Conventional vs Electric Commercial Vehicle Fleets

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Capital budgeting in all its essential meaning is the decision taken by the organization to decide whether a project or venture is worth investing. The assessment is done by analyzing the cash flow projects of both inflows and outflows over the project’s lifetime and see if there are any substantial gains. There are different ways of analysis: Discounted cash flow analysis, present value analysis, and throughput analysis

Article 1-

Feng, W., & Figliozzi, M. A. (2012). Conventional vs Electric Commercial Vehicle Fleets: A Case Study of Economic and Technological Factors Affecting the Competitiveness of Electric Commercial Vehicles in the USA. Procedia – Social and Behavioral Sciences, 39, 702–711. https://doi.org/10.1016/j.sbspro.2012.03.141

With the rise of the electric vehicle market and the need to have a sustainable market for automobiles, this paper explores the capital budgeting analysis on electric trucks and compares them to diesel trucks in terms of investment, problems and best way to get return on investment. One of the author Miguel A. Figliozzi, the founder and co-director of the Transportation Technology and People (TTP) Lab, elucidated the facts along with the co-author. The intended audience for this article can be potential company executives and students who are curious about the benefits of such advancement in the auto industry. The conclusion is that if the investments are made in electric trucks, they need to be utilized for more than 28,000 miles per year and assume diesel trucks have MPG of 8.2 miles.

Article 2-

Grinstein, Y., & Tolkowsky, E. (2004). The Role of the Board of Directors in the Capital Budgeting Process – Evidence from S&P 500 Firms. SSRN Electronic Journal, 12–21. https://doi.org/10.2139/ssrn.625141

As we understand the importance of capital budgeting in terms of rise and fall of new projects, new innovation breakthroughs and new ways to redesign the world, it is important to know how the board of directors decide such ways of investing that go beyond academic knowledge. One of the authors is from Cornell University- Yaniv Grinsten, along with the co-author found that the board has four main purposes in the process. The intended audience for the paper can be management students, project managers and potential board of directors in order to get a better understanding of the real life scenario of decision making. They review and approve: huge capital and infrastructure expansion or acquisition requests, annual budgets, horizontal and vertical merger and transactions, and continuously monitor the performance of approved and delivered projects.

Article 3-

Sierzchula, W., Bakker, S., Maat, K., & van Wee, B. (2014). The influence of financial incentives and other socio-economic factors on electric vehicle adoption. Energy Policy, 68, 183–194. https://doi.org/10.1016/j.enpol.2014.01.043

Again, to continue with the topic of electric vehicles, this paper explores the financial analysis of owning an electric vehicle along with added benefit of government incentives. The market share of electric vehicles is dependent on charging infrastructure, financial incentives and local production in countries will help bring down the cost and eventually increase the consumption. The author, William Sierzchula, from Delft university, along with co-authors agree that in 2012, there is not much incentive to increase the consumption of EV cars in the market despite the incentives. The intended audience for this paper can be anyone who’s interested in EV market analysis.

Article 4-

Hardman, S., Chandan, A., Tal, G., & Turrentine, T. (2017). The effectiveness of financial purchase incentives for battery electric vehicles – A review of the evidence. Renewable and Sustainable Energy Reviews, 80, 1100–1111. https://doi.org/10.1016/j.rser.2017.05.255

This paper explores if incentives really drive the sales of EV vehicles, especially in the US. One of the author Scott Hardman, Plug-in Hybrid and Electric Vehicle Research Center, Institute of Transportation Studies, University of California, Davis, United States, along with co-authors investigate the time at which the incentives need to be given, with emphasis on giving them before and during purchase and not after that. The analysis also states that removing such benefits is bad after some time as it negatively affects the purchasing of EV vehicles.

Lessons Learnt:

My understanding is that all of the concepts are interlinked – the decision taken by the board of directors can change the market and can drive consumerism into a different direction and at the same time if the consumers are demanding change, the market is in turn transformed into something that companies need to keep in mind. Also, financial incentives are not the only way to market share increase, it is the timing of the incentives that propel sales.

Managerial usage:

As a manager, I would make better decisions in terms of understanding the cash flow projections of new projects and any changes that need to be implemented. As in, it might be so that existing projects might need some cash to reduce inefficiencies and improve productivity. But if the project has an expiry date that is fast approaching, I would understand how much room there is for the company to bear the negative cash flow. I would also be more aware of the way that the companies tale decisions as that is driven by rapid changes in the market and that means that I would need to improve my skills to better adapt to the changes.