Oil-engined Taxicabs Can Save £25m. a Year
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"The Commercial Motor" Costs Expert Computes the Minimum Annual Mileage Above Which it is Economical to Employ a Taxicab with a Compression-ignition Power Unit, and Calculates the Rates of Interest Returned on the Investment in Such an Engine.
APETROL-ENGINED taxi runs 16-18 m.p.g.: an oil-engined taxi covers 30-34 m.p.g. These arc figures given to me by London taxi owners. The averages arc therefore 17 m.p.g. and 32 m.p.g. Taxi owners pay 4s. 31-d per gallon for petrol and 3s. 11 fd. for oil. The cost per mile is thus 3d. in the case of the petrol-engined vehicle, as against 1.5d. for the oiler. That is a saving of 1.5d. per mile.
There are at present approximately 100,000 cars and taxis plying for hire in this country and the total mileage covered by these vehicles'approximates to 4,000m. A saving of 1.5d. per mile is therefore equivalent to a total of £25m.
Cabs which are included in fleets do a treble shift per day and run 50,000 miles per annum. The economy there is thus 50,000 times lfd. per year, which is £312 10s.
An oil engine of well-known make suitable for use in the popular Austin or Morris makes of taxi can be bought for £280. There is the cost of fitting on top of that but I am told that that is more than eliminated by the revenue from the sale of the petrol engine taken from the cab to allow for substitution of the oil unit.
Clearly, therefore, the extra cost of the oiler is more than wiped out in the ,first year of use. A cab which is owned by its driver does not, as a rule cover such mileages, unless, as is frequently the case, two men split a cab between them. In such cases the annual mileage of the cab can, and often does, equal that of cabs run by fleet owners.
Generally, however, the owner-driver runs his own cab and garages it for the night before he himself retires. In such cases I am told that the average weekly mileage is 500, about half that of the fleet-owner's vehicles. The saving is thus half of the amount claimed above and approximates to £156 5s. per annum. In that case the cost of the oiler, £280, takes a little longer to be wiped out, but even then the time needed is less than two years The Economic Mileage
The problem is to discover at what minimum mileage per annum it is economical to fit an oil engine. There are three items of importance which should have study in this connection: the expectation of life of the engine; how many miles it may be expected to run before it must be replaced; in one word—depreciation. There is the interest on the capital outlay and maintenance, the money which must be spent on it to keep it in good trim. Most of the expenditure on maintenance, insofar as it applies to a London cab, will arise when the cab is presented for its 'annual renewal of the licence.
First, the depreciation: the expectation of life of a London taxi may be taken as 10 years. So far as the purposes of this article are concerned, it will bc reasonable to assume 10 years as the basis of the cost of depreciation, which means that the annual allowance on that account will be one tenth of £280, which is £28 per annum.
Next, the interest on first cost. Assume that this item diminishes with the years, starting at 4f per cent. in the first year and diminishing gradually year by year. The average figure is 21 per cent. or £7 per annum.
In those two items I'have, therefore, £35 to set against the savings on, fuel, reducing the annual amount of the savings from £312 10s. to £277 10s. in the case of fleets of AM cabs. So far as the owner-driver is concerned, we must deduct that £35 from £156 55., which has been sbown to be the annual saving arising from the use of a cab running about 500 miles per week. The net saving per annum is thus shown to be £121 5s.
There is still maintenance to be considered, and for that I propose to use the figures in "The Commercial Motor Tables of Operating Costs," not to take the figures direct— that would be impossible because there are no figures which relate to oil-engined cabs—but to establish a percentage difference between the maintenance costs of petrol-engined and oil-engined cabs.
I will take as an example the smallest oil-engined vehicle for which data on maintenance cost are available, namely, a 3-tonner. The figure I may use is that described in the Tables as Maintenance (e). ,That figure is an average of the cost per mile run and it provides for expenditure per mile likely to be involved in the general upkeep of the vehicle, including running repairs as well as complete overhauls.
10 Per Cent, In Favour
For the 3-tonner, the appropriate figure, in its application to a petrol-engined lorry, is 1.05d. per mile. For an oilengined vehicle of the same load capacity the amount is 0.94d. per mile. It is likely that the expenditure required in the case of taxicabs will differ in the same way, that is to say, the percentage difference will be 10 per cent. in favour of the oiler In another table, there arc figures relating to hire cars. I think it likely that the data given in the tables relating to 16 h.p. hire cars will apply to a petrol-engined taxicab, in which case I may assume that the expenditure on maintenance (c) will average 0.66d. per mile. It is reasonable to expect that the maintenance cost of the oil-engined taxicab will be 10 per cent. less than this, namely 0.60d. There is thus likely to be a saving in maintenance cost amounting to 0.06d.
That may be added to the savings accruing from the use of the oiler on account of the fuel economies, already shown to be 1.50d. per mile, making the gross savings frdm fuel and maintenance to be 1 56d. A comparison between the two types may now be made, intrAucing all the relevant items from the Lotai expenditure on operating the vehicles.
In all, there are 11 items to bc considered: Tax, wages, garage rent, insurance, interest on first cost, depreciation, overheads, fuel, lubricants, tvres, maintenance.
Of these items there are several which are not affected by the use of oil. Those which arc left must be included in any comparison, interest, depreciation, fuel, lubricants and maintenance. Of these, two have been shown to be in favour of the oiler, namely, fuel and maintenance: the others, interest and depreciation are against. Lubricants are sometimes in favour of the one and occasionally to the detriment of the other. The amount in any case is so small that it can reasonably be ignored.
What we must do now is to show that the savings on fuel and maintenance are more than the extra expenditure on account of interest and depreciation. There is no need o know the actual prime cost of the cabs: all that we arc oncerned with in these calculations is the difference, the
extra cost of the oiler. The initial extra cost has been agreed at £280. Taking depreciation based on a life of 10 years, the amount to be set aside on account of depreciation of the engine is £28 per annum. Interest amounts to £7 per annum. The total annual debit against the oiler is therefore £35.
Now for the items which are in favour of the oiler. 1 hey are: fuel, 1.50d.; maintenance, 0.06d.; total, 1.56d. per mile. Next to show how many miles the cab must run to ensure that the extra expenditure of £35 per annum is balanced. First, reduce the 135 to pence-8,400d. Divide that by 1,56d., the savings per mile, and the result, 5,384, is the mileage per annum at which the extra cost of the oiler is eliminated. However, 5,384 miles per annum is only just over 100 miles per week: most cabs will run that distance in a day. Therefore with normal weekly mileages substantial savings will be made.
Standard Charges An interesting point arises here. In the case of goods haulage. the owner-driver can be a thorn in the flesh of those who are keen to standardize charges and do away with rate-cutting. The owner-driver of a cab is in quite a different category. He does not cut rates: they are checked by the clock" besides being posted up on a chart inside the cab. He must therefore, if he wants to get on in an exclusive market, work more hours per week than his fellow who works for a company. He does so as a rule, and that is how I come by my figures which, whilst providing for 1,000 miles per week for a company-owned cab, running three shifts per day, allow for 500 miles for the owner-driven cab.
In the accompanying table 1 have set out the figures for gross and net earnings in respect of a cab powered by an oil engine. The basis of the data set out in that table has been already discussed. There is a debit of £35 per week compared with a petrol-engined vehicle and a gain of 1.56d. per mile. I have set out the figures starting at a mileage which is so low that the oiler shows a loss, including one which allows the two to break even.
The debit remains unaffected by the mileage, but the credit per annum steadily rises as the weekly mileage increases. The critical point, that at which the debit and credit break even, is 5,400 per annum—so low as to be ridiculous. Where it is significant is that it demonstrates that for all practical mileages the oiler scores.
A brief explanation of the way the table has been made may be useful. The first column is self-explanatory. The second, " Gross savings on fuel and maintenance per annum," gives the figures for savings calculated at the rate of 1.56d. per mile. The next column gives the debit per annum on account of depreciation and interest, amounting to £35 per annum and not affected by the mileage. In the next column, "Net savings," I have deducted £35 from the totals in the second column.
The figures in the fifth column are interesting. They show what the net profits are if assessed as percentages of the initial outlay of 1280. I am asking the reader to assume that he has invested that £280, as indeed he has, and I show him, in this fifth column, what percentage he is getting from that investment.
110 Per Cent Profit
At 4,800 miles per year there is actually a loss: the gross savings have not caught up to the expenditure. The next figure also fails to show a profit, but just evades a loss. Those mileages, as I have said, are too low to need consideration, More nearly practicable are those examples where the mileage exceeds 20,000 per annum, 400 per week. At a mileage of 24,000 per annum, for example, the net saving is 1121 per annum, and the rate of saving, counted as interest on the investment, is 43 per cent. For a vehicle running three shifts per day and showing a saving of £329, the profit expressed as interest on the original investment is actually 110 per cent., the vehicle running 48,000 miles per annum.
It is surely an excellent return for the capital outlay and, in the case of a cab company operating, say, 100 cabs, will amount to approximately £33,000 per annum. The oil engine should be able to do a great deal to case the problems of the London taxicab trade. S.T.R.