Lotus Rental Car Company is exploring options regarding adding alternative fuel vehicles to its fleet. The Environmental Protection Agency defines alternative fuels “as fuels that can replace ordinary gasoline. Alternative fuels may have particularly desirable energy efficiency and pollution reduction features. Alternative fuels include compressed natural gas, alcohols, liquefied petroleum gas (LPG), and electricity” (EPA, 2006). E85 fuel, a type of alternative fuel, is not the same as the 85, 87, 89, 91 or 92 octanes rated gasoline produced from oil seen at many gas pumps. E85 fuel is distinguished at the pump, specifically as “E85” fuel and is an alternative fuel blend of “85 percent ethanol, which comes from plants like corn, and 15 percent gasoline” (Mills, 2006). Specifically, adding E85 (Ethanol Based) fuel vehicles is advantageous to the Lotus Rental Car Company.
Henry Ford designed the first ethanol cars in the 1880’s to run on ethanol or gasoline. In the United States, ethanol–blended gasoline accounts for more than 10 percent of the total gasoline purchases. Ethanol is a product of fermented plant sugars derived from corn, potatoes, wood, waste paper, wheat and many other agricultural products and food waste. It is essentially 100 percent pure grain alcohol that is unfit to drink (EPA, 2002).
Lotus Rental Car Company faces several advantages for adding E85 fuel vehicles to the rental fleet. According to the Environmental Protection Agency, ethanol vehicles exhibit the same performance, payload acceleration and cruising speed as conventionally fueled vehicles. Consumers have a variety of choices with the availability of vans, trucks and luxury cars using E85 fuel (EPA, 2002).
The U.S. government is committed to finding alternative fuel sources and offers incentives, which include tax breaks for the automobile manufacturers and oil companies who provide E85 fuel at the pump. The current incentive for producing ethanol is 10 cents per gallon tax credit for up to 15 million gallons produced annually (U.S. Department of Energy, 2006).
The federal government offers a $2,000 tax credit per vehicle to consumers who purchase E85 fueled vehicles (Bioenergy, 2006). This tax incentive is a huge cost advantage to adding E85 fuel vehicles to the Lotus Rental Car Company.
Technology is advancing in the production of ethanol-based fuels and less energy is consumed in the production of E85. New technologies have the capability of using all types of crop waste. One of the types of technology is called “cellulosic ethanol.” Cellulosic ethanol uses the corn stalks left after harvest, grain straw, and quick growing trees like popular and willow to produce ethanol-based fuel. Cellulosic ethanol seems promising and experts hope that the technology will assist in reducing ethanol production costs (American Coalition for Ethanol, 2006).
The availability of E85 fuel is also increasing. There are 98 ethanol plants nationwide with 17 plants currently under construction. These new plants will increase the capacity to 689 million gallons, up from 3.7 million gallons. Many states are increasing the availability of E85 due to the support of incorporating programs such as “Clean Cities”. Clean Cities is a government incentive program giving businesses incentives such as tax breaks and cost initialization measures to use alternative fuels that are more environmentally safe reducing the use of petroleum. According to the U.S. Department of Energy, ethanol is now available in every state. As the government continues its support in offering more incentives to service stations and corporations who use E85 in their fleets, the availability of E85 will increase (Clean Cities, 2006).
Another advantage to adding E85 fuel vehicles to the Lotus Rental Car Company fleet is the steady increase of gasoline prices. E85 fuel is less expensive for the consumer when compared to current gasoline prices. According to a quarterly report from the Department of Energy’s Clean Cities program, in September of 2005, when gas prices peaked for the year, E85 was 36¢ cheaper on average than regular gasoline nationwide (Morrison, 2006, para. 7). In addition, experts expect E85 fuel prices to remain fair and reasonable. Steve Karnowski of the Associated Press reports, “While regular gasoline prices have been rising, ethanol prices have stayed down because of a rapidly growing ethanol supply and tax subsidies” (2005).
Adding E85 fuel vehicles to the Lotus Rental Car Company’s fleet is yet another way to express the company’s environmentally conscious attitude. E85 fuel vehicles produce lower harmful emissions and fewer toxic contaminants than gasoline. E85 fuel vehicles also reduce impacts on air quality, global warming, public health, and overall, the environment (Clean Cities, 2006). The use of E85 fuel vehicles would serve as a visible sign of Lotus Rental Car Company’s commitment to use environmentally friendly vehicles. Lotus Rental Car Company’s use of advertising with an environmentally sound theme and cheaper fuel alternatives would increase consumer incentive to use Lotus Rental Car Company.
Despite the aforementioned advantages, there are a few opposing viewpoints that stand strongly against the use of E85 fuel vehicles. The most noted disadvantage to using ethanol is the lack of vehicles that currently run on it. As of right now, approximately two-dozen vehicles can use ethanol as fuel (Karnowski, 2005). With such a shortfall of vehicles available, customers would not have the opportunity to have much of a variety to choose from when renting. The availability now may be limited to few choices; however, within the next five years, this will not be an issue because General Motors and Ford both have plans to increase production and sales of E85 fuel vehicles. According to John Mills, Editor in Chief of the Exponent, Purdue’s Independent Student Newspaper, “GM plans to produce more than 400,000 vehicles annually that can run on E85 and regular gasoline. Ford plans to sell 500,000 flex fuel vehicles by 2010” (2006).
Another major disadvantage to using ethanol is the amount of energy needed to produce E85 fuel when compared to the amount of energy E85 fuel puts out. David Pimentel, an agriculture scientist at Cornell University says, “It takes 70 percent more energy to make a gallon of ethanol than it gives off. Since much of that energy comes from oil or coal, it’s not a good alternative” (Pimentel in Joyce, 2006). David Kammen, a physicist and energy expert at the University of California Berkeley, agrees with Pimentel by saying, “It is not a massive savings, not like putting in 10 percent energy and getting out 100 percent. We find it is somewhat better than gasoline, but it’s not a home run” (Kammen in Joyce, 2005). Putting all of this information together, it means that it would take more time to travel the same distance as a vehicle using gasoline would.
The amount of money it takes to create ethanol is astonishing. H. Sterling Burnett, who is a Senior Fellow at the National Center for Policy Analysis states, “One report by the U.S. Agriculture department determined that every $1 spent subsidizing ethanol costs consumers more than $4.” Burnett goes on to say, “The costs of growing, distilling and blending ethanol into gasoline makes it 51 cents more per gallon to produce than regular gasoline” (Burnett, 2005). So, it seems that we will eventually end up paying more for ethanol than we pay for gasoline because it is more costly to make.
Another drawback to using ethanol is the shortage of ethanol fuel stations. E85 is limited in some areas of the country and the need for refueling stations is a major obstacle. Currently, there are almost 500 out of 180,000 fuel stations in the United States that offer E85, which does not seem very suitable for people who rent vehicles mostly for road travel (Environmental Protection Agency, 2006). Increased government incentives to build fuel stations offering E85 as a fuel source could make it feasible for Lotus Rental Car Company to build fuel stations for the express use of Lotus rental vehicles with the driving distance of between 300 – 400 miles between refueling. These incentives make building E85 fuel stations for the Lotus Rental Car Company fleet a strong possibility. Even with the shortage of E85 fueling stations, most E85 fuel vehicles also use gasoline. Offering customers the ability to choose their fuel source is a great advantage.
Considering all of the advantages and disadvantages of adding E85 fuel vehicles to the Lotus Car Company rental fleet, great advantages exist for the addition of these vehicles. The American people are environmentally conscientious and concerned about the pollutants given off by gasoline burning engines. Ethanol is a cleaner burning fuel and although the production costs of E85 may be greater than the production costs of gasoline, American citizens would be willing to pay a higher price for a cleaner world. Lotus Rental Car Company benefits in customer response to environmentally safe advertising campaigns.
Costs for producing E85 fuel could be a strong deterrent for not adding E85 based fuel vehicles to the Lotus Car Company rental fleet. However; the technology to develop and produce E85 fuel is relatively new and as demand increases, businesses will require new technologies to compensate for the costs. New technologies exist that are lowering the production costs and that within the next five years, production costs of E85 fuel will be dramatically lower than producing gasoline.
U.S. companies produce and develop E85 fuel. Consumers who use E85 fuel are also strengthening the American economy. Jobs and production of E85 will be American based and the United States will not be dependent upon the purchasing of oil from outside the country.
Within the next five to ten years, E85 fuel vehicles will develop into a strong competitive market. Consumers will continue to buy E85 fuel based vehicles increasing the demand for fueling stations and choice variety.
The authors’ recommend adding E85 fuel based vehicles to the Lotus Rental Car Company fleet and are of the opinion that the feasibility exists to add these cars. The advantages of using E85 fuel vehicles include: more environmentally safe emissions, cheaper fuel prices with new technological production developments, government tax incentives, and future increased usage within the next 5-10 years making the E85 fuel vehicle market demand increase. The greater demand will resolve the current challenges of fuel allocation sources. The greatest disadvantage to producing E85 fuel is that the production costs are greater than gasoline production costs. Americans are an environmentally conscious people and will invest monies necessary to new technologies to reduce production costs of E85 fuel or pay a higher price for the fuel if paying more money for E85 fuel produces a cleaner world. The advantages to adding these vehicles are stronger than the disadvantages. Vehicle cost comparison analyses are recommended for an actual cost study of current gasoline engines versus E85 based engines. Researchers are conducting studies now and the results should be posted within the next year.

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