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Driving Green? A discrete choice approach to forecast the demand of alternative fuel cars in China

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Wednesday 3 November 2010, 13:00
LT12, Management School

Lixian Qian
(PhD Student)

Abstract: Governments are promoting the market of alternative fuel cars by encouraging consumers to adopt them as well as supporting car manufacturers to produce them. The Chinese central government is no different and recently also announced pilot stimulus policy in June 2010 in 5 selected cities to encourage consumers to buy hybrid or electric cars. It is important for the state to be able to assess the effectiveness of such a policy. However, as far as we are aware, there is no or little data or research about either consumer preference for such green cars or on the effectiveness of the stimulus policy.

This paper uses conjoint experiment data to investigate the effects of underlying factors and incentive policies that will potentially influence consumer behaviour towards alternative fuel cars. We use different specifications of discrete choice models and compare the effects towards choice of different fuelled cars. Empirical results show that consumers in China are concerned about high purchasing prices of green cars, scarcity of charging facility and range of electric cars, but incentives are insignificant on average for them. Furthermore, the elasticity comparison between car owners and households without a car reveals that car owners would be less sensitive to the high price but more attracted by the incentives, which could lead to better design of governmental stimulus policy.

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