Environmental Protection Agency
Fuel Economy Label
Literature Review
United States
Environmental Protection
Agency
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Environmental Protection Agency
Fuel Economy Label
Literature Review
Office of Transportation and Air Quality
U.S. Environmental Protection Agency
and
National Highway Traffic Safety Administration
United States Department of Transportation
Prepared for EPA by
PRR, Inc.
EPA Contract No. GS-23F-0364P
Task Order 0001
United States z^D^^^ EPA-420-R-10-906
Environmental Protection ^^r ^R § A 4.imn
Agency ^\^S ^ August 2010
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Table of Contents
Executive Summary 3
/. Introduction and Methodology 13
II. Understanding How Consumers Choose Vehicles 17
A. The Vehicle Buying Process 17
B. Sources of Information 20
1. Typical Sources of Information 20
2. The Emergence of the Web as an Important
Information Source 21
3. Importance of New Web-based Consumer-to-Consumer
Tools and Strategies 23
4. Green Car Labeling 24
C. Factors Which Influence Vehicle Choice 24
1. Vehicle-related factors 24
2. The Role of Demographics in Vehicle Purchasing 30
3. The Role of Psychographics in Vehicle Purchasing 32
4. Fuel-Efficient/Low Emission Vehicle Options 39
5. Importance of Interactions with Customers 44
III. Consumer Education Campaigns Regarding
Fuel Efficient Vehicles 47
A. Evaluation of Existing Consumer Education Campaigns 47
B. Overview of Existing Social Campaigns Influencing
Perceptions About Vehicles 48
IV. Summary of Results and Conclusions 53
Attachment 1 - Summaries of Major Studies 57
Bibliography 75
Literature Review
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EPA Fuel Economy Label Redesign
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Executive Summary
In 2006 EPA updated how the city and highway fuel economy
values are calculated to better reflect typical real-world driving
patterns and provide more realistic fuel economy estimates. In
addition, EPA redesigned the fuel economy label to make it more
informative for consumers. The redesigned label more prominently
featured annual fuel cost information, provided contemporary and
easy-to-use graphics for comparing the fuel economy of different
vehicles, used clearer text, and included a web site reference to
www.fueleconomy.gov which provided additional information.
EPA and the National Highway Traffic Safety Administration
(NHTSA) are now initiating a new rulemaking to ensure that
American consumers continue to have the most accurate, meaningful
and useful information available to them when purchasing new
vehicles and that the information is presented to them in clear and
understandable terms. Further, the agencies must provide metrics
that are relevant and useful for advanced technology vehicles such
as plug-in hybrid electric vehicles (PHEVs).
To help inform the creation of the new label, as well as to inform
an eventual public education campaign regarding fuel-efficient
vehicles, EPA engaged PRR to work with them in the design
and implementation of several information gathering protocols
including:
• Literature review
• Focus groups (in 3 phases)
• National level online survey of new vehicle buyers
• Expert panel
Literature Review
-------
This document presents findings from the literature review that
PRR conducted. The primary focus of the review was to understand
how consumers decide which vehicles to purchase and the factors
that influence their decisions. This information will prove useful
to informing the label redesign, as well as the planned educational
campaign to assist consumers to identify more fuel-efficient vehicles.
PRR assembled and reviewed eighty articles pertaining to topics
relevant to understanding the consumers' vehicle choice and
purchase process. Of the eighty articles reviewed, fifty-five were
included in this literature review report. (However, all eighty
articles appear in the bibliography.)
Understanding How Consumers Choose
Vehicles
Several factors were explored to help understand how consumers
determine which vehicle to buy. These included the decision-making
process and the sources of information and types of information they
use. Also of interest were the impacts of such factors as reliability,
safety, price, and fuel economy in the vehicle purchase process. The
impacts of consumer demographics and psychographics were also
noted in the review. Of growing importance is the availability of
emerging technologies and fuels and how consumers weigh the
cost, consumption, fuel source and environmental impacts of such
vehicles against other factors. Literature addressing the importance
of interactions between the vehicle dealers and consumers and how
that impacts consumer satisfaction and loyalty was also reviewed.
The Vehicle Buying Cycle
The vehicle buying cycle is that period of time between consumers'
first contemplation of purchasing a new vehicle and when they
actually purchase the vehicle. For many consumers, purchasing a
big-ticket item like a vehicle happens only occasionally and tends
to be related to other major changes in their lives. This increases
the anxiety level of the consumer and increases the need for good
information to drive the decision process (Center for Advancing
Health, 2009). With the dramatic increase in the type and amount
of information available to consumers on the Internet, most
consumers consider more alternatives and make decisions quicker
EPA Fuel Economy Label Redesign
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than ever (Center for Advancing Health, 2009). The vehicle
buying cycle is contracting due to the amount of information that
consumers are accessing on the Internet. By the time the consumer
enters the dealership to test drive a vehicle s/he is closer to a final
purchasing decision than was true in the past. The Internet also
provides consumers the opportunity to purchase vehicles online
(annual growth rate of 14.6% in the United States over the past
five years) which is very attractive to consumers who do not want
to negotiate with vehicle dealerships. Consequently, influencing
consumer purchasing decisions increasingly needs to occur prior to
consumers visiting dealer showrooms.
Sources of Information
Consumers gather information from a variety of sources as they
work their way through the vehicle buying decision-making process.
Traditionally, information has come from vehicle manufacturers
and dealers, by word of mouth, and from family and friends, but
much has changed with the advent of the Internet and the ability
of consumers to search for information on specific types of vehicles
and brands. Nearly half of consumers visit a vehicle manufacturer's
Web site (Capgemini, 2009a), particularly in search of product
and price information. Consumers are also increasingly using the
Internet to access fuel economy information. The Internet also
serves as a great source of information from those with first-hand
experience with specific vehicles through reviews and blogs.
Factors Which Influence Vehicle Choice
Vehicle related factors
Consumers differentiate between different makes and models by
what the vehicles have to offer, and make choices that maximize
their utility when compared to other available makes and models of
interest (Garcia, 2007). Even though there has been a tremendous
growth in the number of vehicle makes and models and vehicle
features, the most important factors that lead consumers to
purchase a particular vehicle have remained consistent over time.
According to Cars Online (Capgemini, 2009a, 2008, 2007), the
top four factors that consumers continue to claim they value
when making vehicle purchasing decisions are: reliability, safety,
price, and fuel economy. This finding is in line with the Deloitte
Literature Review
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(2008, 2010) survey findings wherein fuel economy and price were
reported to be the most important vehicle attributes by consumers
who were between the ages of 17 and 30 years.
Vehicle reliability influences consumers' experience and colors
their opinion about the make and model of the vehicle, as well
as the reliability and reputation of the brand (halo effect). No
matter which vehicles consumers choose to buy, they have high
expectations that the vehicle will be safe. In fact, many consumers
are willing to pay more to obtain a vehicle with enhanced safety
features. While the role of safety in consumers' decision process is
yet to be explored in depth in research studies, both the government
and manufacturers have acknowledged consumers' increasing need
for safety in vehicles.
Vehicle price has become even more critical for consumers because
of the global economic crisis, which has interested consumer
interest in purchasing low-cost fuel-efficient cars (Capgemini,
2009a, 2008). Fuel economy has also become even more critical for
consumers because of increasing gas prices. Further, fuel economy is
the top reason why people are opting for fuel-efficient or alternate-
fuel vehicles (Capgemini, 2009a, 2008). When gas prices go up and
some feel the crunch in the operating costs of their current vehicle,
they look for vehicles that have higher fuel efficiency.
Demographics
Vehicle purchasing decisions are influenced by consumers' specific
needs and situations, but are also influenced by specific consumer
demographics. Those demographics can include age, gender,
income, education level, and household size. Each of these factors
can influence what type of vehicle is likely to meet a consumer's
needs. The studies reviewed showed that, not surprisingly, higher
income families and individuals tend to drive more expensive
vehicles, larger households tend to drive larger vehicles, and
households are more likely to drive a minivan the more members
are under the age of 19 (Choo & Mokhtarian, 2002).
Deloitte's 2008 Generation Y survey results found that in regards to
fuel economy and environmental impact, those with lower personal
or household income are more likely to rate gas mileage as an
extremely or very important factor. Women attach more importance
than men to gas mileage, storage capacity, and environmentally-
EPA Fuel Economy Label Redesign
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friendly production, while men tend to be more focused than women
on leg room and horsepower. In addition, those who have attended
college are more likely to say that thinking about the economic
outlook and the relationship with oil-producing countries has a
strong impact on their vehicle purchase decisions (Deloitte, 2008).
Finally, concern for the environment, although important, is not
important enough for most Gen Y consumers to pay a premium for
a vehicle (Deloitte, 2010; Deloitte/MSU 2010).
Psychographics
In addition to demographics, psychographics also influence vehicle
purchasing decisions. Psychographics are more about providing
what consumers want than just providing something that they
need (Assaraf, 2008). It's about what types of lifestyles they lead,
what type of images they want to portray, how much and for
what reasons they travel in their vehicles, and how they view their
vehicles as an extension of self. Personality and lifestyle play a big
part in what types of vehicles consumers choose to purchase and
drive. It is also clear that by knowing more about a consumer's
travel attitudes, personality, and lifestyle the better the prediction
of the type of vehicle that will appeal to that consumer.
For example, when considering purchasing a vehicle, Gen Y
consumers (age 17-28) indicated that (Deloitte, 2008):
• A vehicle says a lot about a person's taste/sense of style (82%)
• When buying a vehicle, I consider how it impacts my
personal pursuit such as jobs, relationships, and hobbies
(77%)
• When buying a vehicle, I consider how it reflects who I am
as a person (67%)
• A vehicle says a lot about a person's status in society (65%)
• A vehicle says a lot about a person's values (57%)
Literature Review
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Fuel-Efficient/Low Emission Vehicle Options
Consumer demand for green products is growing, and the
automobile industry is no exception. There is growing awareness of
fuel-efficient and alternative fuel vehicles, and consumer research
indicates a growing interest in purchasing more fuel efficient and
low emissions "greener" vehicles. While there is growing awareness
of the environmental impact of the automobile, environmental
concern typically shows up as a secondary factor and is not enough
on its own to compel consumers to pay a premium in price or
sacrifice performance for the sake of "being green." For green
vehicles to gain widespread commercial acceptance, the cost and
performance must at least match traditional vehicles.
In addition, while Generation Y drivers tend to understand the
environmental benefits of "green" vehicles better than other age
groups, many feel they lack the information to make good choices.
They also are concerned about cost and tend to prefer vehicles that
can provide both economic and environmental benefits.
A number of other barriers get in the way of consumers purchasing
electric vehicles. These include: concerns about insufficient driving
range, the need for specialized infrastructure (such as charging
stations), battery performance, and doubts concerning the electric
car's ecological value.
Importance of Interactions with Customers
Also important to a consumer's decision of what vehicle to purchase
are the experiential factors that influence consumer loyalty to the dealer
and/or brand, their satisfaction with the purchase, and their behavior
after purchase. As the global auto industry struggles to deal with
the economic downturn and American carmakers try to recuperate
from a year full of bad news, maintaining a strong customer focus
becomes essential for survival and good performance. As Accenture
(2009) in their paper 'New Places, Faces and Spaces: Customer-centric
principles for acquiring customers in today's multi-polar world' points
out, the key to negotiating the extreme volatility of the present day
market is to build customer loyalty to ensure long-term growth. This
requires dealers to understand their current customer base, work
hard to engage new customers, develop trust-based relationships
with customers, and manage customer interactions and transactions
efficiently. Good service and experiences build loyalty, which results in
customers returning to the dealership for their next vehicle purchase.
EPA Fuel Economy Label Redesign
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Another part of this equation is the transformation of the customer-
dealer relationship in recent times. With customers having access to
all sorts of information from the Internet about the vehicles under
consideration, they gain more of the power in the relationship than
before. This creates a customer-dealer relationship that is more like
an interaction between two equal parties. Further, consumers also
read online reviews and rankings about other shoppers' experiences
at the dealership and use these to determine what kind of experience
they're going to have at a dealership.
Consumer Education Campaigns
The literature review did not find any academic studies on the
results of education campaigns to encourage consumers to choose
more environmentally friendly vehicles. Therefore, the focus of the
information presented is on existing education campaigns, but not
on their outcomes. For each campaign, a brief description of the
campaign and a review of key outreach components are presented.
Conclusions
This literature review provides a summary of available information
on the vehicle buying process, information sources used by
consumers as they shop for vehicles, the factors that influence
consumer vehicle purchasing decisions, and the impact of the
increasing availability of "greener" vehicles. It also summarizes
information on available public education campaigns that address
the benefits of driving "greener" vehicles.
The sources used to prepare this literature review were varied in
their methodologies and carried a variety of limitations as to their
coverage of the population of U.S. car buyers. It should be noted
that in spite of the multiple methods used by the major sources, a
number of similar and consistent results and themes emerged from
among them.
The following are a number of key findings that have implications
for the redesign of the fuel economy label, as well as an educational
campaign designed to aid consumers' understanding of more fuel-
efficient vehicles.
Literature Review
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The length of the vehicle buying cycle is contracting as
more and more consumers obtain more information
sooner from the Internet. By the time consumers enter a
dealership, many are closer to purchasing a vehicle than
ever before. The Internet has emerged as one of the most
important sources of information for consumers interested
in purchasing a vehicle. To gather information consumers
can visit manufacturer and dealer Web sites, and rely
on consumer-to-consumer tools like reviews and blogs.
Consumers are also increasingly interested in purchasing
vehicles online. Consequently, information on the
redesigned fuel economy label that is intended to inform
them about a vehicle's performance in regard to several
metrics (such as fuel consumption, cost, and environmental
impact) should also be available online to assist consumers
to find more fuel-efficient vehicles.
Considering that in the consumer surveys reviewed
consumers consistently stated that the most important
factors that influence which vehicle they purchase are
reliability, safety, price, and fuel economy (not necessarily
in that order), the fuel economy label and educational
campaign will need to acknowledge the place that fuel
economy plays in the purchase process and identify ways
to 'be heard' as consumers make their decisions.
Consumer vehicle purchasing is also influenced by
individual demographics and psychographics in terms of
how a vehicle satisfies the practical and emotional needs of
the consumer. Age, gender, income, household size, urban
or suburban living, as well as availability of other travel
options, all play a part in what type of vehicle a consumer
decides to purchase. But so do the psychographic aspects
of 'what a vehicle says about me.' This suggests that to
be most effective, the educational campaign should be
tailored to specific demographic market segments, while
also making the purchase of fuel-efficient vehicles a 'cool'
statement about the consumer. Acknowledging what
is important in the vehicle purchase process to specific
demographic segments, as well as to what consumers think
of as 'cool', can serve as a gateway to getting their attention
and assisting them to identify more fuel-efficient vehicles.
10 EPA Fuel Economy Label Redesign
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Finally, demographic and psychographic influences not
only help in understanding the appeal of particular vehicles,
but also point the way towards potential messaging to help
consumers make better informed decisions.
A major challenge will be explaining the functioning of
advanced technology vehicles to consumers. Overall,
consumers lack information on "green" vehicles and
technologies to really understand the differences and be
able to make comparisons across brands, models, and
technologies. Identifying easy-to-understand ways to explain
advanced technology vehicles, how they function, and the
fuel-efficiency of such vehicles will need to be determined
before an effective educational campaign can be designed.
The redesigned fuel economy label will be an important
starting point for this since it is being designed to effectively
allow consumers to make informed comparisons among
vehicle types.
Lastly, the results of the literature regarding consumer
education campaigns related to helping consumers
better understand the benefits of purchasing a more
environmentally friendly vehicle can serve as an important
starting point for the agencies' educational campaign.
Although it does not appear from the literature that these
campaigns have evaluated outcomes, they can still provide
good information, especially if key staff members from
those campaigns are interviewed to learn about what
worked and didn't work from their perspectives.
Literature Review 11
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12 EPA Fuel Economy Label Redesign
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ntroduction and
Methodology
In 2006, EPA updated how the city and highway fuel economy
values are calculated to better reflect typical real-world driving
patterns and provide more realistic fuel economy estimates. In
addition, EPA redesigned the fuel economy label to make it more
informative for consumers. The redesigned label more prominently
featured annual fuel cost information, provided contemporary and
easy-to-use graphics for comparing the fuel economy of different
vehicles, used clearer text, and included a web site reference to
www.fueleconomy.gov which provided additional information.
EPA and the National Highway Traffic Safety Administration
(NHTSA) are now initiating a new rulemaking to ensure that
American consumers continue to have the most accurate, meaningful
and useful information available to them when purchasing new
vehicles and that the information is presented to them in clear and
understandable terms. Further, the agencies must provide metrics
that are relevant and useful for advanced technology vehicles such
as plug-in hybrid electric vehicles (PHEVs).
To help inform the creation of the new label, as well as to inform
an eventual public education campaign regarding fuel-efficient
vehicles, EPA engaged PRR to work with them in the design and
implementation of several information gathering protocols including:
• Literature review
• Focus groups (in 3 phases)
• National level online survey of new vehicle buyers
• Expert panel
Literature Review 13
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This document presents findings from the literature review that
PRR conducted. The primary focus of the review was to understand
how consumers decide which vehicles to purchase and the factors
that influence their decisions. All articles for this literature review
were selected with that focus in mind. This information will prove
useful to informing the label redesign, as well as the educational
campaign to inform consumers about new vehicle technologies and
how to use the fuel economy label to compare vehicles within and
across technologies.
PRR assembled and reviewed eighty articles and studies to better
understand how consumers decide which vehicle to purchase and
what influences those purchasing decisions. Of most interest were
those articles and studies that provided information from the
viewpoint of the consumer. Because of the speed at which trends are
evolving, most of the sources selected for inclusion were published
between 1995 and 2010. The sources span a broad range of books,
articles, papers, and secondary research reports. Data presented are
primarily taken from business, marketing, and academic journals
and magazines; Web sites; newspapers; conference proceedings;
and published government guidelines, standards, and documents.
From the eighty articles reviewed, fifty-five were included in this
literature review report.
The major sources used in this literature review are summarized in
Attachment 1 to this report. These summaries provide information
on purpose, methodology, results and relevance to this literature
review. As noted in Attachment 1, the sources used were based on
varying methodologies. Also noted is that all sources are based on
research from the U.S., except for the Capgemini studies which
include information from a variety of countries. Even with their
varying methodologies, several themes emerged that were consistent
across many of the sources reviewed and are presented in the
literature review. When appropriate, methodological limitations are
noted in the text of this report and are also noted in Attachment 1.
This report was purposely written in a reader-friendly style that
summarizes the key findings in a format that will be useful to a
variety of audiences. In particular, the review provides the following
information:
14 EPA Fuel Economy Label Redesign
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• Decision-making process used by consumers
• Sources of information and types of information consumers
use to make their decisions:
• Typical sources of information
• Emergence of the Web as an important information
source
• New Web-based Consumer-to-Consumer tools and
strategies
• Online buying
• Factors that influence vehicle choice, including:
• Vehicle specific factors such as reliability, safety, price,
and fuel economy
• Consumer demographic and psychographic influences
on vehicle purchases
• Availability of green vehicles and how consumers
weigh the environmental advantages of purchasing
green vehicles against all other factors they consider
when deciding which vehicles to purchase
• Importance of interactions between the vehicle dealers
and consumers, and how that impacts consumer
satisfaction and loyalty
• Education campaigns that have been used to encourage
consumers to make more environmentally friendly choices
when buying vehicles
The APA citation style was used in this report to acknowledge
the sources used in its preparation. The sources cited in the body
of the report appear alphabetically at the end of the report (see
Bibliography) and hyperlinks to full articles have been included for
these sources in the bibliography for easy access and retrieval.
Literature Review 15
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16 EPA Fuel Economy Label Redesign
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. Understanding How
Consumers Choose Vehicles
To better understand how consumers determine which vehicle to
buy, a variety of factors were examined. The review started with
the decision-making process used by consumers and the sources
of information and types of information they use to make their
decisions. The review then looked at the factors that influence vehicle
choice including vehicle specific factors like reliability, safety, price,
and fuel economy. Also considered was how individual consumer
demographics and psychographics influence vehicle purchases. Of
growing importance is the availability of green vehicles and how
consumers weigh the environmental advantages of purchasing a
green vehicle against all other factors they consider when deciding
which vehicle to purchase. Lastly, the importance of interactions
between the vehicle dealers and consumers and how that impacts
consumer satisfaction and loyalty was considered.
A. The Vehicle Buying Process
The vehicle buying process is that time between when consumers
first contemplate purchasing a new vehicle and when they actually
purchase the vehicle. For many consumers purchasing a big-ticket
item like a vehicle happens only occasionally and tends to be
related to other major changes in their lives. The primary reasons
that consumers start considering the purchase of a new vehicle
are mechanical problems with their existing car, or the appeal of
a new car or particular car feature (Capgemini, 2005). With the
dramatic increase in the type and amount of information available
to consumers on the Internet, most consumers consider more
alternatives and make decisions quicker than ever.
Literature Review 17
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n
Awareness
Opinion
Consideration
Preference
Purchase
In the past, studies have shown that the typical process used by consumers
was composed of several distinct phases known as the purchasing
funnel. First developed over a hundred years ago, the purchasing funnel
is used to describe how consumers narrow choices as they move from
awareness, to opinion, to consideration, to preference, to purchase. For
vehicles, the purchasing funnel illustrates how consumers narrow their
vehicle choices as they gather information and make judgments at each
stage (Chatterjee, Jauchius, Kaas, Satpathy, 2002).
How consumers purchase vehicles has evolved with the increased
use of the Internet to gather information about potential choices.
Historically, consumers have started out considering six or seven
different vehicles which they refine down over time to one or two
vehicles they will go test drive (Clift, 2006). New studies by CNW
Research have shown that about halfway through the decision
process, consumers may add new vehicles for consideration as they
are exposed to additional information through their searches on
the Internet. Other important pieces of information available to
new vehicle purchasers are reviews from current owners that may
influence new vehicle buyer opinions and considerations (Clift,
2006). This creates a decision process that is not always as linear
as that illustrated by the purchasing funnel. Although consumers
may go back and forth among the steps of the purchasing funnel,
it is clear that consumers must first be aware of the various vehicle
options before they can form an opinion, and they must have a
positive opinion of a vehicle option before they will consider it and
decide to gather more information to narrow their choices to make
a decision (Henry, 2008).
For many consumers, once they have narrowed their selection to a
few vehicles, they visit a dealer with the intention of going for a test
drive. Armed with additional information from the Internet (as well
as other sources) before they enter an automotive dealership to look
at and potentially test drive a vehicle, it is now more difficult than
in the past to influence a consumer's decision on which vehicle they
will ultimately purchase once they are at the dealership. Consumers
are also able to more quickly reach a decision of whether or not
to purchase a particular vehicle once they make the decision to
take a test drive. They then gather additional information to make
a final decision on which to purchase. At this point, other factors
can influence the decision making process including vehicle pricing,
the value of a trade-in, financing options, and how the consumer
is treated by the dealership (Center for Advancing Health, 2009).
18
EPA Fuel Economy Label Redesign
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As the duration of the vehicle buying cycle contracts through the use of the
Internet, automotive companies have less time to influence purchases. Based
on results from its annual surveys of consumers interested in purchasing
a new vehicle, Capgemini concluded that what used to take six months,
may now only take four months. When a consumer is finally ready to
visit a dealership, they are much closer to making a purchase than they
likely were in the past. Consumers go to dealerships when they feel they
have enough information on what they want to purchase and how much
they want to pay to be able to negotiate. They gather more information
through research on the Internet and visit fewer dealerships than in past
years before making a vehicle purchase (Capgemini, 2009a). Based on a
Capgemini's 2009 customer survey of 3,000 persons interested in buying a
new vehicle, more than two-thirds of the respondents stated that they began
gathering information two to four months before they planned to purchase
a vehicle, and 60% visited a dealership for the first time within two months
of purchasing a vehicle (Capgemini, 2009a).
The Internet also provides consumers the opportunity to purchase vehicles
online which is very attractive to consumers who do not want to negotiate
with vehicle dealerships. Online sales volumes have increased at an annual
growth rate of 14.6% in the United States over the past five years (Deloitte,
2009). In a 2009 Capgemini consumer survey, 21% of U.S. consumers
said they were likely to purchase a vehicle online. This is up from 17%
the previous year (Capgemini, 2009a). Yet, online sales only represented
represent 4% of total car sales in the United States in 2009 (Deloitte, 2009).
Price discounts, avoiding in-person interactions and price negotiations with
a dealer, and ease and speed of the transaction were cited as the top reasons
to purchase a vehicle online. The primary barrier to purchasing online cited
by respondents is the inability to test drive a vehicle. Other barriers cited
by respondents include not being able to see photos or video of the vehicle,
inability to access accurate and complete product and pricing information,
unsuitable interface to negotiate on pricing with dealers, concerns about
delivery, and lack of integration with related services such as financing and
insurance (Deloitte, 2010; Capgemini, 2009a). There is also strong interest
in buying parts and accessories online, primarily as a means to find lower
prices as an alternative to the traditional dealer model (Capgemini, 2009a).
Overall, online buying is increasing, but it is unclear if there will be large
scale adoption of the Internet as a sales channel.
Literature Review 19
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B. Sources of Information
Consumers gather information from a variety of sources as they
work their way through the vehicle buying decision-making process.
Traditionally, information has come from vehicle manufacturers
and dealers and by word of mouth. Much has changed with the
advent of the Internet and the ability of consumers to search for
information on specific types of vehicles and brands. The Internet
also serves as a great source of information from those with first-
hand experience with specific vehicles through reviews and blogs.
Access to all this additional information has allowed consumers
to make quicker and more informed decisions once they visit a
dealership.
1. Typical Sources of Information
In the past, vehicle buyers relied on information from manufacturers,
dealers, third-parties, classified ads, family and friends. More
recently, vehicle buyers have started to gather information from
the Internet (Center for Advancing Health, 2009). There is evidence
that consumers gather information and conduct research prior to
visiting vehicle dealerships (Nye, Greene, Hopson, and Saulsbury,
2003), although when particular types of information are accessed
in the purchase process was not identified in the literature cited
above. A 2009 consumer survey by Capgemini of more than
3,000 potential car buyers (consumers planning to purchase a car
in the next twelve months) in eight countries revealed internet-
based information sources were most popular with consumers in
the United States and Western Europe, including dealer Web sites
(52%), manufacturer Web sites (50%), search engines (48%), and
information Web sites (42%). However, consumers still use and
value more traditional sources of information, such as friends
and family (45%), independent car valuation services (38%),
manufacturer-specific franchise dealers (34%), and used car dealers
(28%). Just 16% of consumers indicated they used television
advertising and auto shows as information sources in the car-
buying process (Capgemini, 2009a).
20 EPA Fuel Economy Label Redesign
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2. The Emergence of the Web as an Important
Information Source
The Internet has become a standard information source for vehicle
buyers. It has grown steadily over the past several years, from
approximately 65% of U.S. consumers in 2005 using the Web to
access vehicle information, to nearly 90% in 2009 (Capgemini,
2009a). The typical web usage pattern is that consumers start
their research with search engines, then move to manufacturer and
dealer sites, and finally to consumer-to-consumer (C2C) tools like
web forums; blogs; RSS (Really Simple Syndication) feeds, which
is a news and blog content syndication tool; and discussion sites
(Capgemini, 2009a). New car buyers report spending nearly seven
hours conducting online research to inform their decision: 47% of
new vehicle buyers using the internet in the buying process visit an
independent site when initiating the research for their new vehicle,
and 46% visit a manufacturer website while conducting their
online research (Center for Advancing Health, 2009).
It appears that consumers seek out the information sources that
provide useful data on the attributes that they care about, and
that those attributes of interest vary widely (Center for Advancing
Health, 2009). The Centers for Advancing Health cites a J.D.
Powers and Associates survey in which shoppers describe using
independent, third-party sites such as Kelly Blue Book, Edmunds,
and Consumer Reports for researching vehicle pricing, ratings, and
reviews; manufacturer Web sites for information about vehicle
model options, features, and specifications; and dealer sites for
inventory information (Centers for Advancing Health, 2009).
Research conducted by the EPA in collaboration with PRR provides
additional insight into where consumers obtain information on
fuel economy. Thirty-two focus groups were conducted between
February 25 and May 27, 2010 in the cities of Seattle, Chicago,
Houston and Charlotte. The participants were asked to complete an
online survey before they took part in the focus group discussions.
The findings from this pre-group online survey indicated that two-
thirds (67%) of the respondents used manufacturers' websites to
search for information on fuel economy. The other sources that
participants reported searching for fuel economy information were:
fuel economy label on vehicles (60%), Consumer Reports (51%),
Edmunds.com (31%), auto dealers (30%), asking those who
had similar vehicles (29%), auto magazines (e.g., Car & Driver,
Literature Review 21
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Road & Track, Motor Trend; 30%), Edmunds.com (30%), auto
dealers (25%) and Government websites (e.g. fueleconomy.gov,
EPA Green Vehicle Guide; 17%). The sources of information that
were less popular included television ads (12%), environmental
organizations (4%), newspapers (4%) and radio ads (2%). The
survey also found that close to three-fourths (72%) considered EPA
as a trusted source of information on fuel economy (PRR - Pre-
Focus Group Online Survey Report, 2010).
The most important Web site features to consumers are price
and product information, and the ability to compare vehicles.
Consumers have consistently ranked these as the most important
Web site features for several years. Less important Web site features
include dynamic graphics, (such as video or eye-catching graphics),
the ability to check dealer inventory, and online information about
the latest ads and promotions (Capgemini, 2008, 2009a). While the
use of the Internet does not appear to preclude consumer use of
the dealer or word of mouth to gather information, there is some
indication that consumers are substituting Internet research time for
time spent at dealerships. In addition, print advertising is becoming
less influential as the Internet becomes more useful and widely used
(Center for Advancing Health, 2009; Capegemini, 2006, 2007).
It also appears that the presence or lack of desired Web site features
can impact consumer buying decisions. For example, a 2008
Capgemini consumer survey of more than 3,100 car buyers in eight
countries revealed that more than three-quarters of respondents
said that "having the [web] features that matter to them would
make them more likely to purchase a vehicle from that company,"
and "more than half said that if the features they care about are not
available they would be less likely to buy from that company." This
pattern was found to be consistent across all markets included in
the survey (Capgemini, 2008).
Consumers increasingly use the Internet to access fuel economy
information. Usage of the DOE and EPA Web site, www.fueleconomy.gov,
increased from 400,000 user sessions in 1999 to more than 30
million user sessions in 2008. Based on web traffic, the four most
popular features of the fueleconomy.gov website are: 1) Find-a-car,
which allows consumers to compare up to four vehicles in terms
of fuel economy, fuel cost, greenhouse gas emissions, and energy
security; 2) "Your MPG," a feature that allows users to share real-
22 EPA Fuel Economy Label Redesign
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world MPG experience with others; 3) driving and maintenance
tips to help drivers maximize fuel economy; and 4) MotorWeek
Fuel Economy, which features public television programming to
provide consumers with information about fuel economy and
alternative fuel vehicles (Greene, Gibson, Hobson, 2009).
3. Importance of New Web-based Consumer-to-Consumer
Tools and Strategies
Many consumers who use the Internet to gather information
prior to going to a dealer showroom use consumer-to-consumer
(C2C) tools after researching vehicles online with search engines
and manufacturer and dealer Web sites (Capgemini, 2009a). C2C
tools include automotive blogs, forums, discussion groups, video
sites and RSS feeds, and allow consumers to gather supplemental
qualitative information including consumer opinions on and
reviews about specific car brands. Consumers also may use C2C
tools to engage in a two-way dialogue with automotive experts
and other consumers and to receive news about new vehicles and
information about vehicle recalls (Capgemini, 2008, 2009a).
Interestingly, a 2009 Deloitte survey of 1,100 Gen Y consumers
(randomly drawn from a panel of individuals who agreed to
participate in online surveys) found that the majority of Gen Y
consumers (64%) do not get their information on a vehicle brand
or model from social networking sites, despite this group's high
rate of social media use for general communication. Further, more
than half (58.2%) do not look for vehicle advice on blogs or other
social media forums. Instead, the majority (79.9%) rely on search
engines such as Google or Yahoo! for information on a specific
vehicle (Deloitte, 2010).
However, there is some evidence that C2C tools may influence
buying decisions. A 2009 Capgemini consumer survey revealed
that more than two-thirds of consumers said they would be more
likely to purchase a particular vehicle or buy from a certain dealer
if they found positive comments posted on blogs and web forums
about the vehicle or dealer. In addition, approximately 57% of
respondents said they would be less likely to buy a particular make
or from a specific dealer if they found negative comments on these
kinds of sites (Capgemini, 2009a).
Literature Review 23
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4. Green Car Labeling
While the Internet is one resource consumers are increasingly
using to look for fuel economy estimates when researching and
comparing vehicles, well designed eco-labels can also be useful
in providing fuel economy information to consumers (Teisl &
Rubin, 2008). In addition, participants in focus groups conducted
in Maine in 2004 stated that they get much of their information
on vehicles on-line, and while they would like to have more
information about environmental factors on the vehicle label, most
had made their vehicle purchasing decision before they visited a
dealership and were exposed to eco-labeling on the vehicle (Teisl
& Rubin, 2004). In their "Green Car Labeling" study, Northeast
States for Coordinated Air Use Management (2003) interviewed
658 individuals 25 years or older that lived in the Northeast region
of the U.S who had purchased a vehicle in the last two years, or
planned to purchase a vehicle in the next two years. They found
that one-half of these individuals thought that knowing about
vehicle emissions was highly important when purchasing a vehicle.
In addition, four out of 10 of these individuals stated that if the
information was readily available, they would be highly likely to
consider emissions in their next vehicle purchase. A key finding
from this study was that the importance of emissions in their
vehicle purchasing decision increased when emissions information
was available, with three-quarters of the people interviewed stating
they were in favor of green car labeling and that they would be
moderately or highly likely to use the information on the label in
their next vehicle purchase.
C. Factors Which Influence Vehicle Choice
1. Vehicle-related factors
As Garcia (2007) has pointed out, automobiles have traditionally
been thought of as bundles of attributes desired by consumers.
Consumers tend to differentiate between different makes and
models by the various attributes they offer. They make choices
among various makes and models to maximize their utility by
choosing the make and model considered superior compared to all
other available choices.
24 EPA Fuel Economy Label Redesign
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Even though there has been a tremendous growth in the number
of vehicle makes and models that offer a plethora of vehicle-
attribute combinations to consumers, the most important factors
that lead consumers to purchase a particular vehicle have remained
consistent over time. According to Cars Online (Capgemini,
2009a, 2008, 2007), reliability, safety, price, and fuel economy (not
necessarily in that order) are the top four factors that consumers
have consistently stated they focus on when it comes to making
their final decision about which vehicle to buy.
a. Vehicle reliability and reliability of brand
The value that reliability plays to both manufacturers and consumers
is of interest to both consumer researchers and practitioners. In
general, consumers consider a vehicle to be reliable if it is likely to
have fewer problems than other vehicles even as it ages (Consumer
Report, 2010). Vehicle reliability has been found to have a positive
impact on the consumers' likelihood of choosing a vehicle (Woods,
2010; Scordo, 2009; Dangol, Jitpaiboon & Walters, 2007; Train
& Winston, 2007). The benefits that consumers see in buying a
vehicle with high reliability include lower costs of repair and
higher resale value. Therefore, consumers are likely to be concerned
about vehicle reliability when researching their upcoming vehicle
purchase (BuyingAdvice.com, 2007).
While reliability in simple terms may be thought of as how well a
vehicle is likely to run without expensive maintenance and repair
over time, it has far reaching impacts on brand reputation. Based on
how reliable consumers consider the vehicle model to be, a brand
halo kicks in whereby consumers build opinions about the vehicle
make, brand reliability and manufacturer's reputation. Such a halo
effect can have serious positive implications for consumers' future
vehicle purchase. A recent research study by Capgemini (2009a)
found that an increasing number of consumers were growing brand
loyal and were more likely to purchase the same make/brand as
their current vehicle.
Research has found that because a new vehicle's reliability is not
available at the point of purchase, the reliability history of the
model (measured based on the number of repairs reported by the
owners of such model), and brand reputation play an important
role in consumers' evaluation of a new vehicle (Betts & Taran,
2004). Further, when such a reputation is backed by trusted and
Literature Review 25
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Because the study was based
on a convenience sample of
Deloitte U.S. employees, it may
not be representative of the
U.S. auto consumer population.
Further, it should be noted
that intended behavior (i.e.,
consumers' willingness to pay
more for safety features) may
not necessarily translate into
actual purchase behavior.
widely-cited publications such as Consumer Reports, Edmunds
publications and other reviews, it has a major impact on consumers
with regard to their purchase decision (Train & Winston, 2007; Betts
& Taran, 2004). For example, foreign automakers have developed
a reputation for building highly reliable cars as compared to
American carmakers (Woods, 2010; Dangol, Jitpaiboon & Walters,
2007; Train & Winston, 2006; Nichols & Fournier, 1999). This
has resulted in the declining market share of U.S. automakers who
have not gained the reputation for improved vehicle reliability as
compared to Japanese and European manufacturers (BuyingAdvice.
com, 2007; Train & Winston, 2006).
b. Safety
Consumers also continue say that they consider safety to be one
of the most important considerations in buying a new or used
vehicle (Consumer Reports, 2010, 2008; Capgemini, 2009a,
2008, 2007, 2006; Deloitte, 2008; BuyingAdvice.com, 2007) and
research vehicle safety performance ratings before purchasing a
vehicle (Harris, 2001). In addition, consumers say that they are
increasingly seeking safety features in their vehicles (Deloitte, 2010)
and are willing to pay more for a vehicle to obtain improved safety
levels (Harris, 2001). A U.S. national automotive consumer study
of 2,160 respondents (who qualified as future new or used vehicle
buyers) in 2003 (TRW Automotive, 2003) found that consumers
had progressively increased their rating of the importance of safety
features such as smart airbags, vehicle stability control and anti-
rollover systems as compared to how they rated safety systems
in 1998. Further, findings from a recent Deloitte survey (Deloitte,
2009) based on 991 U.S.-based Deloitte U.S. employees1 indicated
that U.S consumers are willing to pay a premium for safety features
and options such as skid control, telematics, safety devices (such as
back-up sensing systems, electro-chromatic mirror/auto dimming
mirrors, energy-absorbing steering system, head restraints, padded
kneed bolster, etc.), and blind spot mirrors. The Deloitte study also
predicted that the current economic crisis will leave customers
to value vehicle safety more than before and seek vehicles with
enhanced safety features.
Consumers' increasing demand for safety has led manufacturers
to think and develop safety-related innovations and features
(such as automatic crash notification, emergency assistance, and
remote vehicle diagnostics) in their recent models (Deloitte, 2009;
26
EPA Fuel Economy Label Redesign
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Dannenberg & Burgard, 2007). Yet, due to cost, many vehicle safety
improvements were not universally implemented until mandated by
the U.S. National Highway Traffic Safety Administration (NHTSA).
Most recently, NHTSA has introduced a proposal to mandate
Electronic Stability Control (ESC) on all passenger vehicles by the
2012 model year (Consumer Reports, 2009). According to NHTSA
(2010), ESC will reduce single-vehicle crashes of passenger cars by
34% and single vehicle crashes of sport utility vehicles (SUVs) by
59%, with a much greater reduction of rollover crashes. NHTSA
also estimated that ESC will save 5,300 to 9,600 lives and prevent
156,000 to 238,000 injuries in all types of crashes annually once
all light vehicles on the road are equipped with ESC.
c. Vehicle price
Vehicle price is also one of the top considerations that heavily
impact consumers' vehicle purchasing decisions (Deloitte, 2009,
2008; Capgemini, 2009a, 2008; Consumer Reports, 2009). In
most cases, consumers want to buy a vehicle that they can afford
without compromising much on other important factors such as
reliability and safety. They also want a vehicle that fulfills their
emotional and functional needs. For example, people are drawn
to the BMW as "the ultimate driving machine," though they may
choose a model with a small engine and automatic transmission.
While previous research has shown that consumers do not always
seek the absolute lowest price while purchasing a vehicle (Root,
2008), it is important to remember that the current economic crisis
has impacted consumer behavior with regard to vehicle pricing.
Vehicle price has become even more important than before the onset of
the global recession. Based on a recent survey, Deloitte (2009) predicts
a critical shift in auto consumers' purchase priorities as customers
seek value in the form of cheaper and more efficient vehicles. While
research is yet to substantiate such a shift, recent studies have found
another significant shift with regard to vehicle price. Consumers are
increasingly using the Internet to search for vehicle pricing information
(Consumer Reports, 2009) and are wanting to buy new vehicles online
as an alternative to the traditional dealer model (Capgemini, 2009a).
Research has also shown that the Internet has lowered vehicle
prices by informing consumers about dealer invoice prices and
thereby enabled consumers to negotiate lower prices (Zettelmeyer,
Morton & Silva-Risso, 2005).
Literature Review 27
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d. Fuel economy
Research has shown that fuel economy is one of the top factors that
consumers report influence which vehicle they choose (Deloitte,
2009, 2010; Capgemini, 2009a, 2008, 2007). It has become even
more critical in the minds of U.S. consumers in their final vehicle
purchase decisions because of the volatile changes in gasoline prices
in 2007 and 2008 (Deloitte, 2008; Capgemini, 2008).
Not surprisingly, concern about fuel prices has resulted in
consumers' increased interest in more fuel-efficient or alternative-
fueled cars. Research studies by Capgemini (2009a, 2008, 2007)
have found that more than environmental concerns, fuel economy
is the leading driver behind consumers buying fuel-efficient or
alternative-fuel vehicles, with 83% of respondents reporting fuel
economy was important/very important in 2007. This figure rose
to 90% in the 2008 and 2009 surveys. Studies further found that
women, lower income households, younger consumers, non-white
purchasers, and buyers in more densely populated areas attached
more importance to fuel efficiency in vehicles compared to others
(Deloitte,2008; McCarthy & Tay, 1999).
While fuel economy has been discussed in the past (especially during
times of decreased fuel availability such as during the oil crisis of
1973), only a few studies have attempted to explore it in depth.
In one such study, based on interviews with 57 U.S. households,
Turrentine & Kurrani (2006) attempted to determine how U.S.
consumers think and behave with respect to automotive fuel
economy. They found that there is no systematic way in which auto
consumers analyze fuel economy in their automobile or gasoline
purchases. Most consumers simply look at the cost of their last
tank of gas and the unit price of gas on that day, and then forget it.
As a result, they do not optimize their fuel economy decisions, and
make large errors when asked to estimate their gasoline costs and
savings over time.
As the price of gasoline increases, consumers feel the impact on
the operating cost of their vehicle and look for vehicles that meet
higher fuel efficiency standards. The more the consumers are
concerned about fuel efficiency, the more they search for vehicles
that meet their expected fuel economy expectations (McCarthy &
Tay, 1999).
28 EPA Fuel Economy Label Redesign
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In addition, there is a body of research that uses vehicle choice
modeling to help determine the role of fuel economy in consumer
vehicle purchasing decisions. In Helfand and Wolverton's 2009
review of this research, they determined that while this modeling
is a valuable tool for regulators, there are wide variations in
how these studies estimate the value that consumers place on
fuel economy, that consumers tend to under-value the benefits of
greater fuel economy and that consumer willingness to pay for fuel
economy does not equal the expected value of the fuel savings.
They conclude that more research is needed on how to model the
role of fuel economy on consumer vehicle purchasing decisions
(Helfand & Wolverton, 2009).
e. Other vehicle related factors
Apart from the above discussed factors, studies have documented
other factors that influence consumers' vehicle purchase decisions.
In their 2007 survey, based on 2,600 consumers across five countries
(United States China, France, Germany, and United Kingdom),
Capgemini documented the following factors as being very important
to consumers in their vehicle purchase decisions. Ranked in order of
stated importance: reliability of brand, safety, price of vehicle, fuel
economy, quality of interior/style, after-sales service, brand name of
vehicle, products and services, extra options at no extra cost, vehicle
availability, sales/delivery date, trade-in value, environmental factors,
product/feature options, ability to research information on Internet,
0% or low financing, additional warranty coverage/service credit, and
cash-back incentives. As a follow-up, Capgemini conducted surveys
in 2008 (with 3,100 consumers across eight countries- United States,
Brazil, China, France, Germany, India, Russia, and United Kingdom)
and 2009 (with 3,000 consumers across the same eight countries) with
similar results, although there were some minor changes in the order
in which these factors were rated by respondents. A few novel factors
did emerge as important in these two surveys, including 'Hybrid or
other alternative-fuel cars' (in the 2008 survey as well as the 2009
survey), treatment by the manufacturer during my previous ownership
cycle (in the 2009 survey) and treatment by the dealer during my
previous ownership cycle (in the 2009 survey). The 2008 and 2009
surveys revealed that consumers in developing markets (Brazil, China,
India, and Russia) were more likely than consumers in mature markets
(France, Germany, United States, and United Kingdom) to rate factors
such as additional warranty coverage, cash-back incentives, and
product feature options as important factors in choosing a vehicle.
Literature Review 29
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In their 2008 Generation Y study, (based on a random sample
survey of 1,006 people between the ages of 17 and 28), Deloitte
reported the following factors to be the most important in
vehicle purchase decisions (in order ranked most important): gas
mileage, affordability, performance, leg room, exterior styling,
low emissions, quiet interior, storage, interior look, 'company is
a good corporate citizen', technology, intelligent settings, wheels,
horsepower, environment-friendly factory, manual transmission,
and latest model on the market.
As a follow-up to their 2008 survey, Deloitte (Deloitte, 2010)
conducted another survey (based on a similar random sample
survey of 1,100 people between the ages of 18 and 30 years). This
survey found the following factors to be the top factors that were
critical to respondents' vehicle purchase decisions (in order ranked
most frequently): gas mileage, affordability, exterior styling, interior
room, power locks and windows, air conditioning/heat, safety, CD
player, reliability, and automatic transmission.
2. The Role of Demographics in Vehicle Purchasing
Vehicle purchasing decisions are influenced by consumers' specific
needs, situations and demographics. Those demographics can
include age, gender, income, education level, and household size.
This section presents three examples of how these factors might
affect vehicle purchases. While they may not be indicative of how
the overall population makes vehicle purchasing decisions, they do
show how demographics can influence people's decisions.
a. Demographics and vehicle type
One large study (Choo & Mokhtarian, 2002), based on a randomly
selected mail survey of 1,904 residents in three neighborhoods in
the San Francisco area, provides some interesting insights into what
types of consumers drive what types of vehicles. The neighborhoods
covered by this survey were both urban and suburban and included
a variety of ages, income levels, and household sizes. The survey
specifically asked individuals about the vehicle they primarily drive.
It found that with all other things being equal, the more a vehicle
costs, the less likely it is to be purchased. It also found that higher
income families and individuals are more likely to drive more
expensive vehicles such as luxury cars and SUVs. In addition, the
30 EPA Fuel Economy Label Redesign
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more members there are in a particular household, the more likely
that household will drive a larger car. In fact, the greater the number
of people under the age of 19 in a household the more likely that
household is to drive a minivan. Yet, there were also some large
households with lower incomes that drive small cars.
In terms of age, younger drivers are more likely to drive a small car,
a sports car, or an SUV. Drivers over the age of 65 are more likely to
drive a larger luxury car than any other vehicle type. Homemakers
and retired people tend to drive larger more comfortable cars like
minivans or luxury cars. In general, pickups and large cars tend to
be driven by less educated drivers, and females are less likely to
drive pickups than any other vehicle type. Those that live in urban
settings are more likely to drive small and luxury cars.
b. What about Generation Y?
Much recent research has been conducted by Deloitte on Generation
Y consumers. This includes those individuals born in the late
1970s and the 1980s. People included in this generation have lived
their entire lives during the environmental movement and with
availability of personal computers. Much of this research is trying
to address how this particular age group views sustainability and
gathers information when it comes to purchasing a vehicle.
One study partially based on this data (Deloitte, 2010) found that
Generation Y says they consider the impact of their purchases on
the environment when shopping for a vehicle. However, many stated
that were not willing to pay a premium for a more environmentally
friendly vehicle. Therefore, to be successful, manufacturers must
provide both an economic and environmental value for Generation
Y consumers to adopt emerging sustainable technologies. Additional
findings based on these survey results (Deloitte, 2008) found that
respondents with lower personal or household income were more
likely to rate gas mileage as an extremely or very important factor.
Women attached more importance than men to gas mileage, storage
capacity, and environmentally-friendly production, while men were
more focused than women on leg room and horsepower. In addition,
those who had attended college were more likely to say that thinking
about the economic outlook and the U.S. relationship with oil-
producing countries had a strong impact on their purchase decisions.
From Deloitte's 2009 survey (Deloitte, 2010), respondents indicated
that the top three options or features that a vehicle must have and
Literature Review 31
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are "critical to your vehicle purchase decision" were: gas mileage,
affordability/price, and exterior styling/looks. The respondents also
had some strong feelings about the end of the purchasing process
and a majority stated that they would prefer to test drive a vehicle
for 24 hours (69%), know the final price upfront (85%), purchase
the vehicle without negotiating with a salesperson (60%), and not
have to haggle over the price of the car (62%).
c. Needs of older drivers
Based on U.S. Census data, in 2005 there were 50 million people
aged 60 and above, and it's estimated that that amount will increase
to 75 million by 2020. That translates into one in five people being
age 60 and above by 2020. This group also has the greatest amount
of disposable income of any age group. To appeal to this group,
products need to be designed to address their changing physical
needs (Deloitte, 2005). For example, when Ford realized that driver
fatality rates were higher for drivers past 50, they decided to design
cars that increase occupant safety for older drivers including crash
avoidance, crashworthiness, and post crash assistance. To help them
understand the physical limitations and experiences of older drivers
they designed the Third Age Suit, which engineers can use to evaluate
mobility strength and vision limitations of someone 50 years and
older. The suit adds bulk, restricts movement, and includes goggles
that simulate cataracts. Based on their results, Ford is designing and
building vehicles for aging customers (Deloitte, 2005).
3. The Role of Psychographics in Vehicle Purchasing
In purchasing a vehicle, psychographics help explain how vehicles
satisfy the emotional needs of the consumers, not just the practical
needs. It's about what type of lifestyle you lead, what type of image
you want to portray, how much and for what reasons you travel
in the vehicle, and how you view the vehicle as an extension of
yourself (Assaraf, 2008). This section presents examples of how
psychographics can influence vehicle purchasing decisions.
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a. How travel attitude, personality, and lifestyle influence
vehicle type in the San Francisco Bay Area
A study (Choo & Mokhtarian, 2002) based on a randomly selected
mail survey of 1,904 residents in three neighborhoods in the San
Francisco area specifically looked at how travel attitude, personality,
lifestyle, and mobility factors influence individual vehicle choice.
The results of the study were then used to develop a choice model
based on these factors as well as typical demographic variables.
The study presents six descriptive attitude clusters for the sampled
area:
• Affluent professionals - affluent and mobile. This cluster
eats out a lot, is not family and community oriented and
usually doesn't have a large family. They seem to be more
entertainment oriented than work oriented.
• Transit-using urbanites - Young, urban, highly educated
and community oriented. This cluster is pro-environment
and pro-high density (they live in urban areas and like it).
• Homemakers and older workers - Older suburanites who
focus on family and home and don't particularly like travel.
• Travel haters - This work-oriented cluster doesn't like
travel, does as little travel as possible and wants to do less
of it.
• Excess travelers - Young, urban, highly educated and
adventure seeking. This cluster is pro-environment and
pro-high density, and pro-travel. Not one of the highest
income groups, perhaps because they are prioritizing their
adventure time over work time and status-seeking.
• Adventurous and car-oriented suburbanites - Car-bound,
excess travelers, oldest, organized, status conscious, and
suburban.
Literature Review 33
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In addition, the study presents eleven descriptive personality and
lifestyle clusters including:
• New family model - Young families, enjoy traveling for
fun, but not for work, family/community oriented, but not
settling down.
• Homebodies - Not particularly social, don't really like to
travel, one of the more neutral in attitudes toward travel
clusters compared to others.
• Mobile yuppies - Young, professional, highly educated,
travel lovers.
• Transit advocates - Highly educated, environmentally
sensitive, transit oriented.
• Assistant VPs - Suburban, auto-oriented (but not
particularly travel loving), older, least educated, frustrated
(meaning they feel less in control and less satisfied with
their lives).
• Status seeking workaholics - Travel most (miles and
frequency) for work, auto-bound, enjoy work travel. One
of the most extreme clusters in regard to attitudes toward
travel. Most status seeking, workaholic and not calm.
• Suburban and stationary - Mostly older, suburban women,
calm, don't travel a lot.
• Older and independent - Older, independent,
unencumbered (most strongly NOT family/community
oriented), entertainment focused.
• Middle-of-the-roaders - Most neutral cluster in regard to
travel attitudes, most strongly family/community oriented.
• Travel loving transit users - Highly educated urban
women, middle income, environmentally sensitive, like
short distance travel by bus, strong excess travelers, highest
walking share of total miles traveled.
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• Frustrated loners - Most extremely frustrated (group
with highest level of frustration with their lives), above
average commutes, somewhat transit oriented (Choo &
Mokhtarian, 2002).
The study analyzed vehicle type in relation to these attitude,
personality, and lifestyle clusters. All vehicle types, except the mid-
sized car group, have distinct characteristics:
• Small car drivers are pro-environment, tend to live in high
density areas, and do not have a strong travel freedom
attitude. They tend to be loners and perceive themselves
as traveling less in a personal vehicle than others. They are
also less likely to enjoy personal vehicle travel. They tend
to be female, 40 or younger, have 4-year college degrees,
and are in clerical or professional jobs. They live in single
vehicle and single adult households. Higher proportion
of Transit-using Urbanites, Excess Travelers, Transit
Advocates, Travel Loving Users, and Frustrated Loners
clusters.
• Compact car drivers have a weaker travel freedom attitude
and travel less in their personal vehicles for long-distance
trips. They tend to perceive themselves as traveling less by
personal vehicles than others. Like small car drivers, they
have higher proportions of professional jobs, and single
vehicle and single adult households. They have middle
incomes. Higher proportion of Affluent Professionals,
Transit Advocates, and Suburban and Stationary clusters.
• Mid-sized car drivers have no distinct travel attitude,
personality, lifestyle, mobility, or travel liking characteristics.
Demographically they are more likely to be females
or homemakers, and to have higher incomes or larger
households. Higher proportion of Affluent Professionals,
Assistant VPs, and Middle-of-the-roaders clusters.
• Large car drivers tend to not have pro-environmental or
pro-high density attitudes. They tend to be males, older
or retired, and part-time employees. They also tend to be
less educated and have lower incomes. They have more
than one vehicle, and tend to be older households. Higher
Literature Review 35
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proportion of Homemakers and Older Workers, Travel
Haters, and Adventurous, Car-oriented Suburbanites, and
higher than average proportions of Homebodies, Assistant
VPs, Middle-of-the-roaders, and Frustrated Loners clusters.
Luxury car drivers are more likely to be status seekers and
to often travel long distances by plane. They are more likely
to be male and older or retired. They are highly educated
and higher income people. They have more than one car
and live in older adult households. Higher proportion of:
Travel Haters, Excess Travelers, New Family Model, Status
Seeking Workaholics, and Older and Independent clusters.
Sports car drivers are more likely to be adventure seekers.
They are more likely than average to have 4-year college
degrees and lower incomes. They live in two-worker or
younger adult households. Higher proportion of: Excess
Travelers, New Family model, Mobile Yuppies, Status
Seeking Workaholics, and Frustrated Loners clusters.
Minivan/Van drivers have a weak pro-high density
attitude. They perceive that they travel more by personal
vehicle than do others. They enjoy traveling by personal
vehicle more than average. They tend to be females and
homemakers between the ages of 41 and 64. Both higher
and lower household incomes are represented. They have
more than one vehicle and larger households with children.
Overrepresented in Homemakers and Older Workers,
and Adventurous, Car-oriented Suburbanites; and higher
than average proportions of Homebodies, Suburban and
Stationary, Middle-of-the-roaders, and Travel Loving
Transit Users clusters.
Pickup drivers have a weaker pro-high density attitude.
Their short-distance travel is higher than average, while
long-distance travel by airplane is lower. They tend to
have lower education levels, are full-time employees in
service-related jobs, have middle incomes and two-vehicle
households. Higher proportions of: Homemakers and
Older Workers, Adventurous, Car-oriented Suburbanites,
New Family Model, and Assistant VPs clusters.
36 EPA Fuel Economy Label Redesign
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• SUV drivers tend to have a strong travel freedom attitude
and enjoy traveling short-distances by personal vehicle.
They are likely to be age 40 or younger and are highly
educated or high income people. They have a higher than
average proportion of larger households with children.
Higher proportions of: Adventurous, Car-oriented
Suburbanites, New Family Model, Mobile Yuppies, and
Older and Independent clusters.
Based on these results, the authors concluded that travel attitudes,
personality, lifestyle, and mobility factors do affect individual
vehicle type choices. In regards to attitudes that are pro-
environment, those clusters that are pro-environment are those
that use transit and tend to drive smaller cars. They tend to be more
affluent and more highly educated and community oriented. The
authors' conclusions are based on based on a randomly selected
mail survey of 1,904 residents in three neighborhoods in the San
Francisco area and while they provide interesting insights into how
psychographics can influence which vehicles consumers chose to
purchase and drive, they are not representative of the overall U.S.
population. (Choo & Mokhtarian, 2002).
b. Views of Generation Y
Deloitte's 2008 survey of Generation Y, found that a majority of the
respondents felt that a vehicle reflects a person's style, status and
values, but that when considering the purchase of a new car, the
underlying qualifications were always safety and comfort. Specifically,
the study found that "roughly two-thirds of the respondents strongly
or somewhat agreed that a vehicle reflects a person's taste and status
and they consider these factors when making a purchase decision."
This conclusion was based the results of those that somewhat or
strongly agreed to the following statements:
• A vehicle says a lot about a person's taste/sense of style
(82%)
• When buying a vehicle, I consider how it impacts my
personal pursuit such as jobs, relationships, and hobbies
(77%)
• When buying a vehicle, I consider how it reflects who I am
as a person (67%)
Literature Review 37
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• A vehicle says a lot about a person's status in society (i.e.
importance or wealth) (65%)
• A vehicle says a lot about a person's values (57%)
When considering purchasing a vehicle, this group responded that
the most important factors are: gas mileage (92%), affordability
(91%), performance (90%), leg room (65 %), exterior styling (65 %),
and low emissions (58%). However, for this group environmental
friendliness plays an increasing role in their perception of what is
'cool' in terms of what they drive. The respondents gave as their
top four reasons that a vehicle is considered 'cool' to be: its exterior
styling (44%), affordability (40%), being environmentally friendly
(35%), and comfort (33%). Based on these results, Deloitte
concluded that for Generation Y, environmental friendliness is
playing an increasing role in their perception of cool. Additionally,
when asked what broader issues they considered when purchasing
a new vehicle, 62% responded they considered the environment,
and 80% of that 62% also responded that they were willing to pay
more for an environmental friendly vehicle (Deloitte, 2008).
c. Vehicle choice is often based on emotions
Based on the results of their 2006 and 2007 surveys, Capgemini
concluded that consumers are increasingly driven by their hearts as
well as their heads. They found that although rational factors such as
safety, price, and reliability play a role in consumer decisions, these
factors are often overlooked by other more emotional factors. For
example, when respondents were asked why they had or were going
to switch vehicles, "fits my needs," "wanted to try something new,"
and "enjoyment of the vehicle" scored higher than fuel economy and
safety. To be successful, manufacturers and dealers have to appeal to
both rational and emotional aspects of vehicle buying.
People buy vehicles to make a statement about their personality and
become emotionally attached to their vehicles. In addition, vehicles
can say a great deal about the people who drive them. For example,
the main reason that consumers reported buying one leading
hybrid vehicle was not because of fuel economy or low emissions,
but because they saw the car as making 'a statement about me.'
This was especially the case since this particular vehicle was only
available as a hybrid and so driving it made a clear statement about
the driver's priorities. Also important to consumer decision-making
38 EPA Fuel Economy Label Redesign
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are the influences of social norms and the behaviors of those
around us. What others around us drive may influence what we
choose to drive and what we view as acceptable to drive (European
Commission, 2009).
4. Fuel-Efficient/Low Emission Vehicle Options
Consumer demand for green products is growing, and the
automobile industry is no exception. There is growing awareness of
fuel-efficient and alternative fuel vehicles, and consumer research
indicates a growing interest in purchasing more fuel efficient and
low emissions "greener" vehicles. In a 2009 study of consumers
in eight countries (United States, Brazil, China, France, Germany,
India, Russia, and United Kingdom) 41% of respondents reported
currently owning a fuel-efficient or alternative-fuel vehicle, up from
36% in the prior year's survey. Another 30% of consumers plan to
buy a fuel-efficient or alternative fuel vehicle (Capgemini, 2009a).
The main technologies available for green vehicles include alternative
fuels (which include compressed natural gas, second-generation bio-
fuels, and hydrogen), advanced internal-combustion-engine (ICE)
technologies, and fully electric vehicles (The Boston Consulting
Group, 2009). One view is that hybrids are serving as a transition
technology that will aid in the switch to electric vehicles and that
while hybrids will still outnumber electric vehicles in the year 2020,
trends point to a fully electric long-term future (Deloitte, 2009).
Others see more promise in the development of alternative power-
train technologies such as advanced internal combustion engine
technologies (ICE) and electric as more promising technologies
than alternative fuels due to the significant investment and further
technological progress needed to achieve substantial reductions
in alternative fuel CO2 emissions (The Boston Consulting Group,
2009). However, there is some indication that natural gas could
become an important part of the domestic fuel supply, especially
for fleets (Deloitte, 2009).
a. Reasons for buying fuel efficient/low emission 'green' vehicles
Despite increasing demand for greener purchase alternatives and
growing awareness of the environmental impact of automobile use,
consumer research shows that fuel savings is the primary factor
influencing decisions to purchase green vehicle with concern about
environmental impacts showing up as a secondary factor (Ernst and
Literature Review 39
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Young, 2010; Capgemini, 2009a; Capgemini, 2008; Capgemini,
2007). This finding is echoed in focus group research conducted in
Knoxville and Los Angeles with consumers who were in the market
for a new or used vehicle. The focus group participants indicated
that with the exception of fuel economy, environmental concerns
were not a factor in participants' decision-making process when
purchasing a vehicle, and those who do consider fuel economy do
so primarily for economic rather than environmental reasons (Nye,
Greene, Hopson, Saulsbury, 2003).
There is some evidence that concern for environmental impacts has
a growing influence on vehicle purchase decisions. In Capgemini's
2009 survey of potential car buyers, 20% of U.S. respondents said
that the environment was their primary reason for choosing a
fuel-efficient or alternative-fuel vehicle, up from 9% the previous
year (Capgemini, 2009). However, research on the electric vehicle
market noted that the rising price of fuel is the main factor driving
interest in electric vehicles, and while concerns about energy security
and climate change are growing, they are not yet contributing to
purchase behavior (Ernst and Young, 2010).
The results of Capgemini's 2007 survey indicated that older
consumers are more likely than the younger consumers (defined as
consumers 18-34 years of age) to identify fuel economy as a primary
factor for purchasing a fuel-efficient or alternative-fuel vehicle. In
addition, men are more likely than women to place an emphasis
on fuel economy, while a higher proportion of women identified
environmental impact as the primary reason for purchasing a green
vehicle (Capgemini, 2007).
A Michigan State University study based on Deloitte's Generation
Y survey data similarly found an emphasis on fuel economy. It
found that miles per gallon, price and brand were determined to
be the most important product attributes to the Gen Y consumer,
with environmental concerns taking a secondary role (Deloitte/
MSU, 2010).
A 2008 Deloitte survey analyzing Generation Y's relationship with
the automobile demonstrated that while gas mileage, price, and
performance were rated the most important factors in the decision
process, low emissions and production in an environmentally
friendly factory were also rated as important factors. In addition,
40 EPA Fuel Economy Label Redesign
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Generation Y consumers rated environmental-friendliness as one
of the top three reasons that a vehicle is cool, along with exterior
styling and affordability (Deloitte, 2008). Deloitte's 2009 follow
up survey indicated that 73% of respondents agree that the
environment is an extremely important factor when purchasing a
vehicle, while nearly half of respondents agree that the types of
vehicles they drive directly affect the environment. Additionally,
nearly 53 % of respondents would pay more for an environmentally-
friendly vehicle. Nearly 65% would pay more for a vehicle that is
better for the environment and saves energy costs. But 45% would
NOT pay more for a vehicle that did not save money on energy
costs even if it was better for the environment (Deloitte, 2010). In
short, a vehicle must provide both environmental and economical
advantage to the Gen Y consumer.
Other studies support the idea that although there is a growing
interest in green vehicles, cost is still an important issue. A 2009
survey of 3,000 car buyers in Brazil, China, France, Germany,
India, Russia, the United Kingdom and United States found
that consumers show some willingness to pay for improved fuel
efficiency: 70% of respondents said they would pay no more than
10% extra for a fuel-efficient or alternative-fuel vehicle, and 20%
were not willing to pay any premium at all (Capgemini, 2009a).
Another study found that while a majority of U.S. drivers (52%)
claim a preference for alternative fuel vehicles, only 28% would
be willing to pay a premium for such vehicles. Most customers,
it seems, do not feel that the savings at the pump are sufficient
to offset the higher price of today's alternatively fueled vehicle
(Deloitte, 2010).
One study estimates that a 10% core of possible electric vehicle
early adopters has formed (Ernst and Young, 2010). A 2004 report
on the then-emerging gasoline/electric hybrid estimated the natural
market for gasoline/electric hybrids to be about 15% of the U.S.
population, further noting that the key to sustainability of the green
vehicle market is the ability to capture the more than "30 percent
of the U.S. consumer market that is friendly to green products, but
unwilling to give up much to embrace it" (Booz & Company Inc.,
2004). In this sense, it appears that while there is increasing interest
in going green, green vehicles, especially electric vehicles, are still
considered to be a niche market.
Literature Review 41
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b. Barriers to increasing market share of green vehicles
While much of the literature focuses on the commercial viability
of electric vehicles, and indicates that electric vehicles will feature
prominently in the long-term future of the green vehicle industry,
there are numerous barriers to their widespread adoption. These
barriers include lack of public awareness, price, need for specialized
infrastructure, battery performance, and doubts concerning the
electric car's ecological value. Despite growing interest in green
vehicles, for there to be widespread adoption, green vehicles need
to be seen as a "no compromise" alternative, in that their price
and performance is at least on par with the traditional or "brown"
vehicles available on the market (Booz & Company Inc., 2004).
Public awareness of emerging powertrain technologies is weak in the
United States. Data from the Deloitte' Generation Y surveys revealed
that on average, Generation Y consumers do not feel as though
they are experts with respect to sustainable vehicle technology, and
this absence of confidence may represent a significant barrier to
adoption (Deloitte/MSU, 2010). Thirty percent of U.S. consumers
are still unaware of hybrid/electric technologies even though those
vehicles have been on the market for more than ten years. Further,
few consumers are willing to embrace new technology prior to it
being well established in the market (Ernst and Young, 2010).
A report by Price Waterhouse Coopers estimates electric vehicles
to cost approximately $7,000 - $20,000 more than a traditional
vehicle depending on the vehicle under consideration, with much of
the premium attributed to battery cost (Price Waterhouse Cooper,
2009). Consumer research reveals some willingness to pay a higher
upfront cost for an electric vehicle, if lower vehicle operating costs
offset the higher upfront cost over time (The Boston Consulting
Group, 2009). Another study found that consumers would accept
a three-year amortization period for the price differential, but
noted that under current cost conditions, electric vehicles do not
come close to meeting this time horizon (Price Waterhouse Cooper,
2009). Other studies show that consumers would be willing to
pay a premium of 10% for enhanced fuel efficiency (Capgemini,
2009a) and a 14% premium for an electric vehicle (Wyman, 2009).
Some experts conclude that a combination of high fuel prices and
government purchase incentives is needed for electric vehicles to
make financial sense to the consumer (The Boston Consulting
Group, 2009, 2010; Price Waterhouse Cooper, 2009; Capgemini,
42 EPA Fuel Economy Label Redesign
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2009b). Analysis by the Boston Consulting Group suggests that
in order for U.S. electric car purchasers to break even in three
years, one of three conditions would need to be met, alone or in
combination: an oil price increase from $100 to $300 per barrel;
a 200% increase in gasoline prices caused by higher oil prices,
higher taxes, or both; or $7,500 in government incentives per car
purchased (Boston Consulting Group, 2010).
Battery performance is another key barrier to widespread adoption
of the electric vehicle. The current driving range of an electric
vehicle is between 160 to 190 miles on a single charge, with battery
recharge time of four to eight hours (The Boston Consulting Group,
2009,2010). This insufficient driving range is viewed as a barrier to
widespread commercial acceptance. A 2010 nationwide survey of
1,000 respondents of driving age (Ernst and Young, 2010) revealed
that 33% of respondents have daily driving range expectations of
more than 200 miles. Interestingly, the Ernst and Young survey
revealed that respondents' driving range expectation is much higher
than their actual daily miles driven. While 72% of respondents
drive less than 30 miles per weekday, 87% of respondents expect
electric vehicles to have a daily driving range of 50 - 200 miles
(Ernst and Young, 2010). One study concludes that electric cars
need to achieve a driving range of approximately 312 miles on a
single charge (The Boston Consulting Group, 2010 - batteries for
electric cars). Further, electric cars require a network of charging
stations, which will be costly to build. Without the necessary
infrastructure, drivers of electric vehicles will be restricted to short
commutes (PriceWaterhouseCoopers, 2009a, 2009b; The Boston
Consulting Group, 2009, 2010; Capgemini, 2009b). However, the
2010 nationwide consumer survey by Ernst and Young revealed
some willingness to pay for the infrastructure necessary to support
electric cars, with 34% of respondents saying that they are willing
to help pay for charging stations to be installed in their communities
(Ernst and Young, 2010).
Finally, there is some indication of doubt as to whether electric vehicles
are truly "clean vehicles" because in some cases, the electricity used
to power electric vehicles is generated by high polluting sources such
as coal power plants (PriceWaterhouseCoopers, 2009; Capgemini,
2009b). Another potential area of concern is the environmental
impact of recycling used batteries (Capgemini, 2009b).
Literature Review 43
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c. Vehicle choice among green vehicles
Gas/electric hybrid vehicles such as the Toyota Prius are the primary
type of advanced technology vehicles that consumers currently
own or plan to buy. This is likely due to the fact that these cars
have been on the market the longest, and they run on regular motor
fuels and leverage existing infrastructure (Capgemini, 2009b; Booz
& Company Inc., 2004). Further, gas-electric hybrids available
on the market today are competitive in terms of style, as some
manufacturers provide hybrid versions of traditional models. In
addition, initial data indicate that hybrid reliability is on par with
all-gasoline traditional models, and that the cost and resale value
of hybrids is typically competitive with that of traditional models
(Booz & Company Inc., 2004).
In Deloitte's 2009 survey of Generation Y consumers, respondents
were asked to indicate which type of sustainable technologies
would favorably impact their purchase. Standard gasoline engine
with high fuel efficiency and hybrid gas/electric engines were citied
most frequently (23% and 22% respectively). Alternative fuel
vehicles (ethanol/gasoline engines and clean diesel engines) and
electric vehicles were each selected by 12-13% of respondents.
Slightly less than 7% said that sustainable technology does not
affect their purchase decision in some way (Deloitte, 2010).
Consumer education is lacking with regard to available green vehicle
technologies. It seems that consumers do not have the information
needed to really understand the differences between vehicles to be
able to make comparisons across brands and types of technology
(Deloitte/MSU, 2010). Further, as described in the previous section,
there are several drawbacks to the electric vehicles available on the
market today that limit them from becoming a realistic choice for
more than a dedicated group of early adopters.
5. Importance of Interactions with Customers
As the global auto industry struggles to deal with the economic
downturn and American carmakers try to recuperate from a year
full of bad news, maintaining a strong customer focus becomes
essential for survival and good performance. As Accenture (2009)
points out, the key to negotiating the changes in the present market,
building customer loyalty and ensuring growth in the long-term,
involves understanding the current customer base, experimenting
44 EPA Fuel Economy Label Redesign
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and expanding to newer customers, developing trust-based
relationships with customers, and managing customer interactions
and transactions efficiently.
Further, the role that manufacturers and dealers play in promoting
fuel economy among customers is pivotal. Recent pre-group online
surveys conducted by EPA in collaboration with PRR found that
over of two-thirds of the respondents looked at manufacturers'
websites to search for information on fuel economy. The surveys
also showed that close to one-third (30%) searched for fuel
economy information at automobile dealerships.
a. Customer satisfaction and loyalty
The previous sections in this literature review explored the vehicle
buying process and the various vehicle-related demographic and
psychographic factors that impact current and potential customer
vehicle choice. This section explores the experiential factors
that influence consumer loyalty to the dealer and/or brand, their
satisfaction with the purchase, and their behavior after purchase.
With the world shrinking into a global village, the Internet
becoming a passport to almost everywhere, and the offering of
an assorted range of competing vehicles (models and makes) to
choose from, consumers are becoming increasingly diverse with
specialized needs and are more aware than ever of what vehicle
they want to buy even before they enter the showroom (Capgemini,
2006a). The customer-dealer relationship has undergone drastic
transformations in recent times. With customers having access
to information about the vehicles under consideration, the new
customer-dealer relationship model is more like an interaction
between two equal parties. As Capgemini, (2006b) has pointed
out, the final vehicle purchase decision is a result of a trust-based
relationship where the dealer is not "selling" but instead enabling
the customer to buy.
During the purchasing process, the customer-dealer relationship
starts about two weeks before the final purchase when the
customer visits the showroom (Capgemini, 2006b). During this
entire customer-dealer interaction, the customer goes through
various emotions; how well the dealer manages these emotions can
impact the sale, the price a customer pays, and the reputation of
the manufacturer. In its 2008 study, J.D. Power found that auto
Literature Review 45
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consumers attach a great amount of importance to the quality of
interaction with the dealer and are willing to pay a slightly higher
price to the dealer who has highly professional staff and provides
high-quality customer experience and services. Further, the study
stated that consumers also read online reviews and rankings
about other shoppers' experiences at the dealership and use these
to determine what kind of experience they're going to have at a
dealership (Root, 2008).
In addition to its direct implications (whether or not the customer
buys the vehicle from that dealer), the customer-dealer relationship
has far reaching impacts on customer satisfaction and their loyalty
to a brand and/or manufacturer, which in turn affect brand and/
or manufacturer reputation (Car Internet Research Program &
Capgemini, 2008). As Oracle (2003) explained, a poor dealer
experience can have a significant negative impact on brand
perception. Conversely, those who have a good experience and
feel satisfied are more likely to purchase the same make and/or
brand from the same dealer in the future. In practice, this requires
that dealers and manufacturers learn to understand the consumer's
universe, the tools at their disposal, and the states of mind they are
in when deciding to buy a vehicle (Capgemini, 2006b).
While previous analyses by Oracle (2003) and Capgemini (2006a,
2008) indicated that the automotive industry had been facing declining
customer loyalty over time, a slightly more recent survey by Capgemini
(2009a) found an increase in the number of consumers who have
become brand and dealer loyal and that consumer satisfaction with
the buying process has grown in the last year. The study attributed
this increase to "contraction in the dealer business and improvements
in quality and service resulting from investments in customer lifecycle
management systems" (Capgemini, 2009a). In addition, the study
pointed out that consumers are more loyal to the brand than to
the dealer. A similar finding was reported in the Dohring Company
National Automotive Consumer study (1996). The study was based
on 1,253 respondents who were surveyed across the United States and
found that more customers are likely to be loyal to a certain make of
vehicle than to a dealership and that customers primarily associate
their purchases with the automotive manufacturer rather than the
particular dealer that they purchase from.
46 EPA Fuel Economy Label Redesign
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. Consumer Education
Campaigns Regarding
Fuel Efficient Vehicles
A review of literature on the results of education campaigns
used to encourage consumers to make more fuel efficient vehicle
choices revealed the following. However, it should be noted that
the literature review yielded little academic research evaluating the
effectiveness of these educational campaigns.
A. Evaluation of Existing Consumer
Education Campaigns
Some researchers question the effectiveness of focusing on fuel
economy as a means to change consumer purchase decisions, instead
supporting a focus on fuel efficiency and technological advances.
A 2000 study (Plotkin, 2000) states that education programs
on fuel economy have limited value when fuel prices are low,
suggesting that it may be more effective for government-sponsored
educational programs to encourage consumers to consider green
technologies. Kurani and Turrentine (2004) concluded that current
strategies of drawing attention to annual fuel cost savings could
disappoint buyers, noting that the importance of fuel economy
comes and goes in the minds of consumers as the price of gasoline
or household income changes, or as individual drivers go through
lifestyle changes, such as needing to drive more. The authors
conclude that educational efforts that focus on fuel efficiency and
technical advances may be more effective, 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."
Literature Review 47
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A 2008 graduate thesis (Bacani, 2008) looked at the effectiveness
of Maine's Clean Car Program (described below) in improving
the likelihood of ownership of vehicles with higher environmental
performance. Bacani concluded that the campaign did not appear
to be affecting consumer behavior with regard to purchase of
environmentally-friendly vehicles, and that Maine consumers are
buying more environmentally-friendly vehicles simply because
there are more environmentally-friendly models available in the
market. However, the study did not look at price, indicating a need
for further research to verify results. The author suggests public
education on the importance of the air pollution score and the
greenhouse gas scores would be helpful when purchasing a vehicle.
B. Overview of Existing Social Campaigns
Influencing Perceptions About Vehicles
Existing campaigns include:
• www.fueleconomy.gov
Website provides fuel economy estimates, energy and
environmental impact ratings, fuel savings tips, and links
to other information such as links to fuel prices and crash
ratings. The site also provides a side-by-side comparison
tool to help consumers choose a fuel efficient vehicle to
meet their needs. The website is maintained jointly by the
U.S. Department of Energy's Office of Energy Efficiency and
Renewable Energy and the U.S. Environmental Protection
Agency to help fulfill DOE and EPA's responsibility under
the Energy Policy Act (EPAct) of 1992 to provide accurate
MPG information to consumers.
• It All Adds Up to Cleaner Air, Federal Highway Administration,
www.italladdsup.gov
It All Adds Up to Cleaner Air is a public education and
partnership-building initiative developed by several federal
agencies including the Federal Highway Administration,
Federal Transit Administration, and U.S. Environmental
Protection Agency for the purpose of informing the public
about the impact of their transportation choices on traffic
congestion and air quality. The campaign was developed
48 EPA Fuel Economy Label Redesign
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to help state and local governments meet mobility and
clean air goals of Transportation Equity Act for the 21st
Century and the Clean Air Act Amendments. The campaign
provides state and local agencies free commercial-quality
promotional materials that emphasize four actions
people can take to improve air quality and reduce traffic
congestion: combining errands into a single car trip,
keeping cars properly maintained, refueling in the evening
without topping off the gas tank, and choosing alternate
modes of transportation, such as carpooling, mass transit,
biking, or walking.
• Planet Pollute,
www.planetpolluto.com/indexl.html
Planet Pollute is an educational game developed by the
Sacramento Metropolitan Air Quality Management
District that teaches children about the causes and effects
of pollution.
• Cleaner Cars for Maine Program,
www.maine.gov/dep/air/lev4me/index.html
The Cleaner Cars for Maine Program is designed to help
consumers choose low-emission and fuel efficient cars.
Program strategies include providing a sticker identifying
green vehicles and consumer education in the form of a
website, brochures, newspaper and radio advertising to
educate consumers about Maine's air quality, green vehicle
shopping tips, and maintenance tips.
• Pew Campaign for Fuel Efficiency,
www.pewfuelefficiency.org/index.html
The Pew Campaign for Fuel Efficiency is a public education
campaign advocating greater fuel efficiency standards for
the U.S. car and light truck fleets. The Campaign works
with a diversity of interests — business, faith, consumer,
environmental, safety and national security groups — to
educate the public and inform the national policy debate.
The campaign focuses on six reasons to increase fuel
efficiency, including security, savings, power (the ability
to increase fuel efficiency without sacrificing acceleration
Literature Review 49
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and other measures of performance), jobs, safety (the
ability to make cars more fuel efficient without sacrificing
vehicle size or safety), and lower CO2 emissions. Strategies
include extensive media outreach, national and local print
and radio advertisements, and public opinion research.
Drive Smarter Challenge Campaign,
http://drivesmarterchallenge.org/
The Drive Smarter Challenge Campaign is a program of the
Alliance to Save Energy. The campaign provides a website
that encourages people to learn about money-saving
driving and vehicle maintenance tips and take the Drive
Smarter Challenge by choosing from six fuel efficiency
actions. The site provides a calculator that computes an
individual's savings and keeps a running tally of savings
by everyone who has taken the challenge and encourages
people to get friends and family to take the challenge by
offering discounts on fuel-efficient products.
DriveClean.ca.gov,
www.driveclean.ca.gov/
DriveClean.ca.gov is an online buying guide for clean and
efficient vehicles. The website, run by the California Air
Resources Board, allows consumers to compare pollution
levels between vehicles and provides information and
resources to learn about advanced vehicle technologies and
fuels. The program provides an Environmental Performance
Label, a label required on all new cars sold in California
manufactured after January 1, 2009. The label provides
a global warming score, which ranks each vehicle's CO2-
equivalent value on a scale of 1-10 (10 being the cleanest)
relative to all other vehicles, and a smog score, which tells
the consumer how much a vehicle pollutes. Similar to the
global warming score, the smog score uses a scale of 1-10
with 10 being the cleanest.
50 EPA Fuel Economy Label Redesign
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• Don't Be Fueled! Mothers for Clean and Safe Vehicles,
www.dontbefueled.org/index.shtml
Don't Be Fueled! Is a grassroots campaign initiated by
parents concerned about the safety and environmental
soundness of the existing fleet of vehicles. The campaign
has established a website that serves as an information
clearinghouse and organizes events.
• Freedom From Oil,
http://gx.freedomfromoil.org/
The Freedom from Oil Campaign is a joint effort of the
Rainforest Action Network, Global Exchange, and the
Ruckus Society. The campaign is working to end America's
oil dependence, reduce oil related conflicts, and stop
global climate change by convincing the auto industry
to dramatically improve fuel efficiency and eliminate
vehicle greenhouse gas emissions. The campaign focuses
on supporting grassroots activists by offering materials
and information, skills training, local organizing, group
development, and other general support.
Literature Review 51
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52 EPA Fuel Economy Label Redesign
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IV. Summary of Results
and Conclusions
The purpose of this literature review was to summarize the
information on the vehicle buying cycle, the information sources
used by consumers as they shop for vehicles, what factors influence
consumer vehicle purchasing decisions, the impact of the increasing
availability of "greener" vehicles, and information on available public
education campaigns on the benefits of driving "greener" vehicles.
The sources used to prepare this literature review were varied
in their methodologies and carried a variety of methodological
limitations as to their coverage of the population of U.S. vehicle
buyers. Attachment I provides a summary of each major source
used and an explanation of its methodology and limitations. It
should be noted that in spite of the multiple methods used by
the major sources, a number of similar and consistent results and
themes emerged from among them.
Based on the review, there are a number of key findings have
implications for the redesign of the fuel economy label, as well as
the educational campaign designed to aid consumers in identifying
and choosing more fuel-efficient vehicles.
• The length of the vehicle buying cycle is contracting as
consumers obtain more information sooner from the
Internet. By the time U.S. consumers enter a dealership,
they are closer to purchasing a vehicle than ever before. The
Internet has emerged as one of the most important sources
of information for consumers interested in purchasing a
vehicle. To gather information they visit manufacturer and
dealer Web sites and rely on consumer-to-consumer tools
like reviews and blogs. Consumers are also increasingly
Literature Review 53
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interested in purchasing vehicles online. Consequently, the
information on the redesigned fuel economy label, which is
intended to inform them about a vehicle's performance in
regard to several metrics (such as fuel consumption, cost,
and environmental impact), should also be available online.
Considering that in the consumer surveys reviewed
consumers consistently stated that the most important
factors that influence vehicle choice are reliability, safety,
price, and fuel economy (not necessarily in that order),
the fuel economy label and educational campaign will
need to acknowledge the place that fuel economy plays
in the purchase process and identify ways to 'be heard' as
consumers make their decisions.
Consumer vehicle purchasing is also influenced by how a
vehicle satisfies the practical and emotional needs of the
consumer. Age, gender, income, household size, urban
or suburban living, as well as availability of other travel
options, all play a part in what type of vehicle a consumer
decides to purchase, as do the psychographic aspects of
'what a vehicle says about me.' This suggests that to be most
effective, the educational campaign should be tailored to
specific demographic market segments, while also making
the purchase of fuel-efficient vehicles a 'cool' statement
about the consumer. Acknowledging what is important
in the vehicle purchase process to specific demographic
segments, as well as to what consumers' think of as 'cool',
can serve as a gateway to getting their attention. Finally,
demographic and psychographic influences not only help
in understanding the appeal of particular vehicles, but
also point the way towards potential messaging to assist
consumers in identifying fuel-efficient vehicles.
A major challenge will be explaining the functioning of
advanced technology vehicles to consumers. Overall,
consumers lack information on "green" vehicles and
technologies to really understand the differences and be
able to make comparisons across brands, models, and
technologies. Identifying easy-to-understand ways to
explain advanced technology vehicles, how they function,
and the fuel efficiency of such vehicles will need to be
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determined before an effective educational campaign can
be designed. The redesigned fuel economy labels will be an
important starting point for this since it is being designed
to allow consumers to make informed comparisons among
vehicle types.
Lastly, the results of the literature regarding consumer
education campaigns related to helping consumers
better understand the benefits of purchasing a more
environmentally friendly vehicle can serve as an important
starting point for the agencies' educational campaign.
Although it does not appear from the literature that these
campaigns have evaluated outcomes, they can still provide
good information, especially if key staff members from
those campaigns are interviewed to learn about what
worked and didn't work from their perspectives.
Literature Review 55
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Attachment 1 - Summaries
of Major Studies
Evidence from the Maine Light-Duty Vehicle Market: Are Eco-
Campaigns Effective? was prepared by Eleanor Santiago Bacani
in 2008 as a thesis for a Master of Science in Resource Economics
and Policy at The University of Maine. The goal of the study was
to investigate whether eco-marketing campaigns have been effective
in improving the likelihood of ownership of vehicles with higher
environmental performance, as well as looking at the effects of
demographics and gas prices. The study focused on the light duty
vehicle market in Maine. The researcher conducted regression
analysis using data from the Maine Vehicle Registration Database
between 2004 and 2007, data sets from EPA Green Vehicle Guides
for model years 2004 to 2007 (to obtain environmental information),
U.S. Census (town-level demographics), and gas price information.
Results suggest that eco-marketing campaigns do not appear to have
had a statistically significant effect on the likelihood of owning SUVs
with higher environmental performance. In addition, the study found
that households have differing reactions to the various pollutants
associated with vehicles in some vehicle classes, suggesting that
policy efforts should be directed at informing the general public
of air pollution scores and greenhouse gas scores when purchasing
a vehicle to maximize the effectiveness of future eco-marketing
initiatives. The general conclusion is that the eco-composition of
the light-duty vehicle market is improving over time because of
the increased number of vehicle models with higher environmental
performance that are available in the market today. The results
of this study are only relevant to light-duty vehicles purchasers in
Maine between 2004 and 2007, and the author stated that due to
sufficient information the findings of this study would need further
research to be validated. Regardless, it does provide a case study of
how vehicle purchases are impacted by eco-marketing campaigns.
These findings were used to support the discussion in this literature
review report of existing consumer education campaigns.
Literature Review 57
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Energy Trends: New Hybrids Breaking Out of the Niche? was
prepared by Booz & Company in 2004. The report is part of an
occasional series highlighting emerging trends in the global energy
sector. The report looks at the emergence of gasoline/electric
hybrids in their infancy in 2004 and analyzes hurdles to broader
market acceptance. The article concludes that if long wait times and
premium prices persist, consumers will walk away from this new
technology. In addition, new market entrants need to match the
reliability and performance standards set by hybrid leaders Toyota
and Honda. However, hybrids serve as one part of the long-term
trend towards creation of a more efficient vehicle fleet. The results
of this report provide information relevant to consumer vehicle
purchasing decisions during the early emergence of gasoline/electric
hybrid vehicles. The conclusions made in this report were used to
support the discussion in this literature review report of barriers to
increasing the market share of green vehicles.
Batteries for Electric Cars: Challenges, Opportunities, and the
Outlook to 2020 was prepared by The Boston Consulting Group
in 2010. The paper looks at the impact of the development and cost
of various types of batteries on the emerging market for electric
cars, analyzing the amount of progress anticipated by 2020, and
the barriers that will need to be overcome in order to achieve
widespread commercial adoption of electric vehicles. The report
draws on Boston Consulting Group's work with automotive OEMs
(original equipment manufacturers) and suppliers and on a detailed
analysis of the intellectual property landscape. The researchers also
created a battery cost model to project future costs and conducted
50 interviews with battery suppliers, automotive OEMs, university
researchers, start-up companies working on leading-edge battery
technologies, and government agencies across Asia, the United
States, and Western Europe. The paper concludes that long battery
charging times are a technical challenge and commercial barrier
that must be addressed and that without a major breakthrough in
battery technologies, it is unlikely that fully electric vehicles that
are as convenient as internal combustion engine vehicles (meaning
that they can travel up to 500 km/312 miles on a single charge
and can recharge in minutes) will be available for the mass market
by 2020. Further, the paper concludes that the cost of batteries
will play a critical role in determining the commercial viability of
electric cars and that in the short- to medium-term, early adopters
and government incentives are likely to drive demand for electric
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vehicles. For mass market adoption, total cost of ownership
becomes a factor. Consumers will weigh an electric vehicle's savings
(generated by lower operating costs relative to gasoline) against
the higher upfront purchase price. A combination of high fuel
prices and government purchase incentives is needed for electric
vehicles to make financial sense to the consumer. The findings in
this report help explain the current and projected U.S. market for
electric car batteries. The conclusions made in this paper were used
to support the discussion in this literature review report of barriers
to increasing the market share of green vehicles.
The Comeback of the Electric Car: How Real, How Soon and
What Must Happen Next? was prepared by the Boston Consulting
Group in 2009. The paper evaluates the viability of available
technologies for efficient, low-CO2 emitting power trains and
presents a view on the most likely market scenarios for 2020,
with a discussion of the implications for major stakeholders. The
authors analyzed current scientific findings on energy consumption,
oil reserves, and CO2 emissions, as well as technological options
for alternative propulsion concepts in addition to interviewing
OEMs, suppliers, battery manufacturers, power companies, and
conducting consumer research. The report concludes that electric
cars are a critical component of efforts to reduce CO2 emissions
through increased vehicle efficiency, but a total cost of ownership
advantage is a prerequisite for widespread adoption of electric
vehicles. Without government incentives to encourage consumers
to purchase electric vehicles and power companies and private
investors to provide the infrastructure needed to support electric
vehicles at an affordable price, electric vehicles will not succeed
beyond serving a niche market. This paper represents the views of
its authors on the electric car market based on a variety of sources
based on varied methodologies. The conclusions in this paper were
used to support the discussion in this literature review report of
fuel-efficient/low emission vehicle options, and the barriers to
increasing the market share of green vehicles.
Electric Vehicles: A Force for the Future was prepared by Capgemini
in 2009. The report explores challenges to widespread acceptance
of the electric vehicle. An explanation of the methodology used to
prepare this report is not provided. The report identifies challenges
to widespread acceptance of the electric vehicle including battery
performance, recharging infrastructure investment, market
Literature Review 59
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acceptance, price, existence of other alternatives, ecological
value, and technological maturity. The report concludes that
collaboration is key to electric vehicle development, including
vehicle manufacturers, suppliers, dealers, other retailers, consumers,
electric/utility companies, and governments. The conclusions in
this report were used to support the discussions in this literature
review report of reasons for buying fuel efficient/low emission
vehicles, barriers to increasing the market share of green vehicles,
and vehicle choice among green vehicles.
Cars Online 05/06: Creating Opportunities for Revenue Growth
and Cost Reduction was prepared by Capgemini in 2005. The
purpose of the study was to: 1) compare consumers' automotive
needs, demands and preferences across the buying cycle; 2)
explore the factors that drive automotive buying behavior and
impact consumers' relationships with manufacturers and dealers;
3) address lead management, B2C web strategy and aftersales/
servicing; and 4) examine the similarities and differences among
the countries studied in order to provide a picture of the dynamics
of individual markets. For this study, Capgemini surveyed almost
2,700 consumers via telephone in five countries: China, France,
Germany, the United Kingdom and the United States. The
composition of the consumer sample in each country was based on
projectable national samples representative of the population from
the standpoint of region, age and gender. Nearly all consumers
surveyed were in-market—that is, intending to purchase or lease a
new or used vehicle in the next 12 months. In addition, almost 230
dealer interviews were conducted in the five countries along with
interviews at nearly 25 manufacturer headquarters or national sales
offices. European, U.S. and Asian brands were represented among
the consumers, dealers and manufacturers surveyed. Relevant main
findings of the study included: consumers are becoming more
sophisticated and are using the Internet to gain more information
prior to purchasing new vehicles, and demographic differences are
more significant especially between the youngest and oldest age
groups of vehicle buyers in terms of what information they use
to make purchasing decisions, how they obtain this information,
and how they make their vehicle purchasing decisions. The study
findings are based on a demographically representative sample of
consumers planning to purchase a car within the next 12 months.
While the results are informative, as they include information from
countries besides the U.S., they are not exclusively representative
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of the U.S. market. Regardless, the study does provide information
on trends that is relevant as all countries (except China) are mature
car purchasing populations. The findings in this study were used
to support the discussion in this literature review report of the
emergence of the web as an information source, the vehicle buying
cycle, and how demographics impact vehicle purchasing decisions.
Cars Online 06/07: Understanding the Dynamics of Consumer
Buying Behaviour and Customer Loyalty was prepared by
Capgemini in 2006. The purpose of the study was to: 1) explore
the factors that drive automotive buying behavior and impact
consumers' relationships with manufacturers and dealers, address
lead management, B2C Web strategy and consumer loyalty, and
examine the similarities and differences among studied countries
to provide a picture of the dynamics of individual markets. For
this study, Capgemini surveyed more than 2,600 consumers in five
countries: China, France, Germany, the United Kingdom and the
United States. The composition of the consumer sample in each
country was based on projectable national samples representative
of the population from the standpoint of region, age and gender. All
consumers surveyed were in-market—that is, intending to purchase
or lease a new or used vehicle in the next 18 months. The main
findings of the study included: consumers are increasingly driven
by their hearts as well as their heads when it comes to vehicle
purchasing; customer loyalty is decreasing as consumers expect
more information faster from manufacturers and dealerships; post-
sales communications is important to repurchase of same brand
and/or from same dealership; manufacturers and dealers need to
work together closely to meet consumer needs; and vehicle buyers
are using the web in a more targeted fashion. The study findings are
based on a demographically representative sample of consumers
planning to purchase a car within the next 18 months. While the
results are informative, as they include information from countries
besides the U.S., they are not exclusively representative of the U.S.
market. Regardless, the study does provide information on trends
that is relevant as all countries (except China) are mature car
purchasing populations. The results from this study were used to
support the discussion in this literature review report of the role of
psychographics and the growing importance of the web in vehicles
purchasing decisions.
Literature Review 61
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Inside the Customer/Dealer Relationship: A Qualitative Study
Examining the Shift of Power and the Influence of the Internet on the
Vehicle Buying Process in Dealerships was prepared by Capgemini
in 2006. The purpose of the study was to provide a close-up look
at the relationship between consumers and dealerships and how this
relationship changes as consumers become better informed through
use of the Internet. The study was directed at vehicles dealers to help
them better prepare to serve better informed consumers. The study
was based on qualitative research, consisting of observations and
interviews with consumers and dealers, in both North America (U.S.,
Canada) and Europe (France, UK) at car dealerships representing
12 North American, European and Asian mid-market brands. This
approach provided the opportunity to observe both what was said
and what was done in order to understand behavioral trends and
practices. The main findings of this study were: greater transparency
is essential to improving the customer/dealer relationship because
consumers have access to a seeming bottomless well of information
from the Internet; the more knowledgeable consumers become about
the vehicle buying process, the more the balance of power shifts in their
favor; consumers increasingly demand a personalized and customized
approach during the vehicle buying process; customers want to be seen
as individuals, as people in their own right who cannot be reduced to
a box in a grid; and the customer/dealer relationship is not a one-size-
fits-all formula , it can vary considerably depending on a consumer's
degree of advance knowledge. The results of this qualitative study are
informative, as they include information from customers and dealers
in the U.S., Canada, France, and the U.K., but are not representative
of the U.S. market. Regardless, the study provides information on
trends related to how consumers gather information to inform their
vehicle purchasing decisions and consumer/dealer relationships in
mature car purchasing countries. The findings from this study were
used to support the discussion in this literature review report of how
the Internet is being a more important source of information during
the vehicle purchasing process.
Cars Online 07/08: Responding to Changing Consumer Trends and
Buy ing Behaviour was prepared by Capgemini in 2007. The purpose
of the study was to provide insights to help vehicle manufacturers
and dealers develop and execute more effective strategies in sales,
marketing, advertising, aftersales service, customer relationship
management, and manufacturer/dealer collaboration. For this
study, Capgemini surveyed more than 2,600 consumers in five
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countries: China, France, Germany, the United Kingdom and the
United States. The composition of the consumer sample in each
country was based on projectable national samples representative
of the population from the standpoint of region, age and gender.
All consumers surveyed were in-market—that is, intending to
purchase or lease a new or used vehicle in the next 18 months. The
main findings from this study include: consumer interest in online
purchasing is growing as consumers become more sophisticated in
use of the web; online tools such as search engines, blogs, and web
forums are becoming key information sources for vehicle buyers;
consumers are more interested in purchasing "green" vehicles;
vehicle buyers want their information fast, if don't get it they will
switch dealers, brands, or both; and personalized communications
have a significant impact on repurchase decision. The study findings
are based on a demographically representative sample of consumers
planning to purchase a car within the next 18 months. While the
results are informative, as they include information from countries
besides the U.S., they are not exclusively representative of the U.S.
market. Regardless, the study does provide great information on
trends that is relevant as all countries (except China) are mature
car purchasing populations. Information from this study was
used to support discussion in this literature review report of the
vehicle purchasing cycle, information sources and the use of the
web in vehicle purchasing, how psychographics influence vehicle
purchases, and other factors that influence vehicle purchase such as
reliability, safety, price, and fuel economy.
Cars Online 08/09: 10th Annual Global Automotive Study:
Tracking Consumer Buying Behavior in Both Mature and
Emerging Markets was prepared by Capgemini in 2008. The
purpose of the study was to provide automotive manufacturers
and dealers with insights into changing consumer dynamics in
both mature and developing markets, and to help the industry gain
a better understanding of how to successfully anticipate evolving
consumer needs and demands. The study was based on a survey
of more than 3,100 consumers in eight countries: Brazil, China,
France, Germany, India, Russia, the United Kingdom and the
United States. The composition of the consumer sample in each
country was based on projectable national samples representative
of the population from the standpoint of region, age and gender.
All consumers surveyed were in-market (20% plan to buy or lease
a vehicle within three months; 25% in three to six months; 40% in
Literature Review 63
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six to 12 months; and 15% in 12 to 18 months). The main findings
of the study included: fuel economy is as important a factor in a
consumer's choice of vehicle as are safety and reliability; consumers'
demand for online vehicle buying continues to grow (in 2008, 44%
of consumers said they were likely or very likely to purchase a
car entirely over the Internet if that capability were available, up
from 20% the previous year); consumers are confident in their
knowledge about green vehicles and are increasingly likely to own
fuel efficient and alternative-fuel cars, although consumers are not
prepared to pay a high premium to go green - 85% of respondents
expect to pay less than 10% extra for a fuel-efficient or alternative-
fuel car; consumers are increasingly demanding about the speed
of response they expect from dealers and manufacturers; most
consumers are satisfied with the vehicle buying process, but they
see plenty of room for improvement; and consumers said that less
haggling and pressure by dealer salespeople would increase their
vehicle buying satisfaction level. The study findings are based on a
demographically representative sample of consumers planning to
purchase a car within the next 18 months. While the results are
informative, as they include information from countries besides the
U.S., they are not exclusively representative of the U.S. market.
Regardless, the study does provide great information on trends
in car purchasing behaviors. Study results were split out between
those for mature and those for emerging markets. Those mature
market results were used to support the discussion in this literature
review report of the growing importance of the Internet in vehicle
purchasing decisions, and the reasons for buying green vehicles.
Cars Online 09/10: Understanding Consumer Buying Behavior
in a Volatile Market was prepared by Capgemini in 2009. The
purpose of the study was to look at online buying of vehicles
and parts/accessories, alternative-fuel vehicles, and aftersales/
servicing. The study also looked at what consumers saw as the
biggest changes they expect to make in how they shop for and
buy vehicles in the coming years. The study was based on a survey
of more than 3,000 consumers in eight countries: Brazil, China,
France, Germany, India, Russia, the United Kingdom, and the
United States. The composition of the consumer sample in each
country was based on projectable national samples representative
of the population in terms of region, age and gender. All consumers
surveyed were in-market (24% plan to buy or lease a vehicle within
three months; 29% in four to six months; 11% in seven to nine
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months; and 36% in 10 to 12 months). The main findings of the
study relevant to this literature review were: usage of the web as a
key information source during the vehicle buying process continues
to increase with almost 90% of consumers today (2009) using the
Internet to research vehicles, up from 61% in 2005; consumers
want to buy vehicles and parts and accessories online due to lower
prices and an alternative to the traditional dealer model with
nearly 40% of respondents saying they would like to buy a car
over the Internet; green vehicle ownership continues to rise as
environmental concerns grow, with 41% of consumers saying they
currently own a fuel-efficient or alternative-fuel vehicle, up from
36% the year before, and another 30% saying they plan to buy
a fuel-efficient or alternative-fuel vehicle; as the duration of the
vehicle buying cycle contracts, automotive companies have less
time to influence purchases as consumers can quickly and easily
get vast amounts of information from the Internet; and a number
of indicators point to a growing desire for improved ease and
speed of transaction, consumers expect a dealer to be responsive
and almost one-quarter of respondents point to ease and speed of
transaction as the key reason for buying a vehicle online, and 30%
say it is the driving factor behind their desire to purchase parts
and accessories over the web. The study findings are based on a
demographically representative sample of consumers planning to
purchase a car within the next 18 months. While the results are
informative, as they include information from countries besides the
U.S., they are not exclusively representative of the U.S. market.
Regardless, the study does provide great information on trends in
car purchasing behaviors. The results of this study were used to
support the discussion in this literature review report of the growing
importance of the Internet in vehicle purchasing, the vehicle buying
cycle, the reasons for buying green vehicles.
The Relationship of Vehicle Type Choice to Personality, Lifestyle,
Attitudinal, and Demographic Variable was prepared by Choo and
Mokhtarian in 2002. The purpose of the study was to explore how
travel attitude, personality, lifestyle, and mobility impact individual
vehicle type choices. The data is based on a 1998 mail-out/mail-
back- survey of 1,904 residents of three different neighborhoods
in the San Francisco Bay area representing suburban and urban
areas. Based on the data, the authors developed a disaggregate
discrete choice model to be able to estimate the effect of key
variables on the probability of choosing vehicle types. The model
Literature Review 65
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determined that specific vehicle types have distinct characteristics
with respect to travel attitude, personality and lifestyle. Based on
their research, the authors concluded that in addition to traditional
demographics, travel attitude, personality, lifestyle, and mobility
factors have significant impact on individual's vehicles type choices.
The findings of this study are based on the three neighborhoods
surveyed in the San Francisco Bay area, and are therefore not
representative of the U.S. populations as a whole. Regardless,
the researchers carefully selected these three neighborhoods to be
representative of countless other similar neighborhoods in the U.S.
These findings provide relevant information on how demographics
influence vehicle choices. These findings were used to support the
discussion in this literature review report of how psychographics
impact vehicle purchasing choices.
Automotive Gen Y Survey Findings was prepared by Deloitte
in 2008. The goal of the study was to report findings from the
Connecting with Gen Y: Making Cars Cool Again survey. It
provides information to prepare the auto industry for Generation Y
by shedding insight into what captured the automotive imagination
of this dynamic age group. The information was based on a survey
administered to a randomly drawn panel of 1,006 individuals in
the U.S. between the ages of 17 and 28 who had previously agreed
to participate in online surveys. The sample was evenly dispersed
across geographic regions. The main findings included:
• Safety and comfort were the most important considerations
for the Gen Y respondents when choosing cars. Gas
mileage, price, and performance were the most important
factors in the purchase decision. The factors named most
often as among the top three reasons that a vehicle was
cool were exterior styling (44%), affordability (40%) and
being environmentally friendly (35%).
• Almost two-thirds (63%) perceived the cost of a vehicle as
an indicator of quality.
• Close to half (49%) of respondents preferred foreign vehicle
brands, compared to only one-quarter who preferred U.S.
brands.
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• Over one-fourth (27%) said that they expected to be driving
the same brand in five years and stated that their current
brand had a range of models to accommodate their future
needs and that it was affordable. Another 27% said that
they did not expect to be driving the same brand and stated
that their current vehicle was all they could afford or that
it had been given to them. Further, 45% reported that they
were not sure whether they would be driving the same brand,
and stated that the decision would depend on their personal
finances, their lifestyle, and the available incentives.
• The majority (80%) said they are willing to pay more for
a car that is environmentally friendly. Of those, 62% also
viewed vehicles produced in an environmentally friendly
factory as a determining factor in their decision.
These findings are not representative of U.S. population since the
survey was administered to online panel members between the
ages of 17 and 28 who had agreed to participate in such online
surveys. However, the results were used to support the discussion
in this literature review report of those factors that impact
vehicle purchasing such as price, fuel economy, demographics,
psychographics, and the reasons for buying green vehicles.
Connecting with Gen Y Making the Short List was prepared by
Deloitte in 2010 as a follow-up to Connecting with Gen Y: Making
Cars Cool Again. The goal of this study was to take a deeper look
at Generation Y's attitudes and perceptions of vehicles and the
auto industry. It was based on a survey administered to a randomly
drawn panel of 1,100 individuals in the U.S., between the ages
of 18 and 30, who had previously agreed to participate in online
survey. The main findings included:
• Gas mileage and vehicle affordability emerged as the
most important considerations for the Gen Y respondents
purchasing cars.
• Over 63% believed that used vehicles were a greater value
than new vehicles and they were more than three times as
likely to purchase a used vehicle over a new one.
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Over half (53%) stated it was important that the vehicle
be manufactured in an American factory no matter what
brand it was.
Over two-fifths (42%) reported they expected to be driving
the same vehicle brand five years later. This was a 15%
increase in brand loyalty from 2008 wherein only 27%
indicated that they expected to be driving the same brand
five years later.
Over three-fifths (64%) stated that they were willing to
pay more for a vehicle that was environmentally friendly
and saves money on energy costs. Close to three-fourths
(73%) reported that the environment was an extremely
important factor when purchasing a vehicle. Half (50%)
believed that the type of vehicle they drove directly affected
the environment.
Close to three-fifths (58%) reported that they did not look
for advice or information on blogs or social media forums
before purchasing a vehicle. Further, over three-fifths
(64%) reported that they did not look for information
about a brand or model on social networking sites (such as
Facebook, etc.) when shopping for a vehicle. Instead, the
majority (80%) tended to turn to on-line search engines
(Google or Yahoo!) to search for information on vehicles
and they trusted auto manufacturers' sites the most.
Over three-fifths (62%) reported that they preferred the 'no
haggle' method when purchasing a vehicle. The majority
(85%) reported that they would prefer to know the final
selling price upfront (by eliminating vehicle incentives from
the vehicle purchase equation) and more than 60% stated
they would prefer to skip pricing negotiations altogether
with a salesperson. Additionally, they indicated that they
would prefer to get the information they need over the
Internet from the dealer rather than having face-to-face
conversations with salespeople.
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These findings are not representative of U.S. population since the
survey was administered to online panel members between the
ages of 18 and 30 who had agreed to participate in such online
surveys. However, the results were used to support the discussion
in this literature review report of those factors that impact
vehicle purchasing such as price, fuel economy, demographics,
psychographics, and the reasons for buying green vehicles.
Gen Y+ Sustainability was written by Michigan State University in
collaboration with Deloitte in 2010. The goal of the paper was to
provide an understanding of Gen Y's understanding of sustainable
technologies, the degree to which Gen Y cares about sustainability
and if they are willing to pay to embrace these ideas, and the
"perceived monetary value" of these sustainable technologies.
The paper used data from the 2009 Deloitte Automotive Group
Generation Y Survey, focus groups and conjoint analysis (conducted
on a nationally-representative sample of 200 Gen Y respondents)
to explain Gen Y's "green" mindset. The main takeaways from
this paper were: Gen Y is becoming more stable and homogenous
as it matures into adulthood (as against the popular belief that
Gen Y is thought of as autonomous and highly individualistic);
educating consumers and communicating common industry wide
sustainability standards is paramount for the auto industry (Gen
Y lacked clear understanding of the different types of "clean"
energy); Gen Y's value of sustainability and green technologies is
tied to dollar savings (both environmental and economic advantage
must be communicated whereby environmental logic must have
economic logic as its backbone); and MPG is not a sustainable
differentiator of value proposition to differentiate between vehicles
(small MPG differences between vehicles were of little value to
consumers).
These findings are not representative of U.S. population since
Deloitte's survey was administered to online panel members
between the ages of 18 and 30 who had agreed to participate in
such online surveys. The conclusions in this study were used to
support the discussion in this literature review report of the role of
demographics in vehicle choice, reasons for buying green vehicles,
barriers to increasing market share of green vehicles, and vehicle
choice among green vehicles.
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A New Era: Accelerating Toward 2020 - An Automotive Industry
Transformed was prepared by Deloitte in 2009. The goal of the
report was to offer Deloitte Touche Tohmatsu's (DTT) senior
automotive leaders' perspectives on the structural changes and
major customer, technology, and people trends expected to
transform the auto industry over the next decade. The report
highlighted the following trends in the U.S.:
• The United States is one of the six markets (others are
Western Europe, Japan, Korea, China and India) that will
dominate as the center of design and manufacturing for
original equipment manufacturers and their suppliers.
• U.S. auto consumers will be more cost conscious and will
look for value of money and safety as the most important
features.
• The median age of the population in United States will go
up and car manufacturers will need to address the changing
priorities of older drivers in order to remain competitive.
• Environmental considerations will weigh heavily on the
auto industry toward 2020 and there will be a fierce
competition to develop and produce electric vehicles
spurred by both customer demand and government
incentives.
This report represents the views of Deloitte's automotive practice
based on their work and experience in the field. The conclusions
in this report were used to support the discussion in this literature
review report of the vehicle buying cycle, how safety impacts
vehicle choices, fuel-efficient/low emissions vehicle options, and
reasons for buying green vehicles.
Gauging Interest for Plug-In Hybrid and Electric Vehicles in the US
was prepared by Ernst and Young in 2010. The goal of the survey
is to understand consumer awareness of electric vehicle technologies
and reveal the factors that may influence them to purchase an electric
vehicle. The survey was conducted with 1,000 U.S. licensed drivers
across all 50 states. The survey found that public awareness of
emerging powertrain technology remains very weak across the United
States, and the rising price of fuel is the main factor driving interest
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in electric vehicles, with concerns about energy security and climate
change growing in importance. The largest concerns in purchasing an
electric vehicle are vehicle cost and driving and battery range, although
most consumers do not need to cover long distances regularly. These
findings may not be representative of U.S. licensed drivers since the
report does not clearly indicate how the sample was drawn. They were
used to support the discussion in this literature review report of the
reasons for buying fuel efficient/low emission vehicles, and barriers to
increasing the market share of green vehicles.
Evaluating the Consumer Response to Fuel Economy: A Review
of Literature was prepared by Helfand and Wolverton in 2009.
The purposed of report was to review literature on the role of
fuel economy in consumer's vehicle purchasing decisions, review
consumer vehicle choice models focusing on the role of fuel
economy, examine consumer and producer behavior in the market
for fuel economy, and assess the potential contributions of consumer
vehicle choice modeling to regulatory analysis. The main findings
of the literature review were: consumer vehicle choice models can
used to help estimate how regulatory changes will impact consumer
behavior, however, the literature review also noted the wide variance
in these models on the value consumers place on fuel economy;
consumers continue to under-value energy efficiency; producers
appear to provide less fuel economy than consumers are willing
to buy; and while consumers pay attention to fuel economy when
they purchase vehicles, there is more to learn about how to model
the role of fuel economy in consumers' decisions. The results of the
study were based on the authors' review of relevant literature on fuel
economy and vehicle choice models. The findings from this literature
review were used in this literature review report to support the
discussion of how fuel economy impact vehicle purchasing decisions.
Providing Consumers with Web-Based Information on the
Environmental Effects of Automobiles was prepared by Nye, Greene,
Hopson, and Saulsbury in 2003. Findings are based on focus groups
conducted in Knoxville, TN and Los Angeles, CA with seven to ten
participants per group and lasting two hours. The focus groups were
comprised of respondents between 18 and 64 years of age who (1)
gathered information using the Internet, (2) participated in one or
more "environmentally friendly" activities, and (3) were in the market
for a new or used vehicle within 6 months. The purpose of the focus
groups was to explore and understand how participants responded
Literature Review 71
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to the different ratings and measurements of environmental effects
provided by four websites: www.fueleconomy.gov, www.epa.gov/
greenvehicles, American Council for and Energy Efficient Economy
(ACEEE) www.greencars.com, and California Air Resources Board
(GARB), www.arb.ca.gov/msprog/ccbg/ccbg.htm (California group
only). Participants were asked to view websites prior to the focus
group. The focus groups revealed that while participants in both
cities understood some of the environmental effects of producing
and operating automobiles, they rarely factored these effects into the
decision process when purchasing a new or used vehicle and until
consumers understand that the environmental effects are issues that
affect them personally (such as safety or cost of fuel) they are not
as likely to factor environmental concerns into the buying equation.
Most participants would prefer some kind of overall environmental
score that they could trust, and that would be applicable across the
country and across all vehicles. There was a great deal of skepticism
about the motives and actions of the government, auto manufacturers
and auto dealers. Participants would use environmental information
if it were readily available (where they normally go for information,
such as Consumer Reports or other automotive magazines). Website
content is important, but needs to be simple and quickly accessible,
i.e., each number or rating system should be fully explained within
the chart or on the same page. Focus groups provide qualitative data
based on a structured set of questions. The results become meaningful
when participants in multiple groups do or do not come to similar
conclusions. Focus group results can be used to provide qualitative
insights on particular issues and can not be used to represent the
views of a larger population demographic and geographic area. The
conclusions of these focus groups were used to support the discussion
in this literature review report of the reasons for buying fuel efficient/
low emission vehicles.
Capitalizing on Change: The Electric Future of the Automotive
Industry was prepared by Price Waterhouse Coopers Automotive
Practice in 2009. The report is part of the Global Automotive
Perspectives services, which provides an industry analysis of top-
of-mind issues facing automotive executives. The report analyzes
the impact of electric vehicles on the automotive industry. The
report identifies several challenges that may slow and/or impede
the market penetration of electric vehicles, including limited driving
ranges, lengthy battery charge times, inadequate infrastructure
(lack of charging station network), and higher upfront costs. The
72 EPA Fuel Economy Label Redesign
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report concludes that short-term gains from incentives combined
with strategic large-scale investment are required to make electric
powertrains a viable consumer option and achieve effective cost
competition with traditional powertrain technology. Current
business models will adapt to the change, with fleets being the
likely wide-scale introductory channel. This report is based on the
work and experience of the PriceWaterhouseCoopers Automotive
practice, and represents the views of the authors. Its conclusions
were used to support the discussion in this literature review report
of the barriers to increasing the market share of green vehicles.
Technologies and Policies for Controlling Greenhouse Gas
Emissions from the U.S. Automobile and Light Truck Fleet was
prepared by Steve Plotkin of the Center for Transportation Research
at the Argonne National Laboratory. The paper focuses on policies
and technologies for increasing vehicle energy efficiency, with
a focus on the light-duty vehicle fleet. The report concludes that
while it is technologically feasible to improve the fuel efficiency of
the U.S. auto and light vehicle truck fleets, many of the available
technologies require trade-offs that manufacturers are unwilling to
or unable to meet in today's market and regulatory environment.
The efficiency of the light-duty vehicle fleet will remain essentially
stagnant over time in the absence of an unforeseen change in
market conditions or strong new policy measures, such as more
stringent CAFE standards, significantly higher gasoline taxes, or
gasoline price increased caused by sustained increases in world oil
prices. This paper represents the author's interpretation of a variety
of industry and academic sources on this subject. The author's
conclusions were used to support the discussion in this literature
review report of existing consumer education campaigns.
Automobile Buyer Decisions about Fuel Economy and Fuel
Efficiency was prepared by Turrentine and Kurani in 2004. The
methodology used for this study was semi-structured interviews with
57 households across nine lifestyle sectors, such as hybrid vehicle
buyers, financial analysts, and off-road enthusiasts. The strongest
finding from the interviews was that consumers do pay attention to
the price of fuel on the day they buy it, but do not consider the costs
of fuel over time. Households interviewed were unable to determine
the potential fuel savings of buying a more fuel efficient vehicle
and in most cases overestimated the potential savings thinking
they could recover an investment of several thousands dollars in
Literature Review 73
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a couple of years. The authors offer two hypotheses: 1) consumers
do not pay attention to fuel costs because of the low price of fuel
and the limited fuel consumption instrumentation; and 2) vehicles
carry too many other attributes of high value to consumers which
minimizes the value of fuel efficiency. Overall, the authors conclude
that consumers do not behave in economic rational way in regards
to fuel economy. They lack the basic building blocks needed to
make calculated decision about better fuel economy because they
do not keep track of fuel costs over time, and do not make vehicle
purchasing decisions based on potential payback from better fuel
economy. The results of this study are attributable only to the 57
interviewed households. They become meaningful and interesting
when the findings become consistent across multiple households
and lifestyle sectors. For our purposes, the results provide an
interesting case study on how households think about fuel economy
and their own use and the cost of fuel. The study findings were used
to support the discussion in this literature report of the role of fuel
economy in vehicle purchasing decisions.
Car Buyers and Fuel Economy? was prepared by Turrentine and
Kurani in 2006. The goal of the study was to investigate how U.S.
consumers thought and behaved with respect to automotive fuel
economy. It was based on the same information used for their
2004 study (see above) - Automobile Buyer Decisions about Fuel
Economy and Fuel Efficiency. The main findings were that none of
the households analyzed their fuel costs in a systematic way in their
automobile or gasoline purchases, and almost none of the households
tracked gasoline costs over time or considered them explicitly in
household budgets. While many of the households knew the cost of
their last tank of gasoline and the unit price of gasoline on that day,
they rapidly forgot such accurate information and replaced it with
typical information. Such loss of information resulted in the lack
of basic knowledge needed to make economically rational decisions
while buying a vehicle. As a result, they made large errors estimating
gasoline costs and savings over time. In addition, the study found
that consumers valued fuel economy not only from the cost savings
perspective but also attached symbolic value to it. The paper is based
the results of the Turrentine and Kurani 2004 study described above
and is subject to the same limitations. The conclusions of this paper
were used to support the discussion in this literature report of how
fuel economy impacts vehicle purchasing decisions.
74 EPA Fuel Economy Label Redesign
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