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Automobile Buyer Decisions about Fuel Economy and Fuel Efficiency

Kenneth S Kurani and Tom Turrentine

Institute of Transportation Studies, Working Paper Series from Institute of Transportation Studies, UC Davis

Abstract: Much prior research into consumer automotive and fuel purchase behaviors and fuel economy has been shaped by the normative assumptions of economics. Among these assumptions are that consumers should pay attention to costs of fuel and that they are aware of their options to save on fuel over long periods of time, i.e., the life of a vehicle or at least their period of ownership. For example, researchers have analyzed in some depth consumer choices for more fuel economical vehicles in the 1980s and more recently consumer choices in Europe for more expensive diesel vehicles with lower fuel costs than their gasoline competitors. Some of this research investigates whether automobile buyers have varying future values for money invested today in higher fuel economy, i.e., consumers' discount rates. More recently, in the context of the political battle over new CAFE standards, both automobile manufacturers and energy researchers have asked consumers questions about their willingness to pay more for higher fuel economy and consumers' payback periods for these investments. Both payback periods and net present value calculations require good knowledge of one's own vehicle and annual fuel expenses, forecasts of future prices, and a sophisticated series of calculations. The new arena of debate and research on consumer response to better fuel economy technology is CO2 reduction strategies generally, and regulations to reduce CO2 emissions from transportation in California specifically. The research we report here is designed to help researchers and policy makers to ground future work in the reality of how consumers think and behave relative to fuel economy and efficiency, both on a daily basis and when they purchase motor vehicles. We recruited what we call an "illustrative" sample; fifty-seven households from ten "lifestyle sectors"—for example hybrid vehicle buyers, financial analysts, and off-road vehicle enthusiasts—that we guessed might have differing information and habits around the issue of fuel economy. We conducted a semi-structured, 2-hour interview, which included these four parts: household vehicle histories, purchase narratives, prospecting of future choices, and knowledge and daily behavior around fuel use and purchases. Our strongest finding was that for the most part, our households do not pay much attention to fuel cost over time or in their household budgets, unless they are severely constrained economically. Consumers do pay attention to the price of a tank of fuel and the unit price of fuel on the given day they buy fuel. But this "knowledge" is ephemeral; it is rapidly forgotten over the next few days. Fuel consumption instrumentation on most vehicles is limited and drivers seldom pay attention; the exception is hybrid vehicles and their drivers. One effect of limited knowledge is that when consumers buy a vehicle, they do not have the basic building blocks of knowledge to make an economically rational decision. When offered a choice to pay more for better fuel economy, most households were unable to estimate potential savings, particularly over periods of time greater than one month. In the absence of such calculations, many households were overly optimistic about potential fuel savings, wanting and thinking they could recover an investment of several thousand dollars in a couple of years. Of importance to regulators, we find that good fuel economy is widely considered an attribute of cheap cars; many of our households expressed greater regard for fuel efficiency, a term free from a cheap image and more closely associated to ideas of resource conservation, advanced engineering, and high technology and quality. In the last part of the report we identify five styles of decision making relative to fuel economy, including a more detailed discussion of the decision-making in a small sample of eight hybrid vehicle buyers. In closing, and as this is the first stage in a longer research project, we offer some preliminary conclusions and two hypotheses to steer more quantitative research. Our findings suggest that current strategies of drawing attention to annual fuel cost savings could disappoint buyers, and instead education efforts might focus on fuel efficiency and technical advances. Our interviewees ignore fuel economy for additional reasons; it is only one feature of an expensive, complex good which has many implications for lifestyle and image goals. Our research suggests that consumers might value fuel economy more highly if it were more like shiny paint or a bold body style—an attribute with some emotional punch.

Keywords: Engineering; UCD-ITS-RR-04-31 (search for similar items in EconPapers)
Date: 2004-09-01
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