Return on Investment Analysis for Improved Energy Efficiency in Passenger Cars

Energy efficiency investment is commonly thought to be poor for business. The analysis presented here uses current cost data to demonstrate that there is plenty of room to improve the energy efficiency of cars from the current 25.7 miles per gallon (mpg) or 20%. Investing in the optimum yields an excellent return of over 22% on the owner’s investment in the improved efficiency. A model for the initial cost of a car was developed to accurately predict (within 10% for the majority of over 90% of the data for gasoline and hybrid cars) the initial cost as a function of power output and fuel efficiency. Minimizing total life cycle costs produces an optimum fuel efficiency ranging from 62 mpg to 82 mpg (48% to 64%) as gasoline prices vary from $5 to $10 per gallon, respectively. The higher efficiencies result in fuel savings with corresponding reductions in greenhouse gas emissions. Therefore, investing in energy efficiency is not only a good business decision, but it also makes for a more sustainable future.