Changing Fuel and Refuelling Patterns: Company Car Drivers' Preferences for Alternative Fuel Cars



Changing Fuel and Refuelling Patterns: Company Car Drivers' Preferences for Alternative Fuel Cars

Authors

A Dimitropoulos, P Rietveld, J N van Ommeren, VU University Amsterdam, NL

Description

We use a choice experiment to elicit the preferences of Dutch company car drivers for several types of alternative fuel cars. Mixed and latent class logit models are used to reveal the impact of changes in various attributes on consumer preferences.

Abstract

Alternative fuel vehicles (AFVs), namely vehicles fuelled by energy carriers other than liquid petroleum products or by a combination of oil-derived and other fuels, have been enjoying the vigorous support of car manufacturers and policy makers during the last decade, as they are considered to be a means to confront mounting concerns over environmental degradation, oil dependence and increasing petroleum prices. With the possible exception of hybrid electric vehicles, however, consumer adoption of AFVs has been long hampered by relatively high acquisition costs, considerable uncertainty over developments in AFV technologies and the fact that it entails notable changes in car refuelling patterns.

Even though consumer preferences for AFVs have been studied in the economic literature since the late 1970s, researchers have been disproportionately focussed on the private car market segment, leaving the possible role of the company car market in the diffusion of AFV technologies virtually unexplored. In Europe, around half of new vehicle registrations concern company cars, namely cars which are offered by employers as fringe benefits to their employees, although mainly serving private travel needs. The vast majority of company cars are offered under lease contracts of a predetermined duration which usually cover also the car's operating costs. Employees make their vehicle choice on the basis of a maximum monthly lease budget determined by their employer. Nevertheless, they are generally free to select a car whose lease price slightly exceeds their lease budget, provided that they pay the difference between the lease price and the budget allowance themselves. The use of a company car is taxed on the basis of a tax base rate, usually being proportional to the car's purchase price.

Especially at the early adoption phase, the company car market constitutes an important candidate diffusion channel for AFVs, as the uncertainty concerning vehicle resale price, battery replacement and maintenance costs is thereof shifted from the private user to the car leasing company. The current study employs a choice experiment approach to investigate the preferences of Dutch company car drivers for electric, hybrid, plug-in hybrid, hydrogen fuel-cell and flex-fuel cars. An online survey launched in late February 2012 invites respondents to engage in eight choice exercises. In each of them they make their choice among three alternative vehicles, differing in terms of nine attributes, comprising (i) fuel type, (ii) purchase price, (iii) tax base rate, (iv) employee's contribution to car's lease price, (v) lease contract duration, (vi) driving range, (vii) refuel time, (viii) detour time needed to reach the nearest refuelling station, and (ix) policy measures implemented to encourage the adoption of AFVs, such as free parking and access to bus/tram lanes.

In contrast to previous research, our analysis deviates from the arguably unwarranted treatment of driving range, refuel time and detour time as three independent elements of consumer?s utility function. We instead analyse them from a generalised costs of fuelling perspective, where drivers consider jointly the number of refuelling actions they have to undertake to cover a specific distance and the time and cognitive burden these actions imply. Hence, we specify a utility function where such interdependencies are investigated by the use of interaction terms (ratios) between refuel and detour time and driving range.

Consumer preferences will be elicited by the use of Nested, Mixed and Latent Class Logit models. Our results are expected to show that: (i) drivers travelling longer daily and annual distances experience a higher disutility from shorter driving ranges and higher refuel and detour times; (ii) consumer preferences for plug-in vehicle technologies are strongly influenced by the availability of a standard parking position at home and workplace; and (iii) the tax base rate can be a powerful tool for the stimulation of the adoption of AFVs in the hands of policy makers, as company car drivers are very sensitive to changes in it. Our analysis will further explore the possible impact of the fuel type, body type and brand name of the current company car, as well as of the other household's vehicle holdings, on consumer preferences for alternative fuel vehicles.

Keywords
Alternative fuel vehicle; Company car; Choice experiment; Generalised costs of refuelling.

Publisher

Association for European Transport