Ryder System Inc
), the world's largest provider of integrated logistics and
transportation solutions, has entered into its first
"Flex-to-Green" lease agreement with Source Interlink, a U.S.-based
publishing and logistics company.
Per the agreement, Ryder will provide Source Interlink with a
flexible option to exchange diesel vehicles for natural gas-powered
vehicles. However, the terms of the deal remain undisclosed.
In September last year, the company first launched its
"Flex-to-Green" lease offering to support sustainable
transportation, or eco-friendly transportation for private fleet
operators. This lease offering involves incorporation of fuel
efficient vehicles into their fleets including liquid natural gas
and hybrid vehicles. The deal provides customers with an
opportunity to convert their conventional vehicles to new
fuel-efficient ones as per their preference.
In 2010, Federal Corporate Average Fuel Economy (
) set out a fuel economy standard of 34.1 miles per gallon, which
is to be implemented on automobiles manufactured from 2012 through
2016. As per market sources, it is estimated that the mandate will
require investments of approximately $50 billion by automakers to
upgrade their technology to meet the CAFE standards. Therefore,
energy conservation is going to be a major area of investment for
transportation companies over the next few years.
Several companies, especially those involved in transportation
and logistic services, are increasingly realizing the benefits of
fuel efficiency mandates.
Fuel-efficient vehicles are not only designed to minimize the
harmful effects of heavy fuel consumption but are also expected to
aid in optimal utilization of resources through alternative fuel
usage, ultimately leading to significant cost synergies for
companies. Consequently, it is apparent that Ryder's Flex-to-Green
lease offering is a significant step toward tapping a gradually
growing market arising from a compelling need for sustainable
transportation. Further, this will also enhance the competitive
position of the company against rivals like
Ryder has pioneered several such initiatives that promote the
utility of alternative fuel vehicles. The SANBAG (San Bernardino
Associated Governments) project is one such. Under this project,
Ryder collaborated with Southern California Association of
Governments Clean Cities Coalition, to sell approximately 200
heavy-duty natural gas trucks to customers last year.
In addition, the company was also benefited by gaining three
natural gas compliant maintenance shops in Rancho Dominguez, Orange
and Fontana, as well as two fueling stations through
The company currently supplies alternative fuel vehicles in
southern California and Arizona, which is also home to Source
Interlink's largest distribution center. As a result, Source
Interlink will also benefit from an easy access to Ryder's fueling
and maintenance centers, which was one of Source Interlink's key
reasons to enter into the deal.
We can expect that with the growing demand for fuel efficient
transportation, Ryder will boost its infrastructural capabilities
by expanding into new markets and thus, promoting its Flex-to-Green
Currently, we have our long-term Outperform recommendation on
Ryder supported by a Zacks #1 Rank (Strong Buy).
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