Taxi Paper


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Taxi Paper

  1. 1. Ta x i o f To m o r r o wWhere are we going? Green Accounting Spring 2012 1
  2. 2. Team Members: Stefano Vrespa Jessica Esposito Scott Miller Chuck Samul Carlos Coella 2
  3. 3. Background 5 A Cab history 5 PlaNYC and the Taxi of Tomorrow 6Financial Analysis 8 What’s under the hood 8 e analysis 11 Our results 13“e Medallion lease model” 14 A different proposal 14Environmental Analysis 15 A non explosive phase out 15 Our results 16Taxi of Yesterday? 17 e real deal 17 Food for ought 17e Wild Car(d) 18 An electric future 18 3
  4. 4. 4
  5. 5. year Nissan NV200 phase-in. In light of our economic and environmental analysis we question some of the decisions the current administration made in regard to the “Taxi of Tomorrow.” We have proposed and evaluated a new type ofB a c k g ro u n d ownership model that could foster the adoption of hybrid vehicles, thus decreasing the taxi In May 2011, Mayor Bloomberg officially fleet’s green house gas (GHG) emissions.announced the “Taxi of Tomorrow” finalist Finally, we end our report by briefly discussingvehicle model that will be replacing all of the the challenges and the uncertainties of acurrent fleet of 13,237 NYC taxis. However the potential future electric taxi fleet.Nissan NV200 hitting the streets in 2013 hasimplications for the environment that make it A C a b historylook more like the Taxi of Yesterday. In the New York City has had motorized publicfollowing report, we discuss a financial and taxi service since 1897; ironically those originalenvironmental analysis of the current NYC taxi taxis were the electric vehicles of the Electricfleet and the future Nissan NV200 minivan. Carriage and Wagon Company. However whene primary objectives of this analysis were to the company went bankrupt in 1907, the city’sunderstand if there are economic factors driving taxi fleet was quickly converted to gasoline-the current vehicle-type mix, to identify the powered vehicles imported from France.economic advantages between hybrid, non- Within a decade, American companies likehybrid and future fleet vehicles, and to General Motors, Ford Motor Company, anddetermine environmental impacts over the five- the Checker Motors Corporation quickly began 5
  6. 6. manufacturing and operating fleets1 . New York decades, with medallions that might have costCity’s iconic yellow taxis have been petroleum $10 in 1930 now reportedly selling for as muchfueled ever since. as $1,000,000 in 20114 . By the 1930s, the number of cab drivers PlaNYC and the Ta xi ofsoared over 30,000. During this time, the taxi Tom or row“medallion” system that is in place today wasintroduced to mitigate concerns about the In 2007 Mayor Bloomberg introducedproper maintenance and reliability of vehicles PlaNYC, a long-term sustainability plan forand drivers, as well as the surplus of vehicles on NYC which set the ambitious goal of reducingthe city’s increasingly congested streets. e green house gas (GHG) emissions by 30 % byHaas Act signed by Mayor La Guardia in 1937 2030. With passenger vehicle emissionsintroduced a formal medallion system of taxi making up approximately 18% of all GHGlicenses, limiting the number of licenses emissions in New York City5, a key piece of thisavailable and thus restricting the number of plan was phasing in more energy efficient taxicabs on the road2 . is quantity has fluctuated models than the highly inefficient Ford Crownbetween roughly 11,000-17,000; today the Taxi Victoria that dominates the taxi fleet. To& Limousine Commission (TLC) has limited encourage the adoption of hybrid vehicles, thethe number of licenses to 13,237 medallions3 . Mayor’s Office offered incentives in the form ofis mandated supply restriction has caused the reduced prices on medallions for hybrid taxis,cost of a medallion to rise considerably over the and attempted to impose a 30-mpg fuel1 of New York, Inventory of New York City Greenhouse Gas Emissions, September 2011, by Jonathan Dicksonand Andrea Tenorio. Mayor’s Office of Long-Term Sustainability, New York 2011 6
  7. 7. economy requirement for new taxi vehicles 2009, the project was aimed at developing alicensed in 2009. At the time, only hybrid new, uniform blueprint for NYC’s iconic yellowvehicles fulfilled this condition, which weremore expensive than conventional taxi modelsand many fleet operators were skeptical of theirreliability and durability as a high mileage taxivehicle. As we will discuss in detail in ourfinancial analysis, another key piece of this issueis that while individual hybrid taxi owner-operators realized cost savings immediately atthe pump, fleet operators (whose contracted taxi fleet that incorporated the priorities of keydrivers bear the cost of gas) do not. As a result, city stakeholders including taxi drivers, owners,fleet operators filed suit against the Mayor’s fuel passengers and city residents. e TLCefficiency requirements and hybrid incentives, surveyed taxi passengers and solicited designwhich was eventually upheld in the US 2nd proposals from vehicle manufacturers, whichCircuit Court of Appeals. at court ruled that resulted in three finalists. In May 2011, thethe city’s attempts violated the pre-emption Mayor’s Office and TLC announced that theclauses of the Energy Policy Conservation Act Nissan NV 200 was officially selected as the(EPRC) and the Clean Air Act (CAA), and “Taxi of Tomorrow.” Our analysis compares theblocked the City from enacting these initiatives. financial and environmental implications of the As a result, the Mayor’s Office and TLC current taxi fleet and the Nissan NV200.considered another way to increase the We h a v e c o n s i d e re d s e v e r a l k e yefficiency of their taxi fleet that focused on stakeholders impacted by this initiative. TLC isphasing out the gas-guzzling Crown Victoria: interested in administrative ease and a stylishthe “Taxi of Tomorrow” project. Introduced in 7
  8. 8. Financialreplacement to the iconic Crown Victoria. eMayor’s Office has aggressive GHG reductiongoals and is eager to replace the inefficient Anal ys i sCrown Victoria fleet. Sur veyed taxi riders prioritize Wh a t ’ s un d e r t h e hoodsustainability, passenger comfort and safety. In following section we discuss andAnd perhaps the most notable of these evaluate the results of a Net Present Valuestakeholders, particularly in our financialanalysis, are the taxi owners and driversthemselves. Owner-operators are especiallyinterested in operating costs, while fleet ownersare most concerned with acquisition andmaintenance costs. (NPV) analysis performed for the varying models of the current fleet, and future Nissan NV200 fleet. e analysis highlights some of the potential factors that drive the vehicle choice in terms of fuel efficiency across four m e d a l l i o n ow n e r s h i p t y p e s , a n d t h e environmental implications in terms of GHG emissions, particularly in light of PlaNYC 2030’s GHG emissions reductions goals. 8
  9. 9. For our analysis, we evaluated five model doesn’t take into account any initialdifferent vehicle models from the current fleet. medallion investment. is simplification isese five models, which include three mainly due to the medallion’s price volatilitygasoline-powered and two hybrid-electric over the past 20 years – most recentlymodels, were selected for the analysis because skyrocketing to $1,000,000 – as well as thethey represent a high percentage of the current medallion’s ownership timeframe that variestaxi fleet, their variations in fuel efficiency, and greatly among owners.other factors such as ADA requirements. e Moreover, this cost would not affect eitherfleet sample considered in our model includes the results or the decision among differentthe following vehicles: vehicles if we evaluate the cost of the medallion • Ford Crown Victoria, 58% of the total as an occurred expense – equal throughout each current fleet (16 mpg city); type of ownership model. • Ford Escape Hybrid, 26% (33 mpg); ere are currently four types of • Toyota Sienna, 9% (17 mpg); ownership models that potentially affect the • Toyota Camry, 4% (22 mpg); medallion owner’s vehicle choice, and thus the • Toyota Prius Hybrid, 2% (51 mpg). fuel efficiency of the vehicle. e four types of e future Nissan NV200 fleet will medallion ownership include the following6 :consist of a single, non-hybrid model, rated at • Owner operated only: the medallion25 mpg city, which will replace the current fleet owner drives his own vehicle and pays for gas;over a 5-year phase-in period starting in 2013. • Owner operated and leased: the Before discussing the primary medallion owner drives his own vehicle andassumptions and hypothesis that will drive our pays for gas, and leases it to a second driverfinancial and environmental conclusions, it is for an extra shift (who pays for their ownimportant to emphasize that our financial gas);6 9
  10. 10. • Fleet-type: the corporate medallion month, split among the drivers; owner pays the drivers (average 3 per car) • tips, 15% of the total gross revenue; based on the shift length – usually 2080 • number and duration of shifts, in hours per year, drivers pay for gas; proportion to a hypothetical 24-hour shift; • Long-term lease: the medallion owner • salary, for the fleet-type and the owner leases the car (2 drivers per car on average), operated and leased model; drivers pay for gas. • cab lifespan: 5 years for owner-operators Because we performed an NPV analysis and long-term leases, 3 years for fleet-typefrom a vehicle-owner point of view, these ownership7;differences among ownership models are critical • gross revenue divided between driverto our assessment. We have assumed annual and owner for the long-term leasing model8 .gross revenue per vehicle to be $145,200 and ese differences will impact the cash-flowan average of 64,600 miles driven per vehicle analysis per ownership model and type of careach year. and they could potentially affect the vehicle Under this assumption, the contractual choice.differences among models have a significant Across the four ownership models, gasimpact on the owner’s gross revenue costs always fall on the driver, whether theindependently from the vehicle choice. us, to driver is the owner-operator, paid by a companyperform an NPV comparison among vehicles (fleet-type), or if he leases medallion andand ownership models we considered the vehicle (long-term lease). While the medallionfollowing parameters: owner always pays the vehicle expenses, the cost • a medallion loan of $1,500 total per of gas will affect only the drivers’ income. is7Per TLC requirements, cars brought into service as cabs must be new models and must be replaced every 3-5years. Fleet-type cabs are usually driven by “unspecified drivers” and must be replaced every 3 years. ( 10
  11. 11. particular variation across ownership models this document.appeared to be the major factor driving our As displayed in Figure 1 there is a clearresults, and potentially the economic driver economic incentive for the owner-operator tobehind the owner’s choice in vehicle. chose a hybrid vehicle instead of a non-hybrid Other minor factors that we considered model even under the current gas price. ein our models were: economic incentive is directly proportional to • straight line depreciation; the average miles driven per year and to the cost • zero salvage value after 3 or 5 years, of gas, and is particularly evident for the first depending upon the conditions previously parameter due to the high number of miles cited; driven each year. On the other hand, for the • maintenance and repair costs other two types of medallion ownership (fleet- proportional to the average miles per year9 ; type and long term lease), there is no clear • drivers license, vehicle taxi conversion, economic incentive that drives the choice insurance costs. between vehicles and therefore there must be other contributing factors, such as maintenanceThe a n a l y s i s costs or reliability, which influence the vehicle choice. e tables following include taxi data, e cost of gas, which is covered by theownership data and assumptions. e complete driver, then becomes the primary incentive justanalysis is an Excel matrix calculating the NPV for one type of owner’s category – owner-for each of the 6 vehicle types and for each of operated cabs—responsible for roughly onethe 4 ownership models, which is attached to9,,, 11
  12. 12. third of the total taxi fleet. occurring according to the 2006 Taxi Two additional results driven by Factbook10 . Secondly, there is a clear economic economic incentive can easily be seen, First of incentive for an owner-operator to lease their all, there is an economic incentive for the cab for a second shift and retain part of the medallion owner to switch from the fleet-type earnings. In light of these conclusions, we to the long-term lease, a trend that is already propose a potential solution to incentivize the adoption of hybrid vehicles by intervening on the dichotomy between who buys the car and who pays for the gas. Financial data by ownership typeAdditional assumption for ownership types Vehicle data 10 12
  13. 13. O u r results $280,000 $260,000 $240,000 $220,000NPV - 5 years - 1 car $200,000 $180,000 NPV - Owner Operated NPV - Fleet Type NPV - Long term leasing $160,000 $140,000 $120,000 $100,000 $80,000 FORD "Crown FORD "Escape" TOYOTA "Prius" TOYOTA "Sienna" TOYOTA "Camry" NISSAN NV200 Victoria" –owner operated with extra shift – $280,000 $260,000 $240,000 $220,000 NPV - 5 years - 1 car $200,000 $180,000 NPV - Owner Operated NPV - Fleet Type NPV - Long term leasing $160,000 $140,000 $120,000 $100,000 $80,000 FORD "Crown FORD "Escape" TOYOTA "Prius" TOYOTA "Sienna" TOYOTA "Camry" NISSAN NV200 Victoria" –owner operated without extra shift – Figure 1 – NPV analysis per type of vehicle and ownership model 13
  14. 14. revenue certainty that will yield a net income equal to or almost equal to (due to a lower business risk) their current one. e driver will only be incentivized to pursue this model by a vehicle-based EBIT at least similar to his actual gross revenue.“The Medallion Even by running our analysis under thelease model” most favorable conditions – using the lowest NPV for the medallion owner, using the vehicleA d i f f e re n t proposal that would grant the highest EBIT (Prius), and using the lowest driver gross revenue (fleet-type e idea behind this proposed model is to model) – there is a lack of financial incentivemerge the responsibilities of car buyer and gas for the driver to pursue this model.payer (the driver) in order to incentivize the Incentives such as a lower tax rate, gasintroduction of hybrid cabs (Prius in primis). discount, or other fuel efficiency-basedis choice would be driven by the notable incentives are needed to support the driver andNPV (or EBIT) difference among the hybrid influence the adoption of vehicles with higherand non-hybrid vehicle types, even with the fuel efficiency. A potential next step for thiscurrent gas price. We expect the primary effect proposed model could be the analysis ofof this proposal to be the increased adoption of different incentive options and their impacts onhybrid models within the current fleet and thus the hybrid adoption rate and overall GHGthe overall reduction of GHG emissions, in line emissions.with PlaNYC 2030 emission reduction targets. To effectively pursue this model themedallion owner needs to be incentivized by a 14
  15. 15. actual vehicle adoption rate) is 425 grams of CO2e per mile, and the future average emission rate will be 431 grams of CO2e per mile. While this will not result in a significant change in emissions levels, it is interesting to see how the Nissan NV200 phase-in is likely to be overE n v i ro n m e n t a l the next five years and the impact of the currentAnal ys i s fleet’s phase-out. Despite the high proportion of high-emitting Crown Victoria models thatA non explosive phase dominate the current fleet,out Upon the assumption that every owner is willing to maximize their revenue, or that they In light of PlaNYC 2030’s GHG emission are pursuing the highest NPV value – meaningreduction targets, we have analyzed the that the owner-driver model absorbs entirelyemission levels of the current fleet and the effect the hybrid vehicle percentage (roughly 28%) –of the NissanNV200’s five-year phase-in period the main assumption is a linear phase-outbeginning in 2013. starting in 2013. It is important to underline Overall, the the different lifespan between the fleet-type Nissan NV200 model (3 years) and the long-term lease model phase-in will (5 years), both based on non-hybrid models. result in slightly higher emission levels; the current average emission (weighted by the 15
  16. 16. O u r results As shown in Figure 2, the phase-out ratefor the non-hybrid fleet is accelerated becausefleet-type vehicles, which are assumed to benon-hybrids, are replaced more frequently. usoverall GHG emission levels are initiallylowered between 2014-2015 as gas guzzlingFord Crown Victorias (16 mpg) are replacedwith the more efficient Nissan NV200 (25mpg). However in 2017 when the phase-in iscomplete, overall GHG emissions will riseabove current levels as hybrid models (33-51mpg) are replaced by the lower performanceNissan. !400,000! !356,000! !350,000! !354,000! Tons&CO2&equiv.&/&Taxi&model2 Total&Tons&CO2&equiv.2 !300,000! !352,000! FORD!1Crown!Victoria1 !250,000! !350,000! FORD!1Escape1 !200,000! TOYOTA!1Prius1 !348,000! TOYOTA!1Sienna1 !150,000! TOYOTA!1Camry1 !346,000! NISSAN!NV200 !100,000! total!CO2!eq.!emission !344,000! !50,000! !+!!! !342,000! 2012 2013 2014 2015 2016 Figure 2 – Emissions levels during 5-year Phase-in Period 16
  17. 17. Ta xi of Food for ThoughtYesterday ? Interestingly, the Nissan NV200 is currently sold in Europe with a diesel engineThe real deal rated at 54 mpg, in compliance with the current European fuel efficiency requirements. Based on the financial and environmental Despite the difference in engine (gasoline vs.results of our analysis, it is difficult to diesel), it is difficult to understand why NYCunderstand what factors drove New York City’s would not pursue this model, with nearlychoice for the future taxi. double the fuel efficiency. A public survey of 23,000 NYC taxi ridersfound that the top three priorities were: 1. environmental sustainability; 2. passenger comfort; 3. safety11. e Nissan NV200 is a considerableimprovement over the gas-guzzling CrownVictoria, and did boast the highest fuelefficiency of the three finalists. However thismodel is clearly a step backwards from the highefficiency hybrid fleet that has been gainingtraction in the NYC taxi fleet in recent years.Regrettably, the current Nissan NV200 fallsshort of taxi riders’ top priority.11 17
  18. 18. The W ild electric motor as the 2012 Nissan Leaf12 . e e-NV200 Concept model is slated toCa r( d ) have a similar range to the Leaf (70-100 miles). Using a Level 2 charging station, this wouldAn el ectri c future require 7 hours of charging time. is is a considerably lengthy time requirement for a While the Taxi of Tomorrow finalists were cab, and would severely limit driver shift times.not explicitly judged on environmental To mitigate this potential concern, Nissan isattributes, one factor noted in choosing the currently working on the development ofNissan NV 200 was the anticipated availability quick-charging ports that can charge to 80%of an all-electric NV200 model by 2017. capacity in 30 minutes.Nissan has also stated that the NV200 gas  e fi n a n c i a l a n d e n v i ro n m e n t a lmodel can be easily retrofitted to an electric implications of the transition from gas-poweredengine, once the technology becomes available. to electric-powered vehicles are difficult toNissan, who already manufactures the all- determine without knowing the future energyelectric Leaf, is eager to establish itself as a profile or rates of the electric grid. Accordingleading electric car manufacturer. to the most recent EPA eGRID data, NYC’s In anticipation of a potential electric fleet, electricity grid mix is primarily nuclear (43%),TLC, city officials and Nissan are piloting six gas (34%), and oil (20%)13 . Further analysis ofall-electric Nissan Leaf taxis beginning in 2012. the emissions outputs from the grid would beis pilot program is intended to test the necessary to determine whether electric vehiclesperformance of EVs under typical high mileage are the right choice for NYC.conditions. e Nissan e-NV200 will have thesame 24-kWh lithium ion battery and 80-kW12 18