Lotus Rental Car Case Study

Lotus Car Rental Case Study

            The car rental business is becoming more competitive every day. For a company to survive in this industry they must be adapting to the changing needs of the consumer. While some consumers may like large SUV’s, some may prefer small compact vehicles that are much more energy efficient. This can be a great time to invest in alternative fuel vehicles (AFV) to compete in the coming years. The costs associated with converting over to AFV fleets is not something that can be done overnight, and must be studied and analyzed very carefully. Determining the results to the companies operating expenses must also be considered. Lotus Rental Car must determine if converting their fleet to AFV’s is feasible and what the options, costs, and benefits will be to implement this change.

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Available Options

With the whole United States aware of global warming, the issue of ‘going green’ is on almost everyone’s minds. People are changing their habits whether it is as small as using electricity efficient light bulbs to other larger areas such as sorting and recycling their trash. Over the last few years there has been an explosion of hybrid and alternative fuel vehicles in this ‘go green’ movement. Many people are now using hybrid vehicles in an attempt to try and lessen their carbon footprint. All the major car makers now offer many hybrid and alternative fuel vehicles in order to compete with one another and for the business and loyalty of consumers. The most recognizable of all the hybrids cars is the Toyota Prius. The third generation Prius offers combined city and highway 50 mpg offering all the standard features any driver would want all for $22,800 (Toyota, 2011). Toyota also offers two of their most popular cars as hybrids as well. These two are the Camry Hybrid and the Highlander Hybrid both of which are more eco-friendly and offer more mpg than their regular counterparts. Of course not to be outdone the other major car brands offer their version of the hybrid car. Honda offers five different models of hybrid and alternative fuel vehicles or AFV. They offer their CR-Z Sport as a hybrid and their Civic as a hybrid as well as a natural gas powered vehicle. The CR-Z Sport offers 39 mpg at about $19,345 and they offer the Civic hybrid at $23,950 with 43 mpg (Honda, 2011). Honda also offers the Insight Hybrid and the FCX Clarity which is their hydrogen powered car. Another popular car maker offering hybrid and AFV’s is Ford. They currently offer the Fusion Hybrid, which starts at $28,340 and offers about 40 mpg, and the Escape Hybrid, which starts at $30,045 and offers about 34 mpg (Ford, 2011). Ford is also working on more models of electric vehicles that will be available in late 2011 and early 2012.

With all these hybrid and AFV’s available and more on the way, it is obvious that consumers are more accepting of these types of vehicles. In the long run these hybrid cars save people many on gas because they run on a different fuel source. For example, the Prius runs on both gas and electricity saving gas for the driver. It has different modes such as a battery mode where the car only runs on the cars battery saving gas and not releasing any emissions (Toyota, 2011). Along with the money saving benefits of using a hybrid, it also saves the environment by releasing less or in some cases no CO2 emissions. With technology advancing everyday, it is safe to assume that one day people will have a car that will not harm the planet while still providing all the comforts and amenities that drivers have become accustomed to.

Advantages of Alternative Fuel Vehicles

            Lotus Rental Car is looking for ways to change the rental car industry by having a fleet of Alternative Fuel Vehicles (AFV) that will use a non-petroleum based product; thus, helping protect the environment. Lotus rental car wants to covert the current vehicle fleet into an AFV. Gasoline and diesel fuels are both petroleum products, which are not environmentally friendly. Each day millions of barrels of crude oil are pumped out in different countries to supply the world number one source of vehicle fuel. The current output and use of petroleum products will create a shortage that will result in a price increase of fuel. The shortage of crude oil is another reason

            Lotus rental car is looking to for a new AFV fleet, and to help save the environment from petroleum products. Converting Lotus’s rental cars to an alternative fuel source will result in money savings by reducing the amount of gasoline purchased. Additionally, the vehicle fleet conversion will decrease the level of carbon emissions released to the environment. Building lighter vehicles is the key to produce a more efficient vehicle because the engine would not have to work as hard; thus, saving fuel.

            Lotus rental car understand the need to find another source of fuel, and the feasibility to change the fleet to AFV is attainable. Burning of fossil fuels contributes to global warming and the government continues to spend money finding ways to reduce it. Another way to help the environment is by creating an alternative fuel source that can create a clean power source. The use of oil destroys the earth’s soil; increasing soil pollution, creating problems with water and air.

            Lotus rental cars could start by changing 75% of the fleet to hybrid vehicles. The average compact hybrid vehicle has on output of 46 to 50 miles per gallon (MPG). The mid-size vehicles are not as efficient, but they provide between 30 and 34 MPG. Comparing the larger vehicles and sport utility vehicles the mileage is below 30 MPG mainly because of the vehicle size and weight. The Toyota Highlander has the best MPG of any larger vehicle at 27 MPG in the city. The United States produces one third of the nation’s carbon emissions through the use of transportation vehicles. Lotus rental cars could help reduce the pollution and the carbon emissions that affect the environment and are part of the global warming problem.

            Electric vehicles are another alternative for Lotus rental cars; however, they can do it only if there are sufficient electric stations in the geographical area where the vehicles are rented. Some of the benefits of electric vehicles: do not have to change oil or provide a tune up. These vehicles do not have the same components as a gas engine vehicle; therefore, they do not have radiators and are lighter. The vehicles battery could be recharge in high voltage fast charging unit in fewer than 20 minutes but consumers would have the final say on the convenience of the vehicles.

Disadvantages of Alternative Fuel Vehicles

The use of alternative vehicles sounds like a good idea; after all we all want to do our part in cleaning up and keeping the environment healthy for everyone. In adding a fleet of alternative vehicles to a rental company line of vehicles, the management will need to consider the higher expense and the practical use. Before adding alternative vehicles, a rental car company will need to know the pros and cons of this giant step. Some disadvantages of alternative fuel are;

  • The company and customers will have make a lot of sacrifices and forgo several things that a normal fuel based car can offer them.
  • Alternative fuel vehicles are very expensive
  • Alternative fuel vehicles require specific gas stations in order to fuel it
  • Alternative fuel vehicles are not  fit for long distance travel
  • Alternative fuel is available at premium costs
  • Parts replacement can be very pricey
  • The refueling and the starting time of alternative fuel vehicles are longer, while the driving range is shorter than in a conventional vehicle
  • Alternative fuel vehicles produce more nitrogen oxide emissions
  • Higher cost of  corn and other plants and recourse , by the consumer due to their being used for alternative fuel production.

“The truth about the manufacture and operation of alternative fuel vehicles is, as with everything else in life, it carries a mixed bag of both benefits and costs.” In today’s society there is a never ending quest to reduce our carbon footprint, in doing so we must consider the outcome of doing so. Be it Ethanol, Propane, Natural Gas, Biodiesel, Electricity or Hydrogen there is an intense debate over the production and use of alternative fuel for powering our vehicles among scientists and activists alike, arguing on both sides for and against this development  . It is imperative that in today’s modern society that we understand the disadvantages as well as the advantages of using alternative fuels to power our way of life. These disadvantages of alternative fuel is meant to present the other side of the production not to disprove or discourage the concept, this is just to lay the facts out. 

Conclusion

There are advantages and disadvantages of adding alternative fuel vehicles to Lotus’ fleet of rental cars. On one hand, alternative fuel vehicles may be beneficial to the environment and could also lead to Lotus’ positive image as an advocate for environmentally-friendly modes of transportation. On the other hand, the rate of converting the fleet of rental cars to alternative fuel vehicles is costly and keeping the vehicles maintained comes at a high price.

In today’s society people are more cognizant about the environment. The car rental industries have already assimilated “green” vehicles into their fleets to cater to the consumers. By converting our rental car line to a full fleet of alternative fuel vehicles, not only will Lotus Rental Car create a niche as an exclusively alternative fuel vehicle rental company, but will also promote the well-being of the environment.

However, as mindful as consumers are with the welfare of the environment, there may be another thing that everyone cares more about: financial security. Just because Lotus Rental Car is converting the fleet to eco-friendly vehicles does not mean the company is being economical, financial-wise. Alternative fuels vehicles are high-priced and high maintenance and this may drive the company to increase the rates and fees.

Ultimately, it is important to maintain steady cash flow to keep a business running. And one way of achieving that goal is to always cater to the needs of our consumers. The benefits and disadvantages of converting the fleet to alternative fuel vehicles have already been analyzed. But at the end of the day, Lotus Rental Car need to keep in mind what really matters more to the consumers: eco-consciousness or affordability. 

Reference

http://www.ehow.com/about_disadvantages-alternative-fuel-vehicles.

Ford. (2011). Ford- New Cars, Trucks, SUVs, Hybrids, & Crossovers. Retrieved from: http://www.ford.com/

U.S. Environmental Protection Agency. Fleet Alternative Fuel Vehicle Acquisition Report for Fiscal Year 2009. Retrieved February 3, 2011 from: http://www.epa.gov/greeningepa/documents/2009afvreport_508.pdf

Honda. (2011). Honda Hybrid & Alternative Fuel Vehicles. Retrieved from: http://automobiles.honda.com/alternative-fuel-vehicles/

Toyota. (2011). The 3rd Generation Toyota Prius Hybrid. Retrieved from http://www.toyota.com/prius-hybrid/

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