Cost Benefit Analysis –
Hybrid Cars
Presented by
Mukesh Kakkar
Jeff Graebner
James Lepp
Agenda

What is Cost Benefit Analysis (CBA)
 Costs and Benefits
 Applications of CBA
 Steps involved
 Process Flow
 Hybrids
 Functioning
 Consumer opinion
Cost & Benefits

Benefits are
primary positive
outcomes or
consequences

Costs are value of
the resources that
must be used to
develop,
implement, and
operate the
program being
analyzed
Application of CBA



Whether or not project should be
undertaken
Could the project be viable in future
Which among many competing
alternatives and projects should be
funded given a limited budget.
CBA Drill-down tree
Cost Benefit
Analysis
Costs
Direct Costs
( resources budgeted)
Benefits
Indirect Costs
(not budgeted)
Tangible Benefits
Intangible Benefits
revenue
Positive benefits
Personnel
Lost time
Goodwill
Facilities, equipment,
and materials
litigation
Knowledge gained
Other
Health/Pension
benefits
Attitude Changed
Opportunity Cost
Process improvements
Benefits to society
and environment
Negative benefits
CBA Process Flowchart
Establish Objectives
Identify Constraints
Identify Assumptions
Define Base case
Define Alternatives
Set Analysis period
Define level of effort
Estimate benefits and cost
relative to base case
Evaluate risks
Compare net benefits
and establish ranks
Recommendations
Hybrid Vehicles
Functioning
A hybrid car
The car moving has
The car braking generates
Kinetic energy
Chemical energy
Electrical energy
Stored in petrol
Electrical energy
From the battery
Chemical energy
Stored in the battery
Opinions- facts or fiction
20
00
-1
20
00
-3
20
01
-1
20
01
-3
20
02
-1
20
02
-3
20
03
-1
20
03
-3
20
04
-1
20
04
-3
20
05
-1
20
05
-3
Gas Price ($)
Gas Prices
Gas Price
3
2.5
2
1.5
1
0.5
0
Year - Quarter
Regressions






Moving Average
Simple Regression
Holt-Winters
Multiple Regression (3)
Time Series Decomposition
ARIMA
Multiple Regression

Dependent Variable


Gas Price
Independent Variables

Significant







Consumer Price Index (CPI)
Average number of miles traveled per vehicle
9/11 – dummy variable
Hurricane Katrina – dummy variable
War in Iraq – dummy variable
Quarters – dummy variables
Insignificant




Total number of hybrids on the road
Total number of light vehicles on the road
Personal Income
Motor Vehicle Output
Statistics
Audit Trail -- Coefficient Table (Multiple Regression Selected)
Series
Included
Standard
Description
in Model
Coefficient
Gas Price
Dependent
-13.76
1.63
-8.44
Error
T-test
CPI
Yes
0.05
0.01
9.88
Miles Vehicles Traveled
Yes
0.00
0.00
6.89
9/11
Yes
-0.16
0.04
-3.74
Katrina
Yes
0.25
0.07
3.57
Iraq War
Yes
6.23
0.92
6.79
Q1
Yes
-0.01
0.04
-0.27
Q2
Yes
0.11
0.04
3.00
Q3
Yes
0.04
0.04
1.00
Accuracy Measures
Value
AIC
-73.65
BIC
-72.47
Mean Absolute Percentage Error (MAPE)
2.38%
R-Square
97.78%
Adjusted R-Square
96.60%
Overall
F-test
82.68
Forecast
Gas Price
4.5
4
3.5
3
2.5
2
1.5
1
0.5
Gas Price
Forecast of Gas Price
Year
Gas Price
2006
$2.73
2007
$2.91
2008
$3.19
2009
$3.47
2010
$3.75
Fitted Values
Ju
l-1
0
Ja
n11
Ju
l-0
9
Ja
n10
Ju
l-0
6
Ja
n07
Ju
l-0
7
Ja
n08
Ju
l-0
8
Ja
n09
Ju
l-0
5
Ja
n06
Ju
l-0
2
Ja
n03
Ju
l-0
3
Ja
n04
Ju
l-0
4
Ja
n05
Ju
l-0
0
Ja
n01
Ju
l-0
1
Ja
n02
0
Vehicles Used in Study
Ford Escape Hybrid
Ford Escape
Honda Accord Hybrid
Honda Accord
Honda Civic Hybrid
Honda Civic EX
Lexus 400 Hybrid
Lexus RX 330
Toyota Highlander
Hybrid Ltd
Toyota Highlander Ltd
Toyota Prius
Toyota Corolla LE
Benefits of a Hybrid


Savings at the Pump
 All Hybrids get a better fuel economy than their counterparts
Lower Insurance Rates


Drop of 5 to 10%
Government Assistance


Federal Tax credit
Coase Theorem


Lower Emissions


Less Carbon Monoxide adding to Global Warming
Self-Powering Engines


Take a decentralized approach to environmental pollution
No hassle in finding a plug
Special Car-Pool Lanes

No matter how many people are in the car
Costs of a Hybrid




General Maintenance and Repair
 Even though it does have an electric engine it is still needed
New Batteries
 Need to be changed out every 8 to 10 years
Higher Depreciation Rate
 Expected as 1 to 4% higher
Higher Initial Cost

Between $4,000 and $9,000
Inside the Numbers
5 years
Purchase price
(Automatic)
Honda Civic Hybrid
(50)
Honda Civic EX
(28)
Hybrid extra cost
or savings
$22,400
$18,444
$3,956
Sales tax (7%)
1,568
1,291
$277
Tax credit
2,100
0
$2,100
Fuel cost (5 yrs)
4,468
7,979
$3,511
Insurance (5%
savings)
4,670
4,916
$246
Maintenance & repair
4,163
4,163
$0
Financing (3%)
3,568
2,938
$630
56.10%
53.00%
9,832
8,669
Five-year
depreciation rate
Projected resale
price
$1,163
with federal tax
credits
$2,156
w/o federal tax
credits
$56
Inside the Numbers (Continued)
Year
Miles
Driven
Carbon
Monoxide
Emitted
Honda
Civic
Hybrid
Honda
Civic EX
50
28
2006
15,000
274,950
5,499
9,820
2007
14,500
265,785
5,316
9,492
2008
14,000
256,620
5,132
9,165
2009
13,500
247,455
4,949
8,838
2010
13,000
238,290
4,766
8,510
25,662
45,825
Total Carbon Monoxide Released
The Results
Model (mpg)
Manufacturer
Ford
Honda
Honda
Escape Hybrid
(33)
Escape (23)
Accord Hybrid
(28)
Accord (25)
Civic Hybrid (50) Civic EX (28)
Costs/Savings
with taxes
$3,871.42
4
without taxes
$2,450.58
-2
with taxes
$3,251.84
-3
without taxes
$3,901.84
-4
with taxes
$2,156.36
2
$56.36
0
with taxes
$4,296.78
-4
without taxes
$6,496.78
-6
with taxes
$2,953.00
-3
$6,074.62
-6
with taxes
$1,493.43
1
without taxes
$4,141.38
-4
without taxes
Lexus
Toyota
Toyota
RX400h (30)
Rx330 (25)
Highlander
Hybrid Ltd
(30)
Highlander
Ltd (25)
Prius (55)
Corolla LE
(34)
Points
without taxes
The Results (Continued)
Carbon Monoxide
Saved
Model (mpg)
Manufacturer
Ford
Escape Hybrid (33)
Accord Hybrid (28)
55,787
Lexus
Toyota
Toyota
16,905
3
5,499
1
20,163
4
8,554
2
8,554
2
14,409
3
Accord (25)
45,825
Honda
Points
Escape (23)
38,882
Honda
Amount
51,324
Civic Hybrid (50)
Civic EX (28)
25,662
45,825
RX400h (30)
Rx330 (25)
42,770
51,324
Highlander Hybrid Ltd
(30)
Highlander Ltd (25)
42,770
51,324
Pirus (55)
Corolla LE (34)
23,329
37,738
The Results (Continued)
Costs/Savings
Manufacturer
Model (mpg)
Escape Hybrid
(33)
Escape (23)
Accord Hybrid
(28)
Accord (25)
Civic Hybrid
(50)
Lexus
RX400h (30)
Toyota
Ford
Honda
Honda
Toyota
With Tax
Without
Savings Tax Savings
Included
Included
9
3
0
-1
Civic EX
(28)
8
6
Rx330 (25)
0
-4
Highlander
Highlander
Hybrid Ltd (30) Ltd (25)
1
-4
Corolla LE
(34)
6
3
Pirus (55)
Questions
"An unsophisticated forecaster uses statistics as a drunken man
uses lamp-posts - for support rather than for illumination."
—Andrew Lang