and feasibility of adding alternative fuel vehicles to the Lotus Rental Car fleet. This paper is addressed to the Chief Financial Officer. There are many types of alternative fuel vehicles (AFV); however, this paper will be focusing on hybrid vehicles. The discussion will cover the overview of existing operations, the advantages and disadvantages of adding AFV’s, the summary of the examination, and the recommendations on why and how it should be implemented.
Current Fleet Status
The Current fleet size for sister companies, Alamo, Enterprise and National, carry nearly 450,000 cars combined that achieve 28 mpg or better. The introduction of EPACT in 1992 introduced AFV’s into the US market, where they were mainly used by government agencies. The common term used to describe AFV vehicles is light duty vehicle (LDV). In addition, federal fleets are required to use dual-fuel vehicles unless a waiver is granted. Because of high oil consumption in the US transportation sector, concerns about national energy usage began to rise. This raised many questions regarding the resulting environmental impacts of greenhouse gas emissions. An example of this was in 2008, when it was estimated that the transportation sector emitted 1,930 million metric tons of carbon dioxide, which represents a 33.2 per cent share of total carbon dioxide emission from all sectors. However, using AFV’s also caused problems, such as not having enough stock of vehicles, an increase of oil price costs and fuel demand. These higher oil prices had a direct impact on the development and penetration of AFV’s in all markets. (According to Jacob, Welch, and Simms2009)

Advantages to Adding Alternative Fuel Vehicles
One advantage to using AFV’s is their comparative economic advantage, specifically referring to the availability of natural resources that replace the petroleum products typically being used in conventional vehicles. Another consideration is that AFV’s will contribute to reducing local air pollution. In addition, some types of AFV’s can emit zero emissions, which will eliminate air pollution entirely. In other types of AFV’s, the emissions are drastically decreased when compared to gasoline or diesel vehicles. Furthermore, AFV’s can lower emission levels of nitrogen oxides, carbon monoxide and air toxins. (Goyal and Sidhartha, 2003).
Disadvantages to Adding Alternative Fuel Vehicles Different types of AFVs employ different technologies, many of which were not fully understood. As with most new technologies, reliable knowledge about how to maintain, repair or adapt the new systems is often not available. The primary goals for the AFV program was to reduce emissions and operational costs of the fleet. To accomplish the goals, the department must understand that they would need to replace gasoline fuel vehicles with AFVs that utilize LPGAS, CNGAS or E-85. LPGAS and CNGAS would require technical modifications unfamiliar to the Fleet Services Department. Furthermore, the internal uncertainty that resulted from insufficient ‘Know-how’ about technical diagnostics, repairs and AFV conversions of LPGAS and CNGAS vehicles represent a secondary risk. (Goyal and Sidhartha, 2003)
Pros and Cons
As we have seen in this case study, there are several advantages and disadvantages to adding AFV’s to a rental fleet. The positive aspect of increased fuel economy and lower environmental impact comes with several ecological considerations.
Studies have shown that while alternative fuels help to reduce an organization’s carbon footprint, the effects of those fuels are not negligible. According to Senegaenik, Vuk, Petrovic, Islajomavic, and Jeremic (2011), the common factor with most alternative fuels is they all have a low net energy output. This means that in order to duplicate the horsepower produced by fossil derived fuels, a significant higher amount of alternative fuel must be used. Therefore, while rental companies like Lotus can boast to its customers that renting AFV’s aids in reducing emissions and helps the environment, the real impact is much more complicated. Fiscally this remains an alternative, as this market is still an emerging one; however, if reduction in environmental impact is the priority, it may not be a responsible one.
Alternatives
On the other hand, the use of fossil derived diesel fuel may be an option. These vehicles cannot claim the low emissions of their alternative counterparts but they still present a significant cost advantage.
In most demographic areas, the cost of diesel is comparable to regular gasoline. However, vehicles with that type of combustion system exhibit a considerable advantage in miles to gallon ratio. This, in conjunction with the newer, cleaner burning diesel engines, provides Lotus with the ability to offer their customers a savings opportunity in fuel costs over the length of their rental, while simultaneously providing a more environmentally responsible choice for their transportation needs. This would be especially beneficial for customers who rent the vehicles for longer periods of time.
When considering a more ecologically friendly fleet of vehicles, Lotus Rent a Car might naturally consider alternative fuel vehicles as the most viable option. Something the company should also consider is the possibility of reducing its carbon footprint by choosing a car manufacturer that shares their commitment to the environment. Companies like Honda, for example, converted 10 of their 14 North American car-manufacturing facilities to zero waste to landfill plants. Their remaining four operations are considered near zero waste to landfill sites. This change has meant a reduction in their waste pounds per vehicle from 62.8 to 1.8 in ten years.
By choosing a more environmentally friendly car manufacturer, Lotus would be able to reduce their overall impact on the environment. Having multiple options enables any company to attain their goal more easily. It is important to research all options thoroughly before selecting one or multiple solutions to company goals.
Comparison
Determining which policy would be more beneficial to Lotus would require understanding the long-term strategic plan of the organization. Predicting the extent to which consumer opinion will gravitate toward environmental responsibility will be key. If opinion swings heavily in favor of such a platform in their market, the high cost of maintaining AFV’s could be offset by demand and would secure Lotus a place as a leader in the new market.
However, if opinion remains weak, the cost of acquiring and maintaining such a fleet would not be justified and pursuing a more conventional business plan may be appropriate. This can mean the incorporation of cleaner burning diesel vehicles that would not require any modification to their existing infrastructure but would provide their customers with an eco-friendlier choice. Additionally, the collaborating with zero waste to landfill car manufacturers may be another marketing strategy that could appeal to this demographic
Course of Action
It is our belief the cost of adding a significant amount of AFV’s to Lotus’s fleet would not be in the best interest of the organization at this time. However, performing a cost benefit analysis by providing key locations with some vehicles would be a viable option. This would enable Lotus to explore the possibility of a nationwide initiative without incurring the massive costs of retooling all of their service locations.
This initial, small-scale test, would give the management at Lotus a snapshot of the feasibility of large-scale incorporation of AFV’s to their fleet.
Possible Outcomes
With a test window of 2 years, Lotus could evaluate the demand for AFV’s and determine whether it is the correct course of action while limiting risk to investment capital. This venture could solidify whether proceeding with true AFV’s would be economically practical or if a more conservative approach to the market is prudent, such as the implementation of more diesel vehicles as discussed above.
Conclusion
As we have seen from the above analysis, proceeding with any new venture requires substantial forethought, research, and planning. Lotus rent a car is in a position to establish itself as leader in an emerging market. However, the stability of that market has yet to be determined. Caution must be used when investing in new areas of commerce. Organizations must take care that the technology or service that is in demand now is not a trend but a true shift in consumer opinion. Only when careful consideration is taken and comprehensive market research is performed and evaluated can a complete assessment be made. References
Honda. (2011, August 18). How honda achieved zero waste to landfill [Video file]. Retrieved from You Tube website: http://How Honda Achieved Zero Waste to Landfill
I believe this qualifies as a primary source; it is a direct report of company statistics from Honda. This video provides information that is directly related to the concept of the paper. http://www.youtube.com/watch?v=w7_hnjr0RGw&noredirect=1 Senegaenik, M., Vuk, D., Petrovic, N., Isljamovic, S., & Jeremic, V. (2011). Biofuels and Their Imapct on Carbon Footprint. Management, 60(), 60-67. Retrieved from https://ehis.ebscohost.com/eds/detail?vid=2&hid=20&sid=8195dd40-6e1a-4709-a3e3-036c0b36a6f4%40sessionmgr12&bdata=JnNpdGU9ZWRzLWxpdmU%3d#db=bth&AN=69815440
I believe this qualifies as a secondary source because provides information on a study directly applicable to the analysis.
Jacob, B., Welch, E., & Simms, T. (2009 , Sept). Emergent Management Strategies in a Public Agency: A Case Study of Alternative Fuel Vehicles. , 9(3), 213-234.
This is a secondary source that provided information to help with this analysis.
Retrieved from http://sustainablog.org/2009/02/enterprise-rent-a-car-adds-5000-hybrids-to-its-fleet-of-fuel-efficient-cars/
This is a secondary source which provided information to help with the analysis.
Sidhartha, G. P. (2003). . An empirical analysis on the adoption of alternative fuel vehicles:, ().

A journal used as a secondary source to help provide information with the analysis.

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