taxi of tomorrow

7/29/2019 Taxi of Tomorrow

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Ta x i o f To m o r ro w W h e r e a r e w e g o i n g ?

1

Green Accounting

Spring 2012


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2

Team Members:

Stefano Vrespa

Jessica EspositoScott Miller

Chuck Samul

Carlos Coella


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Background 5

A Cab history 5

PlaNYC and the Taxi of Tomorrow 6

Financial Analysis 8

Whats under the hood 8

e analysis 11

Our results 13

e Medallion lease model 14

A different proposal 14

Environmental Analysis 15

A non explosive phase out 15

Our results 16

Taxi of Yesterday? 17

e real deal 17

Food for ought 17

e Wild Car(d) 18

An electric future 18

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Background

In May 2011, Mayor Bloomberg officially

announced the Taxi of Tomorrow nalist

vehicle model that will be replacing all of the

current eet of 13,237 NYC taxis. However the

Nissan NV200 hitting the streets in 2013 has

implications for the environment that make it

look more like the Taxi of Yesterday. In the

following report, we discuss a nancial and

environmental analysis of the current NYC taxi

eet and the future Nissan NV200 minivan.

e primary objectives of this analysis were to

understand if there are economic factors driving

the current vehicle-type mix, to identify the

economic advantages between hybrid, non-

hybrid and future eet vehicles, and to

determine environmental impacts over the ve-

year Nissan NV200 phase-in.

In l i gh t of ou r ec on om ic an d

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 of

ownership model that could foster the adoption

of hybrid vehicles, thus decreasing the taxi

eets green house gas (GHG) emissions.

Finally, we end our report by briey discussing

the challenges and the uncertainties of a

potential future electric taxi eet.

A Cab history

New York City has had motorized public

taxi service since 1897; ironically those original

taxis were the electric vehicles of the Electric

Carriage and Wagon Company. However when

the company went bankrupt in 1907, the citys

taxi eet was quickly converted to gasoline-

powered vehicles imported from France.

Within a decade, American companies like

General Motors, Ford Motor Company, and

the Checker Motors Corporation quickly began

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manufacturing and operatingeets1. New York

Citys iconic yellow taxis have been petroleum

fueled ever since.

By the 1930s, the number of cab drivers

soared over 30,000. During this time, the taxi

medallion system that is in place today was

introduced to mitigate concerns about the

proper maintenance and reliability of vehicles

and drivers, as well as the surplus of vehicles on

the citys increasingly congested streets. e

Haas Act signedby Mayor La Guardia in 1937

introduced a formal medallion system of taxi

licenses, limiting the number of licenses

available and thus restricting the number of

cabs on the road2. is quantity has uctuated

between roughly 11,000-17,000; today the Taxi

& Limousine Commission (TLC) has limited

the number of licenses to 13,237 medallions3 .

is mandated supply restriction has caused the

cost of a medallion to rise considerably over the

decades, with medallions that might have cost

$10 in 1930 now reportedly selling for as much

as $1,000,000 in 20114 .

PlaNYC and the Taxi of

Tomorrow

In 2007 Mayor Bloomberg introduced

PlaNYC, a long-term sustainability plan for

NYC which set the ambitious goal of reducing

green house gas (GHG) emissions by 30 % by

2030. With passenger vehicle emissions

making up approximately 18% of all GHG

emissions in New York City5, a key piece of this

plan was phasing in more energy efficient taxi

models than the highly inefficient Ford Crown

Victoria that dominates the taxi eet. To

encourage the adoption of hybrid vehicles, the

Mayors Office offered incentives in the form of

reduced prices on medallions for hybrid taxis,

and attempted to impose a 30-mpg fuel

6

1 http://en.wikipedia.org/wiki/New_York_taxi#Late_1890s_-_The_Electric_Era

2http://www.nytimes.com/1996/05/11/nyregion/medallion-limits-stem-from-the-30-s.html

3 http://www.nyc.gov/html/tlc/html/home/home.shtml

4http://cityroom.blogs.nytimes.com/2011/10/20/2-taxi-medallions-sell-for-1-million-each/

5 City of New York,Inventory of New YorkCity Greenhouse Gas Emissions, September 2011,by Jonathan Dicksonand Andrea Tenorio. Mayors Office of Long-Term Sustainability, New York 2011
http://cityroom.blogs.nytimes.com/2011/10/20/2-taxi-medallions-sell-for-1-million-each/http://cityroom.blogs.nytimes.com/2011/10/20/2-taxi-medallions-sell-for-1-million-each/http://cityroom.blogs.nytimes.com/2011/10/20/2-taxi-medallions-sell-for-1-million-each/http://cityroom.blogs.nytimes.com/2011/10/20/2-taxi-medallions-sell-for-1-million-each/


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economy requirement for new taxi vehicles

licensed in 2009. At the time, only hybrid

vehicles fullled this condition, which were

more expensive than conventional taxi models

and manyeet operators were skeptical of their

reliability and durability as a high mileage taxi

vehicle. As we will discuss in detail in our

nancial analysis, another key piece of this issue

is that while individual hybrid taxi owner-

operators realized cost savings immediately at

the pump, eet operators (whose contracted

drivers bear the cost of gas) do not. As a result,

eet operators led suit against the Mayors fuel

efficiency requirements and hybrid incentives,

which was eventually upheld in the US 2nd

Circuit Court of Appeals. at court ruled that

the citys attempts violated the pre-emption

clauses of the Energy Policy Conservation Act

(EPRC) and the Clean Air Act (CAA), and

blocked the City from enacting these initiatives.

As a result, the Mayors Office and TLC

considered another way to increase the

efficiency of their taxi eet that focused on

phasing out the gas-guzzling Crown Victoria:

the Taxi of Tomorrow project. Introduced in

2009, the project was aimed at developing a

new, uniform blueprint for NYCs iconic yellow

taxi eet that incorporated the priorities of key

city stakeholders including taxi drivers, owners,

passengers and city residents. e TLC

surveyed taxi passengers and solicited design

proposals from vehicle manufacturers, which

resulted in three nalists. In May 2011, the

Mayors Office and TLC announced that the

Nissan NV 200 was officially selected as the

Taxi of Tomorrow. Our analysis compares the

nancial and environmental implications of the

current taxi eet and the Nissan NV200.

We have cons ide red seve ra l key

stakeholders impacted by this initiative. TLC is

interested in administrative ease and a stylish

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replacement to the iconic Crown Victoria. e

Mayors Office has aggressive GHG reduction

goals and is eager to replace the inefficient

Crown Victoriaeet.

Su rvey ed t a x i r i d e r s p r i o r i t i z e

sustainability, passenger comfort and safety.

And perhaps the most notable of these

stakeholders, particularly in our nancial

analysis, are the taxi owners and drivers

themselves. Owner-operators are especially

interested in operating costs, while eet owners

are most concerned with acquisition and

maintenance costs.

Financial

Analys is

Whats under the hood

In following section we discuss and

evaluate the results of a Net Present Value

(NPV) analysis performed for the varying

models of the current eet, and future Nissan

NV200 eet. e analysis highlights some of

the potential factors that drive the vehicle

choice in terms of fuel efficiency across four

medallion ownership types, and the

environmental implications in terms of GHG

emissions, particularly in light of PlaNYC

2030s GHG emissions reductions goals.

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For our analysis, we evaluated ve

different vehicle models from the current eet.

ese ve models, which include three

gasoline-powered and two hybrid-electric

models, were selected for the analysis because

they represent a high percentage of the current

taxi eet, their variations in fuel efficiency, and

other factors such as ADA requirements. e

eet sample considered in our model includes

the following vehicles:

Ford Crown Victoria, 58% of the total

current eet (16 mpg city);

Ford Escape Hybrid, 26% (33 mpg);

Toyota Sienna, 9% (17 mpg);

Toyota Camry, 4% (22 mpg);

Toyota Prius Hybrid, 2% (51 mpg).

e future Nissan NV200 eet will

consist of a single, non-hybrid model, rated at

25 mpg city, which will replace the current eet

over a 5-year phase-in period starting in 2013.

Be fore d i s cus s ing the p r imary

assumptions and hypothesis that will drive our

nancial and environmental conclusions, it is

important to emphasize that our nancial

model doesnt take into account any initial

medallion investment. is simplication is

mainly due to the medallions price volatility

over the past 20 years most recently

skyrocketing to $1,000,000 as well as the

medallions ownership timeframe that varies

greatly among owners.

Moreover, this cost would not affect either

the results or the decision among different

vehicles if we evaluate the cost of the medallion

as an occurred expense equal throughout each

type of ownership model.

ere are currently four types of

ownership models that potentially affect the

medallion owners vehicle choice, and thus the

fuel efficiency of the vehicle. e four types of

medallion ownership include the following6:

Owner operated only: the medallion

owner drives his own vehicle and pays for gas;

Owner operated and leased: the

medallion owner drives his own vehicle and

pays for gas, and leases it to a second driver

for an extra shift (who pays for their own

gas);

9

6http://www.schallerconsult.com/taxi/taxifb.pdf
http://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdf


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Fleet-type: the corporate medallion

owner pays the drivers (average 3 per car)

based on the shift length usually 2080

hours per year, drivers pay for gas;

Long-term lease: the medallion owner

leases the car (2 drivers per car on average),

drivers pay for gas.

Because we performed an NPV analysis

from a vehicle-owner point of view, these

differences among ownership models are critical

to our assessment. We have assumed annual

gross revenue per vehicle to be $145,200 and

an average of 64,600 miles driven per vehicle

each year.

Under this assumption, the contractual

differences among models have a signicant

impact on the owners gross revenue

independently from the vehicle choice. us, to

perform an NPV comparison among vehicles

and ownership models we considered the

following parameters:

a medallion loan of $1,500 total per

month, split among the drivers;

tips, 15% of the total gross revenue;

number and duration of shifts, in

proportion to a hypothetical 24-hour shift;

salary, for the eet-type and the owner

operated and leased model;

cab lifespan: 5 years for owner-operators

and long-term leases, 3 years for eet-type

ownership7;

gross revenue divided between driver

and owner for the long-term leasing model8 .

ese differences will impact the cash-ow

analysis per ownership model and type of car

and they could potentially affect the vehicle

choice.

Across the four ownership models, gas

costs always fall on the driver, whether the

driver is the owner-operator, paid by a company

(eet-type), or if he leases medallion and

vehicle (long-term lease). While the medallion

owner always pays the vehicle expenses, the cost

of gas will affect only the drivers income. is

10

7 Per 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. (http://www.schallerconsult.com/taxi/taxifb.pdf)

http://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdf


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particular variation across ownership models

appeared to be the major factor driving our

results, and potentially the economic driver

behind the owners choice in vehicle.

Other minor factors that we considered

in our models were:

straight line depreciation;

zero salvage value after 3 or 5 years,

depending upon the conditions previously

cited;

ma in tenance and repa i r co s t s

proportional to the average miles per year9 ;

drivers license, vehicle taxi conversion,

insurance costs.

The analys is

e tables following include taxi data,

ownership data and assumptions. e complete

analysis is an Excel matrix calculating the NPV

for each of the 6 vehicle types and for each of

the 4 ownership models, which is attached to

this document.

As displayed in Figure 1 there is a clear

economic incentive for the owner-operator to

chose a hybrid vehicle instead of a non-hybrid

model even under the current gas price. e

economic incentive is directly proportional to

the average miles driven per year and to the cost

of gas, and is particularly evident for the rst

parameter due to the high number of miles

driven each year. On the other hand, for the

other two types of medallion ownership (eet-

type and long term lease), there is no clear

economic incentive that drives the choice

between vehicles and therefore there must be

other contributing factors, such as maintenance

costs or reliability, which inuence the vehicle

choice.

e cost of gas, which is covered by the

driver, then becomes the primary incentive just

for one type of owners category owner-

operated cabsresponsible for roughly one

11

9http://www.edmunds.com, http://www.autotrader.com, http://autos.aol.com/, http://www.motortrend.com
http://www.motortrend.com/new_cars/04/toyota/sienna/http://www.motortrend.com/new_cars/04/toyota/sienna/http://autos.aol.com/cars-Toyota-Prius-2011/cost-to-own/mileage-20000/state-US/http://autos.aol.com/cars-Toyota-Prius-2011/cost-to-own/mileage-20000/state-US/http://www.autotrader.com/research/modelinfo/overview.xhtml?styleid=326217http://www.autotrader.com/research/modelinfo/overview.xhtml?styleid=326217http://www.edmunds.com/ford/crown-victoria/2007/tco.htmlhttp://www.edmunds.com/ford/crown-victoria/2007/tco.html


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third of the total taxi eet.

Two additional results driven by

economic incentive can easily be seen, First of

all, there is an economic incentive for the

medallion owner to switch from the eet-type

to the long-term lease, a trend that is already

occurring according to the 2006 Taxi

Factbook10. Secondly, there is a clear economic

incentive for an owner-operator to lease their

cab for a second shift and retain part of the

earnings. In light of these conclusions, we

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.

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Additional assum tion for ownershi t es

Financial data by ownership type

Vehicle data
http://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdfhttp://www.schallerconsult.com/taxi/taxifb.pdf


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Our resul ts

13

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

$220,000

$240,000

$260,000

$280,000

FORD "CrownVictoria"

FORD "Escape" TOYOTA "Prius" TOYOTA "Sienna" TOYOTA "Camry" NISSAN NV200

NPV5y

1c

NPV - Owner Operated

NPV - Fleet Type

NPV - Long term leasing

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

$220,000

$240,000

$260,000

$280,000

FORD "CrownVictoria"

FORD "Escape" TOYOTA "Prius" TOYOTA "Sienna" TOYOTA "Camry" NISSAN NV200

NPV5y

1c

NPV - Owner Operated

NPV - Fleet Type

NPV - Long term leasing

owner operated with extra shift

owner operated without extra shift

Figure 1 NPV analysis per type of vehicle and

ownership model


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The Medal l ion

lease model

A different proposal

e idea behind this proposed model is to

merge the responsibilities of car buyer and gas

payer (the driver) in order to incentivize the

introduction of hybrid cabs (Prius in primis).

is choice would be driven by the notable

NPV (or EBIT) difference among the hybrid

and non-hybrid vehicle types, even with the

current gas price. We expect the primary effect

of this proposal to be the increased adoption of

hybrid models within the current eet and thus

the overall reduction of GHG emissions, in line

with PlaNYC 2030 emission reduction targets.

To effectively pursue this model the

medallion owner needs to be incentivized by a

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.

Even by running our analysis under the

most favorable conditions using the lowest

NPV for the medallion owner, using the vehicle

that would grant the highest EBIT (Prius), and

using the lowest driver gross revenue (eet-type

model) there is a lack of nancial incentive

for the driver to pursue this model.

Incentives such as a lower tax rate, gas

discount, or other fuel efficiency-based

incentives are needed to support the driver and

inuence the adoption of vehicles with higher

fuel efficiency. A potential next step for this

proposed model could be the analysis of

different incentive options and their impacts on

the hybrid adoption rate and overall GHG

emissions.

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Environmental

Analys is

A non explos ive phase

out

In light of PlaNYC 2030s GHG emission

reduction targets, we have analyzed the

emission levels of the current eet and the effect

of the NissanNV200s ve-year phase-in period

beginning in 2013.

O v e r a l l , t h e

Nissan NV200

ph a s e - i n w i l l

result in slightly

higher emission

levels; the current

average emission

(weighted by the

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 signicant change

in emissions levels, it is interesting to see how

the Nissan NV200 phase-in is likely to be over

the next ve years and the impact of the current

eets phase-out. Despite the high proportion of

high-emitting Crown Victoria models that

dominate the current eet,

Upon the assumption that every owner is

willing to maximize their revenue, or that they

are pursuing the highest NPV value meaning

that the owner-driver model absorbs entirely

the hybrid vehicle percentage (roughly 28%)

the main assumption is a linear phase-out

starting in 2013. It is important to underline

the different lifespan between the eet-type

model (3 years) and the long-term lease model

(5 years), both based on non-hybrid models.

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Our resul ts

As shown in Figure 2, the phase-out rate

for the non-hybrid eet is accelerated because

eet-type vehicles, which are assumed to be

non-hybrids, are replaced more frequently. us

overall GHG emission levels are initially

lowered between 2014-2015 as gas guzzling

Ford Crown Victorias (16 mpg) are replaced

with the more efficient Nissan NV200 (25

mpg). However in 2017 when the phase-in is

complete, overall GHG emissions will rise

above current levels as hybrid models (33-51

mpg) are replaced by the lower performance

Nissan.

16

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!350,000!'

!352,000!'

!354,000!'

!356,000!'

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!100,000!'

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2012' 2013' 2014' 2015' 2016'

To

talTonsCO2equiv.

TonsCO2equiv.

/Taximodel

FORD!Crown!Victoria'

FORD!Escape'

TOYOTA!Prius'

TOYOTA!Sienna'

TOYOTA!Camry'

NISSAN!NV200'

total!CO2!eq.!emission'

Figure 2 Emissions levels during 5-year Phase-in Period


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Taxi of

Yesterday?

The real deal

Based on the nancial and environmental

results of our analysis, it is difficult to

understand what factors drove New York Citys

choice for the future taxi.A public survey of 23,000 NYC taxi riders

found that the top three priorities were:

1. environmental sustainability;

2. passenger comfort;

3. safety 11.

e Nissan NV200 is a considerable

improvement over the gas-guzzling Crown

Victoria, and did boast the highest fuel

efficiency of the three nalists. However this

model is clearly a step backwards from the high

efficiency hybrid eet that has been gaining

traction in the NYC taxi eet in recent years.

Regrettably, the current Nissan NV200 falls

short of taxi riders top priority.

Food forThought

Interestingly, the Nissan NV200 is

currently sold in Europe with a diesel engine

rated at 54 mpg, in compliance with the

current European fuel efficiency requirements.

Despite the difference in engine (gasoline vs.

diesel), it is difficult to understand why NYC

would not pursue this model, with nearly

double the fuel efficiency.

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11http://www.greencarreports.com/news/1071606_nissan-e-nv-200-concept-electric-minivan-nycs-electric-taxi
http://www.greencarreports.com/news/1071606_nissan-e-nv-200-concept-electric-minivan-nycs-electric-taxihttp://www.greencarreports.com/news/1071606_nissan-e-nv-200-concept-electric-minivan-nycs-electric-taxi


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The Wi ld

Car(d)

An electr ic future

While the Taxi of Tomorrownalists were

not explicitly judged on environmental

attributes, one factor noted in choosing the

Nissan NV 200 was the anticipated availabilityof an all-electric NV200 model by 2017.

Nissan has also stated that the NV200 gas

model can be easily retrotted to an electric

engine, once the technology becomes available.

Nissan, who already manufactures the all-

electric Leaf, is eager to establish itself as a

leading electric car manufacturer.

In anticipation of a potential electric eet,

TLC, city officials and Nissan are piloting six

all-electric Nissan Leaf taxis beginning in 2012.

is pilot program is intended to test the

performance of EVs under typical high mileage

conditions. e Nissan e-NV200 will have the

same 24-kWh lithium ion battery and 80-kW

electric motor as the 2012 Nissan Leaf12.

e e-NV200 Concept model is slated to

have a similar range to the Leaf (70-100 miles).

Using a Level 2 charging station, this would

require 7 hours of charging time. is is a

considerably lengthy time requirement for a

cab, and would severely limit driver shift times.

To mitigate this potential concern, Nissan is

currently working on the development of

quick-charging ports that can charge to 80%

capacity in 30 minutes.

e nancial and environmental

implications of the transition from gas-powered

to electric-powered vehicles are difficult to

determine without knowing the future energy

prole or rates of the electric grid. According

to the most recent EPA eGRID data, NYCs

electricity grid mix is primarily nuclear (43%),

gas (34%), and oil (20%)13. Further analysis of

the emissions outputs from the grid would be

necessary to determine whether electric vehicles

are the right choice for NYC.

18

12http://www.greencarreports.com/news/1071606_nissan-e-nv-200-concept-electric-minivan-nycs-electric-taxi

13 http://cfpub.epa.gov/egridweb/view_srl.cfm
http://www.greencarreports.com/news/1071606_nissan-e-nv-200-concept-electric-minivan-nycs-electric-taxihttp://www.greencarreports.com/news/1071606_nissan-e-nv-200-concept-electric-minivan-nycs-electric-taxihttp://www.greencarreports.com/news/1071606_nissan-e-nv-200-concept-electric-minivan-nycs-electric-taxi

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