How a $41,890 CNG Van Can Be Cheaper Than Its $25,980 Gasoline-Burning Cousin
By John O'Dell September 3, 2010
We're all about alternatives to gasoline here so when General Motors announced pricing earlier this week for the compressed natural gas conversion of its full-size 2011 Chevrolet Express and GMC Savana Cargo vans, we posted the info.
But the price did make us gulp - the base $25,980 vans become $41,890 vans after the conversions.
We know CNG is cheaper and cleaner than gas or diesel and we know fleet managers are looking for every way they can to cut a penny here and a penny there from operating costs (not to mention collecting green points from government, which sometimes extends benes to clean and green fleets such as preferential HOV lane access or a leg up in obtaining service contracts).
But $41,890 for a van?
So we called GM and got ahold of the Mikes - Mike McGarry, alternative fuels manager for fleet and commercial vehicles, and Mike Jones, fleet and commercial vehicles product manager.
They were worried that we somehow thought the vans were aimed at the retail market, but once we assured them that we knew the difference between a CNG-burning Honda Civic GX and a CNG-burning Chevy Express van, they relaxed and walked us through the financial rationale.
You've first got to understand that commercial vehicles have longer and harder lives than do most passenger cars and light trucks - 30,000 miles a year for 7-10 years isn't at all unheard of.
That gives the fleet manager more time to recoup up-front costs of alt-fuel or advanced-tech vehicles through accrued saving on fuel and maintenance.
It also helps to understand that in a fleet with loads of vehicles, even a penny a gallon saved on fuel costs adds up quickly to sometimes impressive annual sums.
The Mikes use a couple of assumptions in showing how the CNG conversion for their vans pays off - Jones said the difference in gasoline and CNG prices in many regions can result in a pay-back of the entire $15,910 in under 4 years.
(If you missed our earlier piece, the $15,190 cost breaks down thus: $14,590 for the dedicated CNG fuel system, pressurized fuel tank and new fuel lines and fuel injectors; $1,295 for the beefed-up, CNG capable version of GM's 6.0-liter Vortec V8 engine, $265 for a heavy-duty tow package and a credit of $240 for deleting the spare tire.)
To earn that back, figure fuel economy (we use the term loosely) of 13 mpg and 30,000 annual mileage (the CNG version gets substantially the same fuel economy as the gasoline model).
That's 2,308 gallons a year.
Now figure gasoline at $2.89 a gallon and natural gas at $1.52 per gallon-equivalent (these numbers will change from state to state - CNG runs about around $1.25 as gallon in Oklahoma - and if they seem a little low, remember that commercial fleets usually have their own pumps and don't tack a profit onto the price of the fuel) for a $1.37 per gallon savings when using CNG.
Multiply that by gallons per year and the fuel savings comes out to a nice tidy $3,162.
Subtract federal (and sometimes state) tax credits for buying CNG vehicles, plus the impact of lower-interest financing for fleet purchases (sometimes) and $15,190 premium is more like $9,000, Jones said. That can be earned back in 34 months, leaving the typical fleet operator anywhere from two to seven years to rake in $3,162 per van in fuel savings.
That's GM's story, at least, and it makes sense to us - although here in California the spread between CNG and gasoline is a lot less (around 70 cents a gallon retail right now) so the payback period would be longer and the accumulated savings less.
But in business, any savings, no matter how small, is better than no savings.
And don't forget the PR, political and environmental value of operating a cleaner, greener and less oil-dependent fleet.
There's also the value of the fleet manager's times, said McGarry.
"It's a check-the-box system. the customer orders it and we take care of everything. The customer doesn't have to get involved in contracting with someone to get the system installed."
GM, btw, doesn't actually build the CNG vans itself. It makes the conversion kit, the hardened engines and the vans and sends the pieces to a contractor, Indiana-based PCI, where they're all put together for shipment to the client.
So there you have it: How to make a $41,890 van pencil out better than a $25,980 van.
And the more commercial vehicles that are converted to cleaner fuels, including electricity, the better off we'll all be.
John O'Dell, Senior Editor
-------------
Check out CNG station locations and prices in your neighborhood.
LEAVE A COMMENT