Alternative Fuel Vehicles Alternative Fueled

Alternative Fuel Vehicles

Alternative fueled vehicles use forms of energy other than conventional and traditional gasoline and diesel fuel. Included in those alternative forms of fuel are fuels such as methanol, ethanol, compressed natural gas, liquefied petroleum gas, or electricity. Consumers appear to have mixed beliefs and opinions about the purchase and use of the alternative fuel vehicles and no one company has as of yet fully committed to the production of these vehicles although some companies are producing a hybrid line of vehicles. In addition the choices that are presently available for purchase of alternative fuel vehicles are quite limited. It is presently unknown how the general population perceives the alternative fueled vehicle and how successful the marketing of this vehicle will actually be. The purpose of this study is to determine how well disseminated information is concerning alternative fueled vehicles and as well to determine the perception of the general public concerning these vehicles and the marketability of the alternatively fueled vehicle.

ALTERNATIVE FUEL VEHICLES

Introduction

Alternative fueled vehicles use forms of energy other than conventional and traditional gasoline and diesel fuel. Included in those alternative forms of fuel are fuels such as methanol, ethanol, compressed natural gas, liquefied petroleum gas, or electricity. Consumers appear to have mixed beliefs and opinions about the purchase and use of the alternative fuel vehicles and no one company has as of yet fully committed to the production of these vehicles although some companies are producing a hybrid line of vehicles. In addition the choices that are presently available for purchase of alternative fuel vehicles are quite limited.

Statement of Problem

It is presently unknown how the general population perceives the alternative fueled vehicle and how successful the marketing of this vehicle will actually be.

Purpose of Study

The purpose of this study is to determine how well disseminated information is concerning alternative fueled vehicles and as well to determine the perception of the general public concerning these vehicles and the marketability of the alternatively fueled vehicle.

Significance of Study

The significance of this study is the information and knowledge that will be added to the already existing base of knowledge in this area of study.

Literature Review

In a recent study entitled: "Symbolic Meaning of Vehicles" it is reported that in consumer societies "...what we buy says much about us. It is as much about whom we want to become and how we wish to be seen as it is about form, feature, and function. But research on the hybrid car market has largely ignored what hybrids mean and examined only functionality and economics." (Kurani and Turrentine, and Heffner, 2009) in the study conducted by researchers Ken Kurani and Tom Turrentine with grad student Rusty Heffner the focus of was attempting to determine "...who is buying hybrid cars and why." (Kurani and Turrentine, and Heffner, 2009) Following fifty comprehensive interviews these the study confirmed that "...people buy hybrids for reasons far more complex than saving money." (Kurani and Turrentine, and Heffner, 2009) According to Heffner "For most households a hybrid vehicle is a symbol for their identity." (Kurani and Turrentine, and Heffner, 2009)

In a separate report entitled: "Fuel Economy: What Drives Consumer Choice?" A study is reported that was conducted in 2003 and 2004 on the knowledge, beliefs and behaviors of consumers in relation to the price, purchase and use of fuel, as well as "how these elements influenced vehicle purchases." (Kurani, Turrentine, and Heffner, 2007) During the course of the interviews it is reported that fuel prices rose "from around $1.60 to just over $2 a gallon." (Kurani, Turrentine, and Heffner, 2007)

Fifty-seven interviews were reported in the homes of Northern Californians who had recently purchase a vehicle or who were on the verge of purchasing a vehicle. The interview was in the form of open-ended questions and probing for in-depth answers. It is reported that more attention was given to the "context and validity of the information" received and what is referred to by some researchers as qualitative research rather than to its "statistical reliability." (Kurani, Turrentine, and Heffner, 2007) it is reported by Kurani, Turrentine, and Heffner that they "stratified...respondents into nine 'lifestyle sectors' because they believed that they might have "different sensibilities about fuel use." (2007)

Stated for example is that they "define several groups" in which it was believed that they would "have the awareness and the skills to be particularly sophisticated in their accounting, such as computer engineers, finance professionals, business owners, ranchers and farmers, and even buyers of hybrid vehicles." (Kurani, Turrentine, and Heffner, 2007) it is related that the interviews "unfolded in four phases" and Kurani and Turrentine, and Heffner state that in the first three interviews that they "were careful not to blurt out anything like 'So what do you think about fuel economy?' Instead it is reported that they listened closely as households related their stories about "buying and driving cars." (Kurani, Turrentine, and Heffner, 2007)

It is reported that the first phase of interviewing "covered the history of all vehicles the household had owned. These histories varied from extensive to brief. Some respondents had owned twenty or more vehicles during their lifetime. Others, especially graduating college students may have been buying their first car." (Kurani, Turrentine, and Heffner, 2007) the second phase of the interviews is reported to have rendered a "detailed account of the household's most recent vehicle purchase" and the third phase proposed was a hypothetical purchase of another new vehicle in which was inserted 'fuel economy' as one of the several vehicle attributes for the households to consider." (Kurani, Turrentine, and Heffner, 2007)

It is reported that in the first three phases of the interviews there was little discussion about fuel economy and households in which the issues of fuel economy were mentioned the most were those in which enlisted military personnel with limited incomes were part of the household. For some of the students in the interviews "fuel costs were their entire cost of operating a vehicle." (Kurani, Turrentine, and Heffner, 2007) in the four phase of interviewing the researchers report inquiring about fuel economy and fuel use directly and asking households to provide "details about the fuel economy of their current cars, their day-to-day fuel use and costs and the important of fuel economy in past and present vehicle purchases." (Kurani, Turrentine, and Heffner, 2007)

It is reported by Kurani and Turrentine, and Heffner that drivers "were able to tell us what it cost to fill their tank and the per-gallon price they paid during their most recent trip to the gas station -- if that trip had been made the day of our interview or the day before. If it was any further in the past, then confident answers were replaced by tentative estimates. Many were uncertain because when they paid by credit card they didn't always look at what they spent. Most households confessed to having no idea of their fuel costs over any period of time -- weekly, monthly, or annually. They did not budget, manage, or track fuel costs in any systematic way." (2007)

It is additionally reported that many drivers in this study could not inform the researchers "...with any certainty how many miles per gallon (MPG) their current vehicle got, which was not surprising since many cars do not have fuel economy gauges. " (Kurani, Turrentine, and Heffner, 2007) the individuals in this study who could provide this information to the researchers were stated to have "...either calculated it when they refueled or recalled it from the vehicle's window sticker (only an option if they had purchased the car new). A few who calculated MPG did so to track the condition of their engine, not fuel costs. They had learned from someone -- their father or their mechanic, for example -- that if they saw a drop in MPG, there was something wrong with the engine." (Kurani, Turrentine, and Heffner, 2007)

Furthermore, the researchers quizzed the participants concerning their willingness to pay for a vehicle "...with higher fuel economy and what payback period they expected for the increased cost..." And report a range of answers stating: "Even households with high financial skills struggled to guess what improvements in fuel economy were worth to them in dollars and cents." (Kurani, Turrentine, and Heffner, 2007)

When the researchers asked the participants in the interview in regards to money back on investments in better fuel economy answers given included "I guess it would be nice if it were paid off when the loan was paid off." (Kurani, Turrentine, and Heffner, 2007) Kurani, Turrentine, and Heffner state as follows: "When respondents did offer a desired payback period, we asked where they got the number. In almost all cases, interviewees said they were guessing, and that this simply was not the way they had ever thought about buying a car. One banker we interviewed lit up when we asked this question. He said, "I know what you're talking about -- that's a payback calculation. I do that every day. But I've never done that with a car. I buy what I need to look successful. Besides, how would I ever calculate a payback when I have no idea what gasoline will cost in the future?" A few said with apparent certainty, "one year" or "two years." However, when we inquired where the number came from, they simply asserted that they spent lots of money on gasoline and would quickly earn their money back through savings. A smaller group proposed longer terms -- eight to ten years -- noting that they keep their cars for a long time. Several households explained that their lack of attention to gas costs was due to the fact that they felt they couldn't do anything about it; they had to drive as much as they did to lead the lives they had constructed for themselves." (Kurani, Turrentine, and Heffner, 2007)

Kurani, Turrentine, and Heffner state in regards to the choice of a hybrid vehicle that there have been a number of articles in the mainstream media and it has been noted as well by the automotive press "that the buyers of hybrids do not make the extra cost of their vehicles back through gas savings. These articles contended that hybrid vehicles cost $2,000 to $3,000 more than vehicles of similar size and power. Our small group of hybrid vehicle buyers confessed they had never thought of or calculated a payback when they bought their hybrid. In fact, these people surprised us with how little attention they paid to fuel costs. They did pay a lot of attention to fuel economy. Drivers of hybrids confessed that they watched their fuel economy gauges compulsively. But none kept track of costs. They liked how much better their car's MPG was than other cars, and their gauges made them feel good about their vehicle choice. It turns out they bought hybrids mainly for ideological reasons, and not to save money." (2007)

Kurani, Turrentine, and Heffner report being surprised by these findings so they designed a follow-up study to examine a larger group of hybrid buyers as they state they wanted to "...get a better sense of what motivated purchases of the highest fuel economy vehicles on the market. We built on what we learned from the first study: that consumers look to the media, to experts, and to other consumers to help them decide what to do. Their decisions around cars, fuel economy, and hybrid vehicles drew on social awareness, but not on calculations. They saw the price of gasoline posted at every gasoline station. They listened to reporters talk about gasoline prices on the news. They talked about cars with friends at church or work." (Kurani, Turrentine, and Heffner, 2007)

The findings in the second study state that "decisions about fuel economy were governed more by emotions than by analysis, more by what fuel economy means that by its monetary value." In fact, findings show that in the months prior to the purchase of a hybrid that the buyers were thinking and conversing about the costs of gasoline as well as about new technologies, the security of the nation and the future and environment. When these individuals went to purchase their car comparison shopping against other fuel-efficient compact cars did not take place and the hybrid buyers participating in the study "were more likely to have only one vehicle in their choice set: the particular hybrid they bought." (Kurani, Turrentine, and Heffner, 2007)

It is reported that these individuals were more likely to be "replacing a pick-up truck, SUV, or high-priced luxury car than a small economy sedan. And they often described the decision to buy a hybrid as an exciting moment of commitment to a new set of values." (Kurani, Turrentine, and Heffner, 2007) in the event that fuel economy was spoken of by a hybrid buyer it is stated that it was "usually an aesthetic value rather than a financial one, experienced through their new fuel economy gauges. Some hybrid drivers can watch their vehicle's fuel economy minute-to-minute. One young man talked about the great pleasure he received from checking his fuel economy gauges at the end of a trip and seeing "what a good job" he did. Most of our hybrid buyers mentioned how much less often they refuel and even how much they are spending per fill-up. But they are no more likely than other drivers in our previous study to calculate costs over time. Some hybrid buyers are concerned about costs, but the costs are more symbolic than calculated, and are rooted in a buyer's attempt to look financially smart to themselves, friends, family members, and coworkers." (Kurani, Turrentine, and Heffner, 2007)

Conclusions stated by Kurani, Turrentine, and Heffner following the second study include that the "lack of knowledge and the inattention to costs by cars buyers may surprise some researchers. In defense of our survey subjects, car manufacturers don't make it easy for drivers to calculate or track MPG and fuel costs. Even those hybrid vehicles with advanced energy-use instruments show fuel economy only over short periods of time, and don't track daily, weekly, monthly, annual, or vehicle lifetime costs. Also, the differences in cost resulting from diverse driving styles, price variations between gas stations, or differences in fuel economy between similar car models are often small. So it's unsurprising that even hybrid buyers don't take the time to make calculations or comparison shop for vehicles of similar size or class." (Kurani, Turrentine, and Heffner, 2007)

In addition, it is stated that if more vehicles "...had instruments that tracked fuel use and costs, consumers might pay more attention to them. However, in many cases, such instrumentation might only demonstrate that different driving behaviors and even differences between similar car models do not bring large dollar payoffs. This does not mean that consumers do not care about fuel economy. A quick look at the current car market shows that buyers are shifting away from gas guzzlers. This is happening in a period of heightened attention to many issues related to fuel economy, including climate change and energy security as well as gas prices. But we cannot develop policies or create behavior models that assume drivers calculate costs or even that private cost is the main factor motivating consumers to choose better fuel economy. To be successful, vehicle choice models and policies based on those models must investigate more thoroughly all the aspects of fuel economy that motivate consumers." (Kurani, Turrentine, and Heffner, 2007)

The work entitled: "E-85 Everywhere" reports a Minnesota Consumer Perception Survey for E85 and Flex-Fuel Vehicles. Findings in this study state that female respondents report preferring ALA-recognized vehicles and fuel companies more than did their male counterparts. The number of individuals that were found to presently own a flex-fuel vehicle was stated at 6% while more than 55% of people report that they would purchase E85 when available. Also reported in the study findings is that more than 85% of respondents reported being familiar with E85 while male respondents reported a significant greater level of awareness than did female respondents. Reported as perceived benefits of E85 were those of: (1) clean fuel, environment-friendly and healthier air to breathe; and (2) renewable energy source. (Phoenix Marketing International, 2007)

It is reported in the work entitled: "Study: Car Ads Aren't Green Enough" that a recent survey reports that "auto advertisers' failure to talk green is costing them opportunities to reach mainstream buyers." (Connelly, 2007) According to the study conducted by MindClick Group, Inc. A marketing research firm in suburban Los Angeles "Consumers' environmental consciousness and interest in fuel efficiency outstrip the eco-messages they hear from automakers..." (Connelly, 2007) the survey reports that there is a "huge disconnect between the advertising and the amount of interest. Concerns about fuel economy and gasoline prices are whetting consumer appetites for information about hybrid and alternative fuel. Mileage and environmental performance have become major factors in vehicle purchase consideration." (Connelly, 2007) it is reported that consumer interest in green cars "extends well beyond tree huggers and cuts across the political spectrum. Among survey respondents who said they intend to buy a new vehicle, three-fifths were considering an alternative-fuel or hybrid vehicle. And of those, five out of six cited fuel economy as one of the most critical elements of purchase consideration." (Connelly, 2007) MindClick is stated by Connelly to slice the U.S. consumer market into six segments which reflect "varying concern about global warming." (Connelly, 2007) the survey of U.S. consumers reports the following findings:

(1) 58% of respondents who said they plan to buy a new car or truck considered an alternative-fuel or hybrid vehicle; of those 83% cited fuel economy as a critical reason;

(2) 21% of respondents who bought a vehicle in the past years said they recalled vehicle advertising with a green message. (Connelly, 2007)

The work of Struben and Sterman (2007) entitled: "Transition Challenges for Alternative Fuel Vehicle and Transportation Systems" states that "successful diffusion of AFVs is difficult and complex for several reasons. The enormous scale of the automobile industry and installed base creates a wide range of powerful positive feedback processes that confer substantial advantage to the incumbent ICE technology. Important feedbacks include vehicle improvements and cost reductions driven by scale economics, R&D, learning by doing and field experience, all improving vehicle performance, sales, revenue, scale and experience still further. Word of mouth and marketing stimulate awareness and adoption, boosting revenue and the installed base of new vehicles, generating still more word of mouth and marketing expenditure." (Struben and Sterman, 2007)

It is reported that drivers will not find AFVs "attractive without ready access to fuel, parts, and repair services, but energy producers, automakers and governments will not invest in AFV technology and infrastructure without the prospect of a large market -- the so-called chicken and egg problem." (Struben and Sterman, 2007)

In a report entitled: "All-New Eco Watch Study from Kelley Blue Book Marketing Research Tracks, Trends Shoppers' Opinions" it is reported that according to Kelley Blue Book Marketing Research's all new Eco Watch study, "in-market new-vehicle shoppers are not only increasingly concerned about the environment, but are making purchase decisions based on how their choices will affect the environment. Sixty-one percent of new-vehicle shoppers say it is important to purchase a vehicle from a brand that is environmentally friendly. Consumers cite Toyota, Honda and Chevrolet as first, second and third (respectively) for having the most fuel-efficient and environmentally friendly vehicles." (Kelley Blue Book, 2008)

It is reported that Chevrolet is nearing the top of the list for fuel-efficient vehicles and it is specifically stated that "Chevy's recent push of hybrids, flex-fuel and most recently plug-in electric vehicles is really resonating with the car-buying public. The latest EcoWatch results show that brands with robust alternative-fuel-technology models, be it Toyota with hybrids, Honda with hybrid, natural gas and hydrogen fuel-cell vehicles, or Chevrolet with hybrid, flex-fuel and the much-talked-about electrically driven technologies epitomized by the upcoming Chevrolet Volt, are garnering consumer perception as being the most eco-friendly." (Kelley Blue Book, 2008)

According to this report "sixty percent of consumers are concerned about the environment, with the top issues being water pollution, air pollution, global warming and energy shortages." (Kelley Blue Book, 2008) When respondents in the survey were asked what they were doing to make lifestyle changes in response to environmental issues the following was reported:

(1) 58% - they are considering a more fuel-efficient vehicle;

(2) 57% - changed their driving habits;

(3) 56% - making their home more energy efficient; and (4) 50% - shopping less for clothes, going out to eat less and spending less money on entertainment. (Kelley Blue Book, 2008)

Additionally, it is reported that approximately one-half of consumers state that "gas prices have made them change their mind about the type of vehicle they are considering." (Kelley Blue Book, 2008) Reported as well is that 58% of shoppers who have changed the type of vehicle purchase they are planning to make would not change their minds back to the previous vehicle considered even if prices on gasoline were to drop by $1.00 per gallon.

Features that consumers state that they are willing to compromise on includes the following:

(1) engine size;

(2) vehicle size;

(3) vehicle category; and (4) performance. (Kelley Blue Book, 2008)

Features that consumers are unwilling to compromise on includes the following:

(1) available features and options;

(2) vehicle capacity; and (3) in-vehicle storage. (Kelley Blue Book, 2008)

The report states that consumers have stated that they are willing to spend approximately $2,600.00 more for a vehicle that is environmentally friendly. Additionally it is reported that approximately 75% of individuals shopping for new vehicles expressed a wish that there were more choices in the alternative fuel vehicle marketplace.

Stated as the alternative fuel types that consumers are the most interested in are:

(1) hybrid;

(2) hydrogen fuel cell; and (3) natural gas vehicles. (Kelley Blue Book, 2008)

Alternative fuel vehicles that consumers are the most skeptical about are the following:

(1) biofuel;

(2) diesel; and (3) battery-electric vehicles. (Kelley Blue Book, 2008)

The work of Plax and Kearney (2006) entitled: "California Consumer and Fleet Manger Reactions to Clean Vehicle Technologies" reports a study that sought to identify the most important factors influencing the consumer purchase of new vehicles in the state of California. Factor that were found to be those most important influencing the purchase of new vehicles by California consumers are stated to include factors of:

(1) fuel economy;

(2) cost;

(3) maintenance and reliability; and (4) safety;

(5) performance; and (6) family needs. (Plax and Kearney, 2006)

The study findings also are stated to have revealed that respondents in the survey "were not all that familiar with any of the advanced technology or alternative fuel vehicles, including flex-fuel vehicles. Moreover, participants indicated virtually no familiarity with the acronyms important to vehicle emission levels." (Plax and Kearney, 2006)

Several themes were reported as having been brought to light concerning the attitudes of consumers toward clean vehicles. Those are stated as follow:

(1) Today, the main characteristics consumers weigh in their vehicle purchase decision include fuel economy, purchase price, maintenance and reliability, safety, performance and personal or family needs.

(2) Californians are generally unfamiliar with most advanced technologies and alternative fuel vehicles, or have misperceptions about the vehicles and their capabilities, believing them to be small and lacking in power and style.

(3) Consumers agree that advanced technologies are better for the environment, but tend to be skeptical that vehicle emissions are a substantial problem.

(4) While consumers are generally favorable in concept toward cleaner vehicles, few of them believe their own vehicle choice makes a difference.

(5) Very few Californians factor into their purchase decision the impact of a vehicle on the environment.

(6) Consumers have little trust in new, "untested" technologies, but they tend to trust those they consider to be their peers with personal experience for vehicle validation. (Plax and Kearney, 2006)

It is reported by Plax and Kearney (2006) that the factors influencing vehicle purchase decision by gender were those as listed in the following table.

Figure 1

Factors Influencing Vehicle Purchase Decision by Gender

Source: Plax and Kearney (2006)

Sources of influence by Gender reported by Plax and Kearney (2006) following their study are those listed in the following table.

Figure 2

Sources of Influence by Gender

Source: Plax and Kearney (2006)

Plax and Kearney report that the familiarity with advanced technology or Alternative Fuel Vehicles by Gender findings in the study were findings as listed in the following table.

Figure 3

Familiarity with Advanced Technology or Alternative Fuel Vehicles by Gender

Source: Plax and Kearney (2006)

Factors that were found to motivate purchase of hybrid or alternative fuel vehicles are stated by Plax and Kearney to be the following:

(1) Price of fuel

(2) Price of vehicle

(3) Safety

(4) Looks and style (wanted the vehicle to look more like conventional cars)

(5) Size (roominess)

(6) Rebate incentives

(7) Environmental impact

(8) Warranties

(9) Reliability

(10) Use of the carpool lane

(11) Power

(12) Maintenance feasibility and cost

(13) Re-sale value. (Plax and Kearney, 2006)

Factors that were found in the study conducted by Plax and Kearney to demotivate purchases of hybrid or alternative fuel vehicles are stated to include those as follows:

(1) it has to look like a normal car…. It has room and it has power and it has all the things you would get in a normal car.