Electric vehicles will remain a small part of the car fleets until technological advances can eliminate disadvantages. Government subsidies likely offer a poor value to taxpayers.
MASTER THESIS: Electric Car Adption
Thanks to generous government incentives and the introduction of some relatively attractive new models such as the Nissan Leaf, Norway is currently the world per-capita leader the purchase of battery powered electric vehicles (EV).
Similarly, federal and state government incentives in California have made it numerically the worlds largest market for EVs.
- Watch video: Are consumers willing to pay the costs to be green?
A recent Master of Science thesis investigates the relative importance of government incentives versus vehicle characteristics in the explaining the likelihood of EV adoption by consumers in both Norway and California.
Although EVs emit no tailpipe emissions and use relatively inexpensive electricity as fuel, they are frequently not seen as attractive alternatives to gasoline or diesel vehicles primarily due to the limitations of their batteries which provide relative short driving range before requiring a recharging period that can last for several hours.
Furthermore, EVs tend to be more expensive to than comparable conventional vehicles. To lower greenhouse gas emissions, many governments around the world have offered a number of subsidies to EV buyers in an effort to offset their disadvantages and speed their adoption.
In Norway these subsidies include the elimination of most vehicle taxes, provision for free parking and battery recharging, exemptions from paying road tolls, and permission to use bus lanes in major cities. EV buyers in California have also been offered a similar mix of incentives.
The online survey of 251 Norwegians and 55 Californians were recruited from the membership of EV associations in the two markets. A full-profile conjoint analysis design asked respondents to rate 9 different EV cars on two measures: 1) a 7-point purchase intention scale, and 2) an open-ended “amount they would expect to pay”.
The overall purchase intention results show that the California sample values lower emissions more than the Norwegian sample, while the Norwegians place greater value on the government benefits and EV technology. The most important government benefits for the Norwegians and Californians were free road tolls and free parking respectively, while both samples also placed strong value on exemptions from EV purchase taxes.
With regards to the vehicle characteristics, both samples preferred to have the longest driving range, but the Californians were less concerned about fast battery recharging capabilities than the Norwegians.
When purchase price was considered, the valuation of various attributes changed considerably for both samples. For example, both samples reduced the importance of lower emissions by about half, and increased the importance of EV technical characteristics by nearly 50%, while the importance of government benefits was least changed. Eliminating all CO2 emissions was valued at just under 9,200 NOK for the Norwegians and just less than $2,000 for the Californians. Elimination of road tolls was valued by the Norwegians at just over 5,000 NOK as the most valued government benefit, while the Californians place the most value on free parking at just under $1,000.
Having an EV with a 300 km driving range was valued at 75,000 NOK by the Norwegians and just over $10,000 by the Californians. Both samples also preferred the 5-minute recharge time, with the Norwegians valuing it at just over 17,000 NOK and the Californians at just under $2,200.
What Does This Mean for Marketers?
While government benefits are valued by both samples, eliminating the major disadvantages of EVs in terms of driving range and “refueling” time versus conventional cars are the most valuable characteristics in both samples.
This suggests that EVs will remain a small part of the car fleets in both markets until technological advances can eliminate EV disadvantages. The relatively low value placed on government benefits relative to their costs, further suggests that government EV subsidies likely offer a poor value to taxpayers.
Kuban, Benjamin and Christian Lindquist (2012), “Electric vehicle attribute preferences: An international study using conjoint analysis,” BI Norwegian Business School MSc Thesis.
This article is published in BI Marketing Magazine No. 2 - 2012, a magazine presenting research from the Department of Marketing at BI Norwegian Business School.