Academic journal article ASBM Journal of Management

Models Used for Forecasting Diffusion of Alternate - Fulled Vehicles : A Review

Academic journal article ASBM Journal of Management

Models Used for Forecasting Diffusion of Alternate - Fulled Vehicles : A Review

Article excerpt

Introduction

Greenhouse gas (GHG) emissions from automobiles are a prime contributor to global warming. For instance, the transportation sector contributed about 26% of greenhouse gas emissions in the USA in 2014 (US Environmental Protection Agency, 2016). In an emerging economy like India, the possession of motorized vehicles consuming fossil fuels, especially among the middle class, is on the rise. This, when coupled with the fact that India imported about 71% of the oil consumed in 2012, (US Energy Information Administration, EIA, updated 2014) makes a strong case for alternative vehicle technologies such as electric vehicles (EV), hybrid electric vehicles (HEV) and plug-in electric vehicles (PHEV). In this paper, an alternate fuelled vehicle (AFV) refers to a vehicle that runs on 'nontraditional' fuels (that is, on fuels other than petrol or diesel), or on a technology that does not involve only petroleum (examples being electric vehicles, hybrid electric vehicles, fuel-cell vehicles, solarpowered vehicles etc.).

In fact, India has already initiated National Mission for Electric Mobility (NMEM) setting an ambitious sales target of 6-7 million units of complete range of electric vehicles per year by 2020 resulting in huge savings of liquid fuel and lowering of vehicular emissions (Ministry of Heavy Industries and Public Enterprises, Government of India, 2015). Similar efforts have also been initiated by policymakers in other parts of the world including Western Europe, North America, and Oceania.

Bloomberg projects global sales of electric vehicles at 41 million by 2040 constituting 35% of new light duty vehicle sales and assesses that EVs would represent a more economic option than conventional cars in most countries by 2020 (Bloomberg New Energy Finance, 2016). On the other hand, Nissan, a leading auto-maker sold 9,819 units of Leaf, an EV in the USA, against a projection of 20,000 in 2012. Volt, another EV, remains an underperformer in the Chevrolet stable (Mishra, 2013). To emerge as a feasible mode of transport, EVs have to see improvement on four attributes: battery (costs and reliability), availability of governmental subsidies, willingness of customers to adopt a new technology and realization in the R & D community that the future lies in AFVs and not in incremental advances in the internal combustion engine (ICE).

The article reviews literature on mathematical models forecasting diffusion of electric vehicles and draws insights from them. Starting in the mid1960s, the mainstream consumer behavior literature has embraced the 'diffusion frameworks and research findings' (Rogers, 1976). Almost all leading texts on consumer behavior at the postgraduate level feature this subject (e.g., Schiffman et al., 2013; Solomon et al., 2012). It also finds regular place in leading journals on consumer behavior. All these point to the fact that diffusion is now firmly established as a domain in the consumer behavior literature.

Objectives of the Study

* To provide an understanding of important mathematical models used in AFV diffusion studies, such as the Bass diffusion model, the Total Cost of Operations (TCO) Model, and the Stated Preference (SP) Model;

* To provide a broader understanding of these models in diffusion of AFVs; and

* To identify broad themes underlying diffusion of AFVs and their implications in a developing economy such as India.

The paper first looks at the Aggregate Models to study AFV Diffusion Forecasting Models.

Aggregate Models - Total Cost of Ownership (TCO) Model

This gives an estimate of the total costs incurred by goods or services over their lifetime, preferably appropriately discounted (Government Procurement Branch, Ministry of Business, Innovation & Employment New Zealand, 2013). The main advantage of the TCO model is its simplicity (Massiani, 2013). Mock et al. (2009) use this approach to model EV customer purchase decisions with energy consumption, energy prices and taxation as the relevant variables. …

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