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CtB vs CtO: Why greening taxis?

June 25th, 2008 · No Comments

A brief discussion about the economic imperatives for greening the nation’s taxi fleets. But, first, acronym definition:

  • CtB: Cost to Buy: acquisition price, how much to purchase something
  • CtO: Cost to Own: total ownership costs, from purchase through operating to disposal

Quite simply, moving our collective mindset from CtB to CtO is a societal imperative.

But, to question of greening taxi fleets: When it comes to these issues, while the CtB is slightly higher, the CtO figures are overwhelming for moving taxi fleets (rapidly) toward hybrids or other high-fuel efficiency vehicles. This is something that should be happening nearly everywhere in the country. Now!!!!

Yet, obstacles exist …

Earlier this year, EnviroCab started service in Arlington, Virginia. This is an all hybrid, 50-taxi company and, simply, my favorite taxi service. Each time (not that often) I’ve been in one, the conversations with the drivers have been interesting. And, quite simply, the drivers are the most enthusiastic drivers about their vehicles that I’ve ever encountered in a taxi. What are some things glistened from these conversations?

  • Drivers report massive gasoline savings. Last discussion with a driver (who claims that every day, he keeps data on miles driven, gas bought, etc …), he claimed that he had a $5000 fuel savings in the previous four months. (Scary, no?) He had moved from averaging 12-mpg in a sedan to averaging 36-mpg in a Ford Escape Hybrid. (Note, this driver had ‘cut back’ on his hours to only about 70 / week.)
  • Drivers own own vehicles. Drivers report that, when they started, other drivers thought that they were insane. Now (past several months), they all say that other drivers are talking with them about getting hybrids.
  • Drivers claim something not surprising, but perhaps unexpected: they believe that they have higher demand and are getting higher tips. (The ‘keep data’ driver said that he is averaging 20% higher tips, across all his driving. This is a very good driver, who is very conscientious about how to build business and play people with tips.)
Re Arlington, in addition to the 50 all-hybrid EnviroCab, the Sept 2007 approaval also had 35 hybrids going into existing cab companies. Arlington has a very good mayor re energy issues with a number of good iniatives/programs. (See, for example, If all counties were Arlington, we’d be Energy Smart …. For more, see The Green Miles (including on taxis) and and Arlington County’s green site.)
Arlington County is not alone in greening taxis. With far greater national attention, New York City is slowly introducing hybrids, with about 200 out of a total fleet of 13,000. A year ago, Bloomberg announced that NYC would required all cabs to be hybrids by 2012. At that time (with gasoline prices quite a bit lower), NYC estimated that drivers would save $10k/year in gasoline. (Note: hybrids have other savings, such as reduced brake wear, that we won’t raise here.)
Fostering a move toward hybrid (or at least, for technology neutrality reasons, high-fuel efficiency) vehicles is a clear public good.
  • Reduce gasoline use
  • Reduce pollution (exhaust, noise)
  • Reduce the cost of the taxi service (reducing requirements for future rate increases while providing for a better living for drivers / profits for owners (shared future savings?))
  • Improve quality of vehicles (if there is forced modernization program)
And, unlike calculation the payback periods for the standard driver, taxis are driven so much that the payback period is literally a few months for the difference between a standard car and a hybrid. And, the fuel savings can pay for the entire vehicle (not just the hybrid system) in just a few years.
Now, moving toward high-fuel efficiency vehicles seems to make huge economic sense, no? Pay for a car, that you might drive 10 years, just with gasoline savings in just two or three? That is amazing. The problem in many localities: the drivers lease the vehicles but pay for gasoline. This is a classic renters’ dilemma, with the landlord (taxi fleet owner, in this case) having near zero incentive for energy efficiency and the tenant (the driver) having little reason to invest in energy efficiency due to the uncertainty of payback (since the driver likely won’t have the same car two days in a row). This is a real challenge but might suggest a need to allow fleet owners to charge (slightly) higher rents for fuel efficient vehicles.
In any event, it is clear that, at least in situations where cab drivers own their cars that going to hybrid (high-fuel efficiency) taxis is:
  • Good public policy
  • Good business for drivers (and early adopter companies: more business, EnviroCab is a good ‘brand’)
Now, the question to ask: Why not everywhere? Why not ASAP? Why not simply, as per Mayor Bloomberg, mandate such a change? There are, of course, obstacles from lack of understanding, dismissiveness of the benefits, and entrenched interests (such as fleet owners who don’t want to change their vehicles and don’t want the competition to have an edge).
To try to get past this, there are some who are striving to get incentives put into place, to pay fleets / drivers to introduce hybrids to their taxi fleets, such as being suggested by some in Washington, DC. To be bluntly honest, I see zero reason that the taxpayer should subsidize such a move. At $10k per year in fuel savings (remember, this was calculated below $3 gallon / gasoline, thus $13k+ now?), fuel savings alone would fully pay for a new hybrid vehicle in 2-3 years. (Prius at about $23k, Escape at $28k for new model.)
Perhaps, facing the barriers in place, it could make sense to have a loan program for driver-owners to foster a quicker move. Some might say, “the drivers can’t afford the hybrids.” Well, perhaps they can’t afford the CtB (Cost to Buy) but not only can they better afford the CtO (Cost to Own), the CtO penalties for fuel inefficiency are so great with $4+ gasoline that they can’t afford not to go hybrid/fuel efficiency. The financial benefits are so extreme, however, that I believe that there should be mandated change as per Mayor Bloomberg in NYC, to high-efficiency vehicles. (With, perhaps, exception granted for specific requirement vehicles … but note that Ford Escape can handle physically disability passengers.) (Note: high-efficiency rather than hybrid, make requirement technology neutral. How about 30 mpg or better for all new taxicabs as a starter?) Again, perhaps with a loan program to enable those who don’t have $25-30k cash-on-hand to be able to rapidly gain the CtO benefits.
And, there is a related issue within DC and many other communities. There is what seems to be lax enforcement and weak regulation of cabs. The DC cabs are often old, poorly maintained deathtraps. They are even more fuel inefficient than ‘average’, which makes the shift to hybrids/higher efficiency even higher payback. (Which suggests the value of mandating retirement of old cabs as part of hybridization of the taxi fleet. The benefit would be multipled. Not only paying for vehicles through greater fuel efficiency, but reduced cost of repairs, reduced breakdowns, reduced public safety risk from dangerous vehicles, reduced pollution, etc …) Moving to hybrid/high-fuel efficiency vehicles as the norm for taxi fleets is a massive win-win-win space for the community and the taxi businesses.
This is a win that should be possible without insertion of significant amounts of taxpayer resources. Again, look at the numbers. There is no reason for the taxpayer to pay for this. Want a loan program to speed it and enable drivers to have a fair shake at access at new cars? Absolutely. But, the fuel savings alone can make this a no-brainer. America’s taxi-fleets should be going hybrid and going hybrid fast, they are the portion of the economy where this technology makes the most financial sense TODAY. We should make it happen.

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