How hybrid engines are becoming a cost-effective solution for fleet managers.
For any fleet manager, the biggest issue today is undoubtedly fuel prices. According to reports, some 935 trucking companies around the world have gone out of business since the beginning of the year as a result of skyrocketing fuel prices.
The emerging consensus among forwarders is that if their shipping fees rise, they will have to pass this cost on to the customer. Only the largest international firms are able to absorb the costs to any degree and even then only for a short while.
But few believe the cost of diesel could fall any time soon. Supply is limited and the rate of demand grows by the day. So the search is on for the holy grail - the solution that would enable firms to keep prices steady while rising costs make the rest of the market increasingly unprofitable. A handful of companies believe they have found it.
The slow take-up of hybrid vehicles has largely been framed in terms of a worthy sacrifice that eco-friendly firms make because of the weight of their conscience, but all the evidence suggests now that it could become a long-term solution for rising fuel costs. In case you hadn't heard, hybrid trucks are 20% more fuel-efficient than normal carriers, which in times of crisis could mean the difference between surviving or folding. Despite this, until very recently the Middle East has been left behind in the global scramble for hybrid trucks.
DHL, UPS and FedEx have rolled out the first vehicles in Europe and the US but no-one had done anything similar in the Middle East region until last month, when Aramex adopted four hybrid cars into its UAE fleet.
Moreover, the company said that by 2009 it will have bought 10 new hybrid-electric vehicles as part of its corporate social responsibility charter. CEO Fadi Ghandour said that the company will have reduced fuel consumption by 20%, carbon dioxide emissions by 50% and leaded gas consumption by 100%.
Although such technologies may be expensive now, in the long-run they may offer a solution to high fuel costs. "This is a big challenge for the whole transportation industry," says Ghandour. "We're doing relatively okay but it is definitely affecting our costs. So we are trying to be innovative and flexible in finding alternatives.
"The hybrid vehicles do two things for us. From a cost perspective it is important. And much more important than the cost is our carbon emissions and reducing them, trying to become a carbon-neutral company. In other markets such as Jordan we've already started. In Egypt we've transformed our usage of gasoline to natural gas cars so it's more environmentally friendly and less costly.
The best ways that we are trying to go about finding solutions to high fuel prices is funding alternative modes of transportation and offering new products."
The plans were announced as part of Aramex's corporate sustainability policy, which has been framed more in the language of environmental responsibility than free market principles. And it is true that it will be some time before hybrid technologies sell themselves on purely economic terms.
FedEx was one of the first express providers to adopt hybrid trucks into its fleet and currently operates around 170 of the vehicles, mostly in its North American business.
The company has the largest hybrid fleet in the world and only Coca Cola comes a close second, owning 142 hybrids. It is believed that almost every North American trucking firm currently has a hybrid at least in the production stage. "By reducing reliance on fuel and traditional energy sources, we mitigate our exposure to potential price increases and supply shortages," says Anna McNally, FedEx environment and sustainability advisor for the Middle East region.
At the beginning of the year, DHL announced that it was including two hybrid vehicles in its European fleet. The year before, the company rolled out two such vehicles in its Japanese fleet. "First simulations and tests show that we can reduce our fuel consumption by 20% due to a high stop density in our delivery traffic," says Samah Ahmed, DHL Express spokesman for the region.
With our partners we want to prove the efficiency of electric hybrid technology in city areas. Once we have a considerable amount of them on the road, it will make a visible difference - both in price and in CO2 emissions. We currently investigate the market potentials for hybrid vans and trucks with our partners."
The Eaton Corp, a US industrial manufacturer working with hybrid technology, reports that 10,000 hybrid electric trucks would cut diesel fuel consumption by 7.2 million gallons per year, keeping 83,000 tonnes of carbon dioxide out of the atmosphere.
Average hybrids will save around 20% on fuel in comparison to current trucks, which is around 500 gallons a year. At the beginning of the month, diesel prices in Dubai hit a record US$5.24 a gallon, which totals up to a reasonable saving in the long term. However, if hybrid vehicles are to be genuinely cost-effective, prices need to come down. At present, hybrid trucks are around $35,000 more expensive than normal vehicles, meaning that at current diesel prices it would be roughly 13 years before the initial outlay is fully recouped.
Although many companies have expressed interest in alternative vehicle technology, production volumes remain low and costs remain high, preventing widespread adoption," says McNally. "Additional government incentives at the national and local levels are needed for companies to embrace the technology."
Companies are calling for similar regimes to those adopted in the US - in the state of New York, for instance, authorities contribute up to 80% of the incremental costs of hybrid trucks.
The trucking industry is around 10 years behind the passenger sector, according to Bill Van Amburg, senior vice president for Calstart Hybrid Truck Users Forum, a programme that attempts to speed up commercialisation of these technologies.
"Commercial truck users were interested in saving fuel but it was not until fuel prices rose so high that the value of a system that is initially higher priced was clear," says Van Amburg. "In addition, it has taken a while to scale the technology to the truck world. While the concept of a hybrid system is similar between a car and truck, there are big differences in the scale of the system, the duty cycles it must address and even the availability of components."
He adds that trucks weigh more than cars and travel longer distances, making it more difficult to power them with electricity. In order for trucks to become commercially viable, he argues that it would require manufacturers to develop lightweight materials, more efficient batteries and downsized engines. McNally says that FedEx is also calling for companies to innovate more in these technological areas.
All of this has meant low production rates and thus higher initial costs on the trucks that are available, Van Amburg says, calling on governments around the world to encourage companies to adopt hybrid vehicles by offering incentives.
"Early adopter fleets need some assistance in paying some of the incremental cost of hybrids today if governments want to see introduction speed increased," he adds.
Our research shows that, at most, assistance with half the incremental cost, perhaps over just a few year periods, would be sufficient. Secondly, governments could send clear policy signals about the value of higher-efficiency trucks in general. This could be through incentives, investments in research, development and demonstration or even via regulations on fuel efficiency or carbon emissions."
Aside from hybrid technology, firms have also adopted a range of other methods to improve fuel efficiency in recent times. Officials at UPS noticed that trucks waste a lot of fuel idling while waiting to take left turns and at the beginning of last year decided to eliminate all left turns from its delivery routes.
So far, the firm has reduced almost 50 million kilometres from its routes, saving three million gallons of gas and 32,000 metric tonnes of CO2 - the equivalent of removing 5300 passenger cars from the road for a year.
Moreover, UPS and FedEx have begun using wider, ‘fuel efficient' tyres that create less friction with the road and therefore have better fuel economy. These tyres allow for more miles per gallon of diesel for the truck, thereby reducing emissions and costs.
Although adoption of GPS may be quite expensive, it prevents truckers from getting lost and burning fuel by driving around in circles.
So while the environment may not be at the forefront of every CEO's mind when it comes to cutting fuel consumption, it is clear that the adoption of green technologies is benefiting the environment we all share. As long as diesel prices keep on rising there will remain a growing market for new and environmentally friendly fuel-saving technologies.