Business Case Still Tough To Make

Dunn Lumber was focused on the environment when it bought the T300 hybrid with its $20K price premium, and didn't try to make a business case for it. There really isn't one, mostly because the truck doesn't run enough miles - only 12,000 a year - to capitalize on its fuel efficiency. Tax credits of $4,500 to $12,000 for a heavy hybrid (which in federal terms is a truck or bus weighing over 8,500 pounds) help some buyers, but not in this case.

Here's some math based on fuel savings alone: Geyer says the hybrid's been getting 6.85 mpg in its urban delivery duties, so it will consume 1,751.82 gallons over 12,000 miles. Other 32,000-pound-GVW trucks in the fleet get 5.03 mpg, so each burns 2,385.69 gallons a year. Multiply each of those gallon numbers by $3.25, which is about what Dunn has been paying for fuel, and we see that the bill to feed the hybrid will be $5,693.43 compared to $7,753.50 for a straight diesel truck.

Thus annual fuel savings are $2,060.06 - a nice piece of change, but at that rate it'll take 10 years to pay off the $20,000 upcharge for the hybrid system. If it ran 24,000 miles a year, the payback would come in five years, and at 50,000 miles annually its premium would be recovered in two and a half years. Rising fuel prices would also reduce the payback time.

Now let's factor in a $12,000 tax credit allowed by the Internal Revenue Service. That would cut the hybrid's extra cost to $8,000 and the payback time to four years. But Dunn can't get the credit because its Kenworth-Eaton hybrid is not on the IRS' list of certified vehicles. Certain walk-in vans assembled by Freightliner Custom Chassis, and utility and P&D trucks made by International, all using Eaton hybrid systems, as well as certain automobile hybrids and alternative-fuel cars and trucks, are on the list (at www.irs.gov/businesses/article/0,,id=175456,00.html). Kenworth says it's working to get its hybrid certified.

By the way, the $20,000 premium paid by Dunn is 37.5 percent of the T300's chassis price of about $75,000. That's not bad, as fleets running prototype and pre-production hybrids say they paid 50 to 100 percent more than for straight diesel trucks. Their components - especially the lithium-ion batteries - are expensive due to their low production volume, manufacturers explain.

However, Eaton has announced that it's putting its hybrid system into regular production, and will buy more components from its suppliers. Kenworth, Peterbilt, Freightliner and International say they will begin assembling hybrids as part of regular production in March. Regular production should lower prices, which in turn will tempt more orders, which will bring on more volume, and so on. Eventually the business case should begin to shine, with or without tax credits.