Rushing From Gas Pumps to Charging Stations?
Consider the Consumer
By
Allan Vivian
In 2009 the U.S. Congress passed legislation that mandates a corporate average
fuel economy standard of 35.5 miles per gallon by the 2016 model year. By September
2011, the Obama administration plans to establish new standards that will apply
to the 2017 through 2025 model years. These standards will likely increase the
pressure on manufacturers to design, build, and market more fuel-efficient vehicles
during the remainder of this decade and beyond.
Among automobile manufacturers, the transition to more fuel-efficient and environmentally
friendly vehicles has been going on for quite some time, but this phenomenon
is accelerating in 2011. January 2011 marks the first time that an executive
from a major automotive manufacturer has publicly thrown down the gauntlet to
his peers and declared, “Let’s remember, the destination for all
of us is zero emissions.” By implication, he may also be saying, the ultimate
goal is a world where gas pumps will be replaced by charging stations.
No one expects this transformation to occur any time soon. However, judging
from the products on display at the 2011 Detroit Auto show, automotive manufacturers
are stepping up their efforts and will soon be offering a bevy of alternative
powertrain vehicles to the U.S. consumer. The Nissan Leaf and Chevrolet Volt
were introduced late in 2010. The Leaf is a true electric vehicle, with a range
of approximately 100 miles between charges, and the Chevrolet Volt is a plug-in
hybrid, with a more limited battery range, but with an on-board gasoline-powered
engine that recharges the battery while the vehicle is on the road, extending
its range to approximately 300 miles.
Many more alternative powertrain vehicles are now in the pipeline, including
new body-style variations of the leading hybrid vehicle, the Toyota Prius. Hybrid
vehicles differ from plug-in hybrid, because they retain a gasoline engine that
powers the vehicle alongside a battery. The gasoline engine kicks in only when
needed, and this results in much higher fuel economy than a conventional gasoline
engine. Toyota plans to bring 12 new or redesigned alternative-fuel vehicles
to market by the end of 2012.
The U.S. consumer is now, and will continue, in the foreseeable future to
be, presented with many new and exciting models that possess alternatives to
the standard gasoline engine. We will soon see how the public responds to the
Leaf and Volt, but consumer reception given to hybrid vehicles to date, has
been less than enthusiastic. For the past three years, hybrid sales have actually
been in decline. It has been predicted, though, that this will turn around in
2011, based on an improving economy, higher gas prices (fuel prices now tipping
the $3.00 per gallon mark in some parts of the country and predicted to go as
high as $5.00 per gallon) and the proliferation of exciting new hybrid models.
Of course, any sustainable shift away from gasoline-powered vehicles to alternative
drivetrain vehicles must be accompanied by a shift in consumer acceptance. The
first indicator of acceptance is likely to be a significant increase in consumer
familiarity with these vehicles. U.S. consumers are unlikely to purchase a big-ticket
item like a new vehicle equipped with an engine with that they have little or
no experience with or prior knowledge. Hybrid vehicles have been on the market
in the U.S. since 1999 when Honda introduced the Insight. Toyota followed a
year later with the Prius. But, despite its availability for over a decade,
hybrid familiarity among consumers remains surprisingly low. The overwhelming
majority of consumers still lack firsthand knowledge of anything but the standard
gasoline engine-powered vehicle.
As the Auto Technology Familiarity—Hybrid chart below shows, less than
one in ten (9%) of those currently in the market to buy a new vehicle have actually
driven or owned a hybrid. Approximately two-thirds of U.S. new vehicle intenders
today say that they are only somewhat familiar or not at all familiar with them
(63%). In order for the transformation to charging stations to take place, we
would expect this statistic to be one of the first things to change.
|
| Question: Automobile manufacturers are developing alternatives to the
standard gasoline engine. How familiar are you with the following types
of automobile technology? |
More recently developed products, like the plug-in hybrid and the electric
vehicle just now coming to market, are even further back on the consumer familiarity
curve. More than three quarters of consumers currently in the market to buy
a new vehicle are not at all or only somewhat familiar with them. See Auto Technology
Familiarity—Plug-in Hybrid/Electric chart below.
 |
| Question: Automobile manufacturers are developing
alternatives to the standard gasoline engine. How familiar are you with
the following types of automobile technology? |
While the 2009 law was no doubt designed with two goals in mind: first, to
reduce our nation’s dependence upon foreign oil, and second to reduce
pollution caused from tailpipe emissions—policies that benefit the collective
good of the country—U.S. consumer priorities are inextricably tied to
their own wallets. Clearly, the way to consumer hearts and minds is going to
follow a very different path than federal mandates. Federal legislation alone
is unlikely to affect the needed change in consumer behavior and could ultimately
only waste the heavy investment now being made by manufacturers.
For the transition to take root among consumers, two factors are critical.
The first is that they must feel these alternatives provide them with an attractive
opportunity to reduce or eliminate their expenditures on gasoline. This is the
most influential consideration for consumers. Certainly, if gas prices remain
high or go higher, this will have a significant impact on consumer interest
in these new vehicles. The second factor is likely to be the tougher of the
two for manufacturers to achieve. The price of the vehicle needs to be lower
than, or at least competitive with, gasoline-powered vehicles. Consumers must
be convinced by the MSRP on the Monroney sticker in the window of that shiny
new vehicle that it will cost them no more, and preferably less, to purchase
or lease a vehicle with alternative drivetrain technology than one that is gas
powered. Other considerations such as maintenance cost and range are also important
to consumers, but if the first two factors are not addressed, the others won’t
really matter. See Most Influential Vehicle Characteristic chart below.
 |
| Question: If you were to consider purchasing a vehicle that had an
alternative system of propulsion, like a hybrid or electric vehicle, or
one that runs on a different fuel like diesel or hydrogen, which one
of the following considerations would be most influential to you? |
So what are the near-term prospects for vehicles that provide alternatives
to the gasoline-powered engine? At the current market price of vehicles and
gasoline, about four in 10 (43%) of those who plan to purchase a new vehicle
in the next two years said they would be at least somewhat likely to consider
a hybrid. Approximately one in ten said they would be very likely to buy a hybrid
(10%). Purchase consideration of Plug-in hybrids and electric vehicles is significantly
lower, but approximately one in five (20%) are at least somewhat likely to buy.
(See Purchase Likelihood—Next Purchase chart below.)
 |
| Question: If you were to consider purchasing a
vehicle that had an alternative system of propulsion, like a hybrid or electric
vehicle, or one that runs on a different fuel like diesel or hydrogen, which
one of the following considerations would be most influential to you? |
Are prospects brighter in the long term? Consumers show signs of recognition
that change is coming. More than half of those currently in the market for a
new vehicle anticipate than within the next 10 years they will be likely to
consider a Hybrid (56%). Approximately one-third of those currently in the market
for a new vehicle said they would be likely to consider a plug-in hybrid or
an electric vehicle within the next 10 years. (See Purchase Likelihood—Next
10 Years chart above.)
 |
| Question: How likely are you to purchase a vehicle equipped with the following
powertrain or fuel types in the next 10 years? |
Are some consumers more likely than others to move away from their gas dependency?
The answer to this question is that some U.S. consumers do appear to be more
likely to consider hybrids than others. Manufacturers anticipate that younger
people, as well as those who are more environmentally conscious, will be among
the first buyers of the Leaf and Volt. Our data suggest that new vehicle buyers
among minority groups are also more likely to be early buyers of these and other
alternative drivetrain vehicles than their Caucasian counterparts (based on
percentages of each group, not total number of buyers).
The charts below show that Caucasians index below 100 on being very likely
to buy hybrids, plug-in hybrids, and electric vehicles, indicating that the
transition among this group will be fairly slow. However, among Asian-American,
Hispanic and African-American consumers, the scenario is very different. Consideration
index figures are far higher among all three of these groups compared to Caucasians
(except for African-Americans level of consideration for a hybrid vehicle which
is comparable to Caucasians). Among these four groups, Asian American consumers
show the most promising levels of consideration. The implication is that one
potentially effective marketing approach may be to begin by targeting minority
buyers (as well as younger and environmentally conscious buyers). Youth and
minority groups have often served as trendsetters in the arena of American culture
involving music, entertainment, communication, and technology. This could potentially
be one way to gain the traction needed.
 |
| An index of 100 is average, scores above 100 indicate an above average
likelihood to buy, while scores below 100 indicate a lower than average
likelihood to buy an alternative drivetrain vehicle. |
In summary, great strides are now being made by manufacturers to bring more
fuel-efficient and environmentally friendly vehicles to market. Current policies
of the federal government appear to be ensuring that manufacturers will continue
to aggressively develop these vehicles over the next two decades in order to
meet national standards of fuel economy. As a result, the challenge of successfully
marketing these products to consumers now looms ahead for automotive manufacturers.
Currently, few of those consumers who intend to purchase a new vehicle over
the next two years have any serious level of familiarity with the technology
that will be an integral part of this new wave of vehicles. However, consumers
want a way to reduce what they have to spend on fuel for their vehicles, and
they are looking for vehicles that deliver this benefit without costing more
to purchase or lease initially.
It is clear that a great deal of consumer education will have to take place
over the coming years in order to affect sustainable change of behavior. It
appears also that new vehicle intenders among the minority ethnic groups show
a greater likelihood to consider these new vehicles than do Caucasians. Targeting
youth, environmental groups, Asian Americans, African Americans, and Hispanics
may be a good way to begin the process of engaging the U.S. consumer and affecting
a change that may eventually lead to a transformation from gas pumps to charging
stations.
Source: The data presented in this article are from Decision Analyst’s
New Vehicle Brand Barometer Syndicated Study conducted between December 2010
and January 2011. Sample sizes, except where otherwise indicated, are over 8,000
near term new vehicle purchase considerers (within the next two years).
Footnote: The author acknowledges that there are other major initiatives being
explored in the automotive industry, primarily involving alternative fuel types
like diesel, hydrogen, and biofuels that are not touched upon in this article.
This was omitted because the plug-in hybrid and the electric vehicle are, as
of the introduction of the Chevrolet Volt and Nissan Leaf, now commercially
viable and appear to be the preferred alternative approaches among OEM’s
currently.
Bibliography:
- Automotive News, New Fuel Target Must be Rational and Transparent,
Jan. 7, 2011.
- Automotive News, High Costs at the Pump Make Fuel Savers More Attractive,
Jan. 17, 2011.
- www.hybridcars.com/2001-hybridcars.
- www.hybridcars.com/history-of-hybrid-vehicles.
- Automotive News, Nissan to Rivals: Stop Muddling EV Message, Jan.
17, 2011.
Copyright © 2011 by Decision Analyst,
Inc.
This article may not be copied, published, or used in any way without written
permission of Decision Analyst.
About the Author
Allan Vivian (avivian@decisionanalyst.com)
is Vice President and Director of Automotive Research at Decision Analyst. He
may be reached at 1-800-262-5974 or 1-817-640-6166.
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