Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

Do consumers want alternative fuel vehicles? Maybe not, new study says

February 25, 2010 | 11:40 am


Alternative-fuel vehicles have become the great white hope of the auto industry, widely hailed as a potential savior to reduce the country’s dependence on foreign oil, stem the tide of greenhouse-gas emissions and help fuel a green economy. But a new study sponsored by the National Science Foundation questions consumers’ willingness to buy in.

"If government and manufacturers go down the path they’re on now, we’re not going to get alternative-fuel vehicles into the marketplace for quite some time," said Rosanna Garcia, an associate professor of marketing at Northeastern University who surveyed more than 7,500 car enthusiasts to gauge their interest in hybrid, plug-in hybrid, electric and diesel cars.

Garcia cited a lack of cost effectiveness, uncertainty about fuel availability, uncertainty about the cost of the vehicle and replacement parts and a lack of understanding about how the technologies work as obstacles to greater adoption of alternative-fuel vehicles, which currently account for less than 4% of registered vehicles in the U.S.

"The focus with alternative-power vehicles has always been on manufacturing and governmental policy, but consumers have a big impact, and their needs and wants aren’t really taken into consideration," said Garcia. "Under current conditions, there is no possible design for an alternative-fuel vehicle that could become a profitable product for an automaker."

The main barriers to entry? For electric vehicles, it was price, coupled with insufficient range. Garcia’s study found that consumers were willing to pay as much as $70,000 for an EV, but they wanted a minimum of 110 miles per charge.

For consumers considering a gas-electric hybrid, fuel efficiency was most important. Cost was secondary. For such a hybrid, consumers were, on average, only willing to pay up to $30,000, as long as they got about 40 miles per gallon.

Knowledge is a key factor in consumers' acceptance of alternative-fuel vehicles, Garcia said. "The more knowledge they have, the more accepting they are of innovations. That’s an opportunity for auto manufacturers," she said. "Campaigns that relieve uncertainty now will help get these products into the marketplace when the technology does get there."

-- Susan Carpenter

Photo: Toyota