Converting ToD vehicle from gasoline to LPG in Indonesia: Cost identification and investment analysis

Abstract

The increasing number of transportation on demand (ToD) or online fleets in Indonesia, as well as the rise in gasoline prices, is a concern for most online fleet drivers. However, there is an opportunity to convert online fleets from gasoline to Liquefied Petroleum Gas (LPG) because LPG for vehicles is available in several big cities in Indonesia at a relatively low price compared to gasoline RON 90. Therefore, we present a feasibility simulation study for converting online fleets from gasoline RON 90 to LPG using two scenarios, with and without annual vehicle tax and inspection costs as scenario 1 and scenario 2, respectively. Simulation results with operational data suggest that investment is feasible today. The net present value (NPV), internal rate of return (IRR), and payback period (PP) show promising values. The NPV was IDR 35.52 and 41.14 million with an IRR of 7% and 8% for scenario 1 and scenario 2, respectively. The PP was obtained at 14 and 13 months for scenario 1 and scenario 2, respectively. However, this investment appears to be risky if there is a decrease in daily mileage and an increase in LPG prices simultaneously.