Green cabs change landscape in DC area

The taxicab industry - steeped in regulation and set in its ways - is not an easy business to change.

But that didn't stop Hans Hess, the successful owner of an environmentally conscious organic burger joint, from pushing ahead with plans to open an all-hybrid taxi service in the Washington, D.C. suburb of Arlington, Virginia.

He began hatching the idea in 2003, observing that some Canadian cab companies were already making the switch to the new combination gas and electric vehicles. The economics would be a no-brainer, he recalls thinking, particularly for cab drivers that frequently complain about the cost of filling their vehicles with pricey fuel.

Securing the go-ahead from county regulators was the tricky part. It took some time to gain an understanding of Arlington County's political climate and the procedures necessary to convince its board - which determines how many taxi licenses are annually distributed and to which companies - to take a chance on the idea.

Hess and his nephew, Cord Thomas, who oversees the cab company's day-to-day operations, did extensive research, met with board members and latched onto Arlington County's recent plan to go green under a 2007 program called Fresh AIRE (Arlington Initiative to Reduce Emissions). They then put together their proposal.

"The more pollution, the worse off the community is - it's a pretty simple argument and they bought it," says Hess, whose startup venture, Envirocab, was awarded 50 of the 86 new licenses given out in September 2007. The company, which has progressively built a fleet primarily of Toyota Prius and Camry hybrids, is competing with larger, established taxi services. The densely populated community of more than 200,000 relies extensively on cab service to downtown Washington and several nearby airports.

"If you're concerned about the health and welfare of a community, you shouldn't be giving permits out for cars that get 16 miles to the gallon," says Hess.

Sure, he and Thomas are environmentally minded at a time when going green is all the rage. Call for a car and you'll hear this greeting: "Thanks for calling Envirocab, where you can clean the air for the same fair." Envirocab even purchases clean energy offset credits from a third party - money that goes toward wind farms and other green sources of energy - to reduce its net carbon footprint.

But they're profit oriented too, and Hess says the cab company has been doing well. External factors, such as increased consumer awareness at a time when gas has reached prices of $4.00 a gallon and higher in recent months, isn't hurting the cause.

"It's definitely a good business to be in," says Hess, who concedes that the primary obstacle to growth is convincing the county to award additional licenses, which are only given out once a year based on perceived need.

OWNER OPERATED

Envirocab uses an owner-operated model, reserving its capital outlay for dispatch equipment, staffing of five full- and part-time dispatchers, and advertising and PR to create public awareness in the progressively-minded community. Drivers are required to purchase their vehicles and handle the maintenance; they pay Envirocab a weekly fee of $199 for the right to operate under the brand.

According to a least one driver, the chance to run a hybrid cab is worth the wait - sometimes more than several months at some car dealerships - due to the gas savings and increasing popularity with customers.

"The way business is growing … my vehicle is already paid off within a year," says Irfan Nigah, a 23-year-old Envirocab driver who shares the car with his brother. "People want to ride in Envirocab. It saves the time we wait in line at the taxi stand."

Nigah, who drives 12-hour shifts in his Prius, says the cost of gas is about $18 a day, compared with that in a conventional car, which he estimates would cost $65 to $75.

Toyota contends that demand for its hybrid cars used in commercial fleets has indeed been rising in recent months. But its hybrids are still targeted to a consumer audience and the Japanese automaker does not make any special concessions for commercial buyers. Ford, by comparison, puts special features such as heavy-duty brakes on some versions of its Crown Victoria sedans and other models destined for commercial use.

"As a matter of fact our engineers don't recommend them in taxi use," says Wade Hoyt, a spokesman for Toyota's U.S. operations. "None of them were designed for commercial use."

That's not stopping cab companies. In Arlington, Virginia, for one, the entrance of at least one all-hybrid taxi service has served to raise the bar for competition, prompting conventional cab companies to add hybrids to their own fleets.

"We made a quantum leap with the environmental sensitivity of our cab companies when Envirocab stepped forward," says Jay Fisette, a member of the Arlington County board. "It was shortly after that that all the other cab companies opened their minds."

(Deborah Cohen covers small business for Reuters.com. She can be reached at smallbusinessbigissues@yahoo.com)