Using dynamic scenario analyses to evaluate how market factors could shape San Diego California new car buyer's interest in purchasing a Plug-in Electric Vehicle (PEV)

This analysis creates three temporally sequential hypothetical future time periods for a PEV market. In these scenarios, we present six factors which are likely to influence PEV ownership. These factors are the incremental cost of PEVs, the size of vehicles available for purchase, the vehicle manufacturers producing PEVs, vehicle turnover, the cost to install home charging infrastructure and the authority to install charging infrastructure at a primary residence. In each time period the characteristics of the vehicle and consumer market change to capture the dynamics of vehicle supply and new car buyers. Results from a mixed-method questionnaire of 470 San Diego California residents is matched with the hypothetical scenarios created for this analysis, which provides a baseline measure of how interest in PEVs might evolve over time for San Diego CA new car buyers. Incremental changes from the baseline conditions in each of the factors illustrate how different strategies such as: price reduction, larger vehicles offered for sale, introduction of new makes producing PEVs, and workplace charging infrastructure, might play a role in changing the pool of San Diego CA new car buyers who are interested in purchasing a PEV.


Introduction
Plug-in Electric Vehicles (PEVs) give consumers the option to use grid electricity as a transportation fuel. The substitution of electricity for gasoline is widely regarded as capable of providing societal and consumer benefits, the degree of which will fluctuate depending on consumer use patterns, energy costs, and the feedstock of the electricity grid (Davies and Kurani, 2013). In California, there exists consensus regarding the benefits or electric drive vehicles and there is a strong desire and initiative to accelerate the uptake of PEV purchases as a way to comply with federal and state laws related to the abatement of unhealthy criteria pollution and greenhouse gas emissions. While the sale of PEVs remain stronger than Hybrid Electric Vehicles (HEVs) at their market launch in 2002, policy makers, state and local agencies and automakers remain vigilant and are actively pursuing strategies to support the transition to PEVs. Understanding consumer preferences, expectations and the development of the market will aid in maintaining this transition.
Since the introduction in December 2010 of PEV models by original equipment manufacturers (OEMs) to the new car market, a total of 70,000 PEVs have been sold in the US, with a monthly high of 7,600 vehicles during November 2012 (Forbes, 2012). Within the context of the US new vehicle market, PEV sales for the month of November 2012 were a small fraction (0.6%) of the total 1.2 million passenger vehicles sold (Wall Street Journal, 2012). However, differences in purchase incentives, infrastructure deployment, customer experience, vehicle performance in cold climates and manufacturer marketing initiatives have produced an uneven geographic distribution of US PEV sales. For instance, California households are responsible for approximately 30% of all PEVs purchases. Given the smaller new vehicle market in California and the higher concentration of PEV sales, about 1.5% of all California new car sales in November 2012 were PEVs (California Center for Sustainable Energy, 2012).

A mixed-mode survey is used to evaluate San Diego CA new car buyer interest in PEVs
Within California, the marketing and infrastructure development efforts surrounding PEVs have been divided into five geographic regions of Sacramento, San Francisco/Bay Area, the Central Valley, Los Angeles, and San Diego. To explore the interest and expectations of consumers in one of these markets, Axsen et al. (2011) developed an in-depth, mixed-mode survey instrument which was deployed to households living in San Diego, California. The survey instrument included multiple parts which addressed respondent demographics, an estimate of the cost to install charging infrastructure at the respondent's primary residence, daily driving, charging opportunities, and a hypothetical vehicle design questionnaire in which respondents were given the option to "upgrade" a new vehicle that they were interested in purchasing to a hybrid, plug-in hybrid, or electric vehicle. The survey and the associated vehicle designs provide insight on consumers' interest in, and expectations for PEVs. The results showed that the majority of consumers (56%) are interested in a PEV if it's available to them in a body style, manufacturer, and drivetrain design configuration and price of their choosing.

Expanded analysis of survey
However, a consumer's ability to purchase a PEV with similar characteristics as selected in their survey would likely be contingent upon a number of factors related to the timing of the household's next new car purchase, such as: Lastly, these survey responses represent a snapshot which encompasses new car buyer's experience with and understanding of PEVs and relative prices of fuel at the time at which they filled out the survey. As the conditions of the market change due to policy, price, incentives, innovation or marketing strategies not explored in this survey and simulation, customer expectations, understanding and decisions will undoubtedly change. The work presented here should be interpreted in that light. Like all simulations it is limited by the imagination and creativity of the analyst.

Methods
This analysis creates three hypothetical time periods of a California PEV market. The time periods are successive and overlap with the 5 year product cycle or "vehicle generation" common in the automotive industry. We lay out requirements for PEV ownership in each period based on factors which express a series of vehicle and consumer characteristics that correspond to questions asked of respondents in Axsen et al. (2011). Survey respondents are categorized into a specific time period based on their own assessment of when they expect to purchase their next new vehicle. Later in the paper we evaluate how changing a single factor within each time period gives us the opportunity to observe how changes in the scenarios we present here could impact the proportion of San Diego California car buyers who are interested in purchasing a PEV.

Factors which could influence consumer interest in PEVs
By leveraging institutional knowledge from surveys and interviews of PEV owners (5, 6), PEV demonstration project participants (7,8) and local alternative fuel experts and advocates (9)

The timing of next new car
purchase is the respondent's best guess as to when they plan to purchase their next new vehicle. The survey respondents' answer to this question determines the time period into which they are placed for this analysis.
2.1.5 The cost of infrastructure installation is an estimate of how much the respondent would have to pay to have a dedicated charging station installed for their PEV at their primary residence. In general, infrastructure installation ranged from $0 to $6000, excluding the cost of the charging station, and, obviously, the more difficult the installation process the higher the cost.
Here, we separate infrastructure installation costs into three levels of difficulty. An installation which costs $2000 or less is categorized as "standard", between $2000 and $4000 is regarded as "somewhat difficult", and between $4000 and $6000 is designated as "very difficult".
2.1.6 The authority to install charging infrastructure is the respondent's personal assessment of their ability to change characteristics of their primary residence without obtaining permission from any other person or entity (aside from permits). Home charging infrastructure will be crucial to enabling PEV purchases in all periods. However, the development of away-from-home charging networks (at work and regional fast charging stations) which could be available to those who cannot install charging infrastructure at their home, might serve to lessen the importance of a dedicated home charging station in some PEV purchasing decisions. We simulate the possible market effects of allowing this subset of new car buyers into the analysis.

How factors which affect consumer
interest in PEVs might change over time Three time periods are used in this analysis to simulate the evolution vehicle technology, market aspects and consumer demand over vehicle generations, which is the auto industry traditional innovation cycle. Table 1 summarizes the conditions present in each period and survey criteria used to evaluate respondent interest in purchasing a PEV across the three time periods.

Strategies to change consumer interest in PEVs -Scenarios
In addition to the progression of innovation around PEVs and consumers illustrated in Table 1 there may be an opportunity to promote the adoption of PEVs through strategic programs or interventions. After assessing the interest of survey respondents in purchasing a PEV using the criteria in table 1, we create six alternate scenarios. We modify specific factors for each scenario and evaluate how the change modifies the proportion of survey respondents interested in purchasing a PEV.
• Scenario 1 -Price evaluates how changes in the incremental cost of PEVs from "High" to "low" might change the proportion of survey respondents interested in purchasing a PEV.
• Scenario 2 -Manufacturers evaluates how increasing the number of manufacturers producing PEVs might change the proportion of survey respondents interested in purchasing a PEV.
• Scenario 3 -Home charging evaluates how providing all PEV buyers with access to home charging might change the proportion of survey respondents interested in purchasing a PEV.
• Scenario 4 -Workplace as the primary charger is an alternative to scenario 3.
Here we evaluate how providing workplace charging for commuters, who cannot install charging infrastructure at home, might affect the number of people interested in purchasing a PEV. Of the 27% of the survey respondents who do not have authority to install a vehicle charger at their home, 80% commuted to a workplace.

RESULTS
We used the hypothetical conditions for each time period shown in Table 1 and survey responses from Axsen 2010 to estimate the percent of respondents interested in purchasing a PEV. It is important to highlight the distinction between gauging consumer interest in purchasing a PEV and actual sales. Consumer interest shown here should not be directly translated to projections of number of vehicles sold. A host of other factors could shape the final purchase decision (many of which may not be predictable or are not included in this scenario analysis). Instead we focus on the relative changes in consumer interest given changes in the vehicle and consumer market over time and with hypothetical interventions. As always new innovations, marketing or pricing will alter consumer preferences and decisions.

Survey respondent interest in purchasing a PEV
As expected, the share of consumers who are interested in purchasing PEVs changes between time periods as the conditions which define the market become less restrictive. As noted in Table 2 the proportion of consumers interested in purchasing a PEV in the second and third time periods will be influenced by "repeat" buyers from the prior time period. There is very little publically available longitudinal data on the vehicle purchase habits of consumers. In general, there is a distribution of the timing between household planned new car purchases. Some households purchase vehicles frequently, at intervals of a year or two, while others may wait upwards of 15 years. So, in terms of actual number of new car purchases a portion of car buyers purchase new vehicles more frequently than others and, as such, are responsible for disproportionate share of new car purchases. While it is difficult to characterize these "repeat" buyers from our survey it has been observed from other measurements that up to 93% of PEV buyers have chosen to lease their vehicle. This would suggest that the number of "repeat" buyers in the second period has the potential to be significant.
Since the PEV market is so new, it is unclear if consumer loyalty to PEVs will make it more likely that a household will replace their current PEV with another one. Surveys of Chevrolet Volt owners report that 96% would definitely purchase another PHEV, and interviews with Nissan Leaf drivers suggest a majority of them have undergone lifestyle changes that indicate a strong desire for future PEV ownership. On the other hand, the loyalty of buyers of hybrid vehicles (which are "mass market") has been estimated to be on the order of 20 to 42 percent depending on the vehicle and the timing of the measurement. Lastly these measures apply to planned vehicle purchases. Unforeseen circumstances which result in the need for another vehicle or delay a purchase will change when the consumers represented in this this survey actually enter the new vehicle market again.

How changes in market factors alter the proportion of survey respondents interested in purchasing a PEV
The results in Table 2 provide a baseline for our analysis of San Diego California consumer interest in PEVs. Given our assumptions about market conditions, consumer informed PEV design preferences and purchase timing, we show what maximum proportion of survey respondents might be interested in purchasing a PEV. However, as noted in section 2.3, we expect that changes in market conditions will alter the proportion of survey respondents interested in purchasing a PEV. To characterize these possible effects the results of the six scenarios is reported here. In each of the scenarios only a single market factor is changed. In Table 3 we aggregate the results and show how each of the scenarios changes the proportion of survey respondents interested in purchasing a PEV. The results are presented as percentage point changes relative to the baseline scenarios in Table 1. • For the first time period making Large SUVs and Trucks available for purchase results in an 80 percent increase in the number of consumers interested in PEVs. This constitutes the single largest impact on the number of consumers interested in purchasing a PEV.
• A decrease in incremental prices of small and large sized sedans is also shown to increases the proportion of survery respondents interested in purchasing a PEV in the first time period by 60 percentage points. In the second time period, adjusting purchase price has equal weight to the other initiatives.
• In terms of improving access to charging infrastructure for those consumers who do not have the authority to install one at their primary home, a "workplace based" charging network (assuming it is judged as an acceptable alternative to home charging by the consumer) may provide almost as much benefit as the enhanced access to home charging infrastructure scenario in the first period and increases the number of consumers interested in a PEV by 40% in the first period.

Discussion
Substantial work remains for further investigation of the market drivers, tactics, and features which help build consumer interest and actually lead to additional PEV purchases. The results of the scenario analysis presented here provide a first step, but do not encompass all the possible strategies. Moreover, they are tailored to San Diego, California, and the results are based on a general population survey which represents a snapshot in time of the quickly evolving consumer market. As we look to new car buyer behaviour, it is certain that their expectations and understandings will change over time with the progression of technology, education, innovation, fuel prices and with developments in society and culture -the latter of which may ultimately prove a stronger force than any of the factors which have been measured in the scenarios currently under consideration in this analysis.
Within their scope, however, the results presented in this analysis provide interesting and meaningful findings for evaluating the interest in PEVs among San Diego new car buyers at a certain point in time. The scenarios examined here clearly demonstrate that, as market conditions change so could the number of consumers interested in purchasing a PEV. Elements such as: the size of vehicles available for sale; the expected timing of the consumers' next new car purchase; the incremental price of PEVs; the available choice manufacturers who produce PEVs; and access to home charging could all play a role in shaping consumer interest in PEVs. Although localized and far from comprehensive in scope, the analysis done here is a first step towards understanding how changes in some market dynamics may alter consumer interest in PEVs, which may, in turn, lead to a potential increase in future PEV demand/sales . Specifically, we show that making PEVs available in large SUV and Truck body styles could increase the number of consumers interested in a PEV more than a simple decrease in price (although, price is also a very important factor).
Other strategies, such as providing workplace charging to those interested in purchasing a PEV, but who do not the authority to install charging infrastructure at home, could also increase the pool of interested PEV buyers. However, it remains unclear in this specific case to what extent such an arrangement would meet the needs and expectations of those buyers. However, the results discussed here regarding workplace charging access do not address or capture the other three likely benefits from a workplace charging network, which will include increasing the electric miles traveled for some PEVs, enabling long commutes by EVs, and promoting awareness of PEVs within a workplace community.
Lastly, as a general point, it is important to emphasize the dynamic nature of consumer experience. As we look to help grow consumer interest in PEVs and sales (through strategies discussed in scenarios here and many others not mentioned here) it will be important to measure the relative impacts and adapt strategies and tactics based on continuing research.