• International Journal of Technology (IJTech)
  • Vol 11, No 1 (2020)

Converting ToD Vehicle from Gasoline to LPG in Indonesia: Cost Identification and Investment Analysis

Muhammad Imron Rosyidi, Eko Muh Widodo, Tuessi Ari Purnomo, Muji Setiyo, Djoko Wahyu Karmiadji

Corresponding email: setiyo.muji@ummgl.ac.id


Cite this article as:
Rosyidi, M.I., Widodo, E.M., Purnomo, T.A., Setiyo, M., Karmiadji, D.W., 2020. Converting ToD Vehicle from Gasoline to LPG in Indonesia: Cost Identification and Investment Analysis. International Journal of Technology. Volume 11(1), pp. 100-110

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Muhammad Imron Rosyidi Department of Industrial Engineering, Universitas Muhammadiyah Magelang, Magelang, 56172, Indonesia
Eko Muh Widodo Department of Industrial Engineering, Universitas Muhammadiyah Magelang, Magelang, 56172, Indonesia
Tuessi Ari Purnomo Department of Industrial Engineering, Universitas Muhammadiyah Magelang, Magelang, 56172, Indonesia
Muji Setiyo Department of Automotive Engineering, Universitas Muhammadiyah Magelang, Magelang, 56172, Indonesia
Djoko Wahyu Karmiadji Agency for the Assessment and Application of Technology, Tangerang Selatan, 15314, Indonesia
Email to Corresponding Author

Abstract
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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

Converting to LPG; Feasibility analysis; Online fleet

Introduction

In North America and Europe, the phenomenon of transportation on demand (ToD) or online fleets as well as car-sharing has been around for a long time, and was reported more than 70 years ago (Shaheen and Cohen, 2012; Cuevas et al., 2016). In the past 10 years, car-sharing has spread to five continents. Recently, the phenomenon of car-sharing has influenced people to delay buying a new car (Hui et al., 2019). In Indonesia, ToD was pioneered in 2010 by GO-JEK but only began to grow substantially in 2015. Initially, GO-JEK was present in Jakarta as a motorcycle transportation service and expanded widely, and then competed with GrabTaxi. The rivalry between GO-JEK with GrabTaxi intensified when Uber entered the market in 2014. By 2016, competition among the three companies (GO-JEK, GrabTaxi, and Uber) was fierce. GrabTaxi changed its name to Grab and compete with GO-JEK especially Go-Car, but UBER stopped operating.

The presence of ToD such as Grab and Go-Car in urban areas has affected mobility patterns. The benefits and risks of the presence of ToD have been discussed in detail from various   perspectives, including economic, social, and policy (Natadjaja and Setyawan, 2016; Wahyuningtyas, 2016; Nurhidayah and Alkarim, 2017; Silalahi et al., 2017; Azzuhri and Mada, 2018). ToD  is  a  new  solution for consumers, when conventional  transportation  services are  unreliable,  such  as  uncertainty  schedule  and  altered  routes  due  to  congestion (Arifin and Axhausen, 2012). ToD is available anytime in almost all major cities in Indonesia.

For example, Figure 1 shows ToD availability in three cities in Indonesia at midnight, when city buses does not operate.


Figure 1 Online Fleet Availability In Several Cities In Central Java, Indonesia: (a) Yogyakarta Train Station; (b) Yogyakarta Airport; (c) Semarang Intersection; and (d) Solo Train Station

 

In early 2016, thousands of conventional fleet drivers demonstrated because their income declined due to the presence of ToD. This incident appeared in all mass and electronic media in Indonesia. Demonstrators demanded that vehicles used by Uber, Grab, and Go-Car be tested and inspected by the Department of Transportation as under the regulations for taxis and other public fleets. Demonstrators also demanded that ToD be owned by a legal entity or cooperative to limit the number of the fleet. By the end of 2016, some conventional taxies that had previously opposed ToD changed their policy. Some now saw online transportation services as an opportunity, and some joined existing ToD fleets. Until the beginning of 2018, precise data about the number of online fleets operating was not available. However, the Ministry of Transportation provided a quota of 91,953 online fleet units operating in all cities in Indonesia (CNBC Indonesia, 2018).

As a result, due to the huge number of vehicles, since the end of 2016, GO-JEK and Grab have come under pressure from their drivers because their incomes have declined by 50%. Therefore, the registration of new drivers is limited to maintaining supply and demand (Kusuma, 2018). We validated this data by surveying ToD drivers in Yogyakarta. They experienced a decrease in income with the increase in vehicles, especially those who worked as full-time drivers. This phenomenon worsens when the government limits the supply of subsidized fuel, which is gasoline RON 88 (Premium) sold by the government for IDR 6,550. ToD drivers must purchase non-subsidized fuel such as gasoline RON 90 and RON 92 at a higher price. At the time of writing, the price of gasoline RON 90 was IDR 7,800 and RON 92 was IDR 8,900, 19% and 36% higher than RON 88, respectively. On the other hand, there is the potential to replace gasoline with LPG, which has a better environmental impact and lower prices than gasoline, around IDR 5100 per liter equivalent to premium. In 2018, WLPGA reported at least 136 types of LPG-fueled vehicles produced as Original Equipment Manufacturer (OEM) (WLPGA, 2018). However, the practice of replacing an existing fleet with a new fleet is not easy to implement (Deendarlianto et al., 2017). As an alternative, adding LPG converter kits to the existing fleet is a reasonable solution so that vehicles can operate with LPG.

We chose LPG because it is available at fuel stations in many major cities in Indonesia (12 in Jakarta and its surroundings, 3 in Surabaya, 3 in Denpasar, and 1 in Bandung, Semarang, Yogyakarta, and Magelang, respectively). The cost of converting from conventional fuel to LPG is also lower than to Compressed Natural Gas (CNG) due to the lower LPG pressure compared to CNG, so the conversion equipment is cheaper. In addition, LPG has been shown to produce lower emissions and has a high octane number that can be applied to high-compression spark-ignition engines to get the best performance. The loss of power in LPG engines can be increased by various methods to approach gasoline engine power (Kaleli et al., 2015; Çinar et al., 2016; Suyabodha, 2017). Based on the description of the problems related to online fleet driver competition, fuel prices, and the benefits of LPG as an alternative fuel, we present a techno-economic simulation of the use of LPG for ToD. 


Conclusion

The simulation study showed that investing the conversion of online fleet from gasoline RON 90 to LPG is feasible today. This program will further assist car owners if the government provides waivers or exempts owners from taxes and inspection costs. The government can also promote loans with bank interest rates below 1% per month or by giving free converter kits to online fleet owners. Additional analysis showed this investment is resistant to daily mileage reduction to less than 100 km and LPG price increases to 89% of RON 90 gasoline prices. However, these investments appear to be risky if there is a decrease in daily mileage and an increase in the price of LPG simultaneously.

Acknowledgement

This article is part of research funded by the Ministry of Research Technology and Higher Education, Republic of Indonesia through the scheme of Penelitian Dasar Unggulan Perguruan Tinggi (PDUPT). The researchers also thank the Center of Research Development and Community Services of the Universitas Muhammadiyah Magelang for their support.

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