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Ta x i o f To m o r r o w

Where are we going?

Green Accounting Spring 2012


Team Members:
Stefano Vrespa Jessica Esposito Scott Miller Chuck Samul Carlos Coella

A Cab history PlaNYC and the Taxi of Tomorrow

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Financial Analysis
Whats under the hood e analysis Our results

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e Medallion lease model

A dierent proposal


Environmental Analysis
A non explosive phase out Our results

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Taxi of Yesterday?
e real deal Food for ought

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e Wild Car(d)
An electric future


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

B a c k g ro u n d
In May 2011, Mayor Bloomberg ocially announced the Taxi of Tomorrow nalist

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 brie y discussing the challenges and the uncertainties of a potential future electric taxi eet.

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. following report, we discuss a In the

A C a b history
New York City has had motorized public

nancial and taxi service since 1897; ironically those original taxis were the electric vehicles of the Electric

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, nonhybrid and future eet vehicles, and to General Motors, Ford Motor Company, and determine environmental impacts over the vethe Checker Motors Corporation quickly began Within a decade, American companies like powered vehicles imported from France. taxi eet was quickly converted to gasolinethe company went bankrupt in 1907, the citys Carriage and Wagon Company. However when

manufacturing and operating eets1 . 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 signed by 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 Ta xi of Tom or row

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 ecient taxi models than the highly inecient Ford Crown Victoria that dominates the taxi eet. To

encourage the adoption of hybrid vehicles, the Mayors Oce oered incentives in the form of reduced prices on medallions for hybrid taxis, and attempted to impose a 30-mpg fuel



City of New York, Inventory of New York City Greenhouse Gas Emissions, September 2011, by Jonathan Dickson and Andrea Tenorio. Mayors Office of Long-Term Sustainability, New York 2011 6

economy requirement for new taxi vehicles licensed in 2009. At the time, only hybrid vehicles ful lled this condition, which were more expensive than conventional taxi models and many eet operators were skeptical of their reliability and durability as a high mileage taxi vehicle. As we will discuss in detail in our

2009, the project was aimed at developing a new, uniform blueprint for NYCs iconic yellow

nancial analysis, another key piece of this issue is that while individual hybrid taxi owneroperators realized cost savings immediately at the pump, eet operators (whose contracted taxi eet that incorporated the priorities of key city stakeholders including taxi drivers, owners, passengers and city residents. e TLC

drivers bear the cost of gas) do not. As a result, eet operators led suit against the Mayors fuel eciency 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 Oce and TLC considered another way to increase the eciency of their taxi eet that focused on

surveyed taxi passengers and solicited design proposals from vehicle manufacturers, which resulted in three nalists. In May 2011, the

Mayors Oce and TLC announced that the Nissan NV 200 was ocially selected as the Taxi of Tomorrow. Our analysis compares the nancial and environmental implications of the current taxi eet and the Nissan NV200. We h a v e c o n s i d e re d s e v e r a l k e y stakeholders impacted by this initiative. TLC is interested in administrative ease and a stylish

phasing out the gas-guzzling Crown Victoria: the Taxi of Tomorrow project. Introduced in

replacement to the iconic Crown Victoria. e Mayors Oce has aggressive GHG reduction goals and is eager to replace the inecient Crown Victoria eet. Sur veyed taxi riders prioritize sustainability, passenger comfort and safety. And perhaps the most notable of these stakeholders, particularly in our nancial

Financial Anal ys i s
Wh a t s un d e r t h e hood
In following section we discuss and evaluate the results of a Net Present Value

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.

(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 eciency 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 2030s GHG emissions reductions goals.

For our analysis, we evaluated


model doesnt take into account any initial medallion investment. is simpli cation 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 aect either the results or the decision among dierent 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 aect the medallion owners vehicle choice, and thus the fuel eciency 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);

dierent 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 eciency, 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. Before discussing the primary assumptions and hypothesis that will drive our nancial and environmental conclusions, it is important to emphasize that our

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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 dierences 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 dierences among models have a signi cant 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 ownership7; gross revenue divided between driver and owner for the long-term leasing model8 . ese dierences will impact the cash- ow analysis per ownership model and type of car and they could potentially aect 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 aect only the drivers income. is eet-type

Per TLC requirements, cars brought into service as cabs must be new models and must be replaced every 3-5 years. Fleet-type cabs are usually driven by unspecified drivers and must be replaced every 3 years. (http://
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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; maintenance and repair costs proportional to the average miles per year9 ; drivers license, vehicle taxi conversion, insurance costs.

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 ( eettype 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 in uence 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 owneroperated cabsresponsible for roughly one

The a n a l y s i s
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,,,


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.

Financial data by ownership type

Additional assumption for ownership types

Vehicle data
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O u r results
$280,000 $260,000



NPV - 5 years - 1 car




NPV - Owner Operated NPV - Fleet Type NPV - Long term leasing





FORD "Crown Victoria"

FORD "Escape"

TOYOTA "Prius" TOYOTA "Sienna" TOYOTA "Camry"


owner operated with extra shift





NPV - 5 years - 1 car




NPV - Owner Operated NPV - Fleet Type NPV - Long term leasing





FORD "Crown Victoria"

FORD "Escape"

TOYOTA "Prius" TOYOTA "Sienna" TOYOTA "Camry"


owner operated without extra shift Figure 1 NPV analysis per type of vehicle and ownership model 13

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

The Medallion lease model

A d i f f e re n t 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) dierence among the hybrid and non-hybrid vehicle types, even with the current gas price. We expect the primary eect 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 eectively pursue this model the medallion owner needs to be incentivized by a

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 eciency-based incentives are needed to support the driver and in uence the adoption of vehicles with higher fuel eciency. A potential next step for this proposed model could be the analysis of dierent incentive options and their impacts on the hybrid adoption rate and overall GHG emissions.


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 signi cant change in emissions levels, it is interesting to see how

E n v i ro n m e n t a l Anal ys i s
A non explosive phase out
In light of PlaNYC 2030s GHG emission reduction targets, we have analyzed the emission levels of the current eet and the eect of the NissanNV200s ve-year phase-in period beginning in 2013. Overall, the Nissan NV200 phase-in will result in slightly higher emission levels; the current average emission (weighted by the

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 dierent lifespan between the eet-type

model (3 years) and the long-term lease model (5 years), both based on non-hybrid models.


O u r results
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 ecient 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.
!400,000!' !356,000!'








FORD!1Crown!Victoria1' FORD!1Escape1' TOYOTA!1Prius1' TOYOTA!1Sienna1' TOYOTA!1Camry1' NISSAN!NV200' total!CO2!eq.!emission'
















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


Ta xi of Yesterday ?
The real deal
Based on the nancial and environmental results of our analysis, it is dicult 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. safety11. e Nissan NV200 is a considerable improvement over the gas-guzzling Crown Victoria, and did boast the highest fuel eciency of the three nalists. However this model is clearly a step backwards from the high eciency hybrid eet that has been gaining

Food for Thought

Interestingly, the Nissan NV200 is currently sold in Europe with a diesel engine rated at 54 mpg, in compliance with the current European fuel eciency requirements. Despite the dierence in engine (gasoline vs. diesel), it is dicult to understand why NYC would not pursue this model, with nearly double the fuel eciency.

traction in the NYC taxi eet in recent years. Regrettably, the current Nissan NV200 falls short of taxi riders top priority.

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The W ild Ca r( d )
An el ectri c future
While the Taxi of Tomorrow nalists were

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. not explicitly judged on environmental To mitigate this potential concern, Nissan is attributes, one factor noted in choosing the currently working on the development of Nissan 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 model can be easily retro tted to an electric implications of the transition from gas-powered engine, once the technology becomes available. to electric-powered vehicles are dicult to Nissan, who already manufactures the alldetermine without knowing the future energy electric Leaf, is eager to establish itself as a pro le or rates of the electric grid. According leading electric car manufacturer. to the most recent EPA eGRID data, NYCs In anticipation of a potential electric eet, electricity grid mix is primarily nuclear (43%), TLC, city ocials and Nissan are piloting six gas (34%), and oil (20%)13 . Further analysis of all-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 vehicles performance of EVs under typical high mileage are the right choice for NYC. conditions. e Nissan e-NV200 will have the same 24-kWh lithium ion battery and 80-kW
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