January 1, 2018
So much is written about the future of transportation and the shift to electric vehicles, but not enough focus is being given to the whims of the consumer. This fickle beast will determine whether alternatives, like EVs, will take over the world – but how do we know what consumers actually think and what they will actually do?
People very often say one thing and do something completely different. When we are considering what vehicles consumers might purchase in the future, it is absolutely essential to understand the difference between intentions and actions. When it is actually time to exchange money, the alignment between our fiscal priorities and our aspirational ideology often does not match up.
Our most recent report takes a close look at this relationship. In early 2017, the Transportation Energy Institute went into the field and asked consumers what they might do with their next vehicle purchase. We wanted to know which attributes were most important to consumers when selecting a new car and what their level of interest might be in non-gasoline alternative vehicles. The insights are always intriguing…but how well do these responses reflect reality?
To test it, we then pulled vehicle sales data from WardsAuto and compared it with what our consumers told us. The differences were not unexpected, but a consistent trend emerged showing that at the foundation of the vehicle market in the U.S. lies the almighty dollar: it takes a very compelling and sustained impetus to get consumers to part ways with this funky green colored paper.
The Almighty Dollar
For example, in 2014 and 2017 the number one attribute that would influence a purchase decision was and is vehicle price. What is telling, however, is the decline in focus on fuel economy. In 2014, when asked what is the single most important factor in purchasing a vehicle, fuel economy was cited by more than 30% of respondents; yet in 2017, it topped the list for only 23% of consumers. This was clearly driven by the decline in retail fuel prices, which had dropped from $3.64 during our 2014 survey to $2.28 during our 2017 survey.
We clearly see the influence of retail fuel prices on consumer-stated interest, and actual purchase, of hybrid vehicles. When fuel prices dropped, interest in hybrids dropped from 84% of consumers saying they would consider such a vehicle to just 44%. What is more, market share of hybrid sales dropped from a peak of 3.2% of all light duty vehicles sold in 2013 to less than 2% in 2016.
In these examples, there is a consistency between what consumers said they might do and what they actually did, at least in terms of direction. As fuel prices went down, interest in and purchase of hybrid vehicles likewise went down. But there remains a major disconnect – if 44% of consumers would consider a hybrid yet hybrids represented less than 2% of vehicle sales in 2016, what happened?
It is important to look also at the number one factor influencing a purchase decision – vehicle price. With hybrids commanding a higher retail price than their gasoline equivalents, it is much more difficult for a consumer to calculate a positive return on initial investment, especially when fuel prices are low. Consumers say one thing, but when money hits the table they go with the more familiar, safer and easier to justify option.
This disconnect is further demonstrated in both the electric vehicle and diesel vehicle markets, sectors we asked consumers about specifically.
Half are Interested, but Very Few Buy
For EVs, 51% of consumers said they were “somewhat likely” or “very likely” to consider buying one for their next purchase. Yet, in 2016, EVs accounted for less than 0.5% of total light duty vehicle sales. The transition from desire or interest to actual acquisition is a difficult one to make. Those interested in an EV primarily cited the environment and fuel economy as key factors, the latter of which has become more difficult to justify when fuel prices remain low. And the environmental issue – I have long told reporters that in surveys, consumers say they want to be “green” but when they get to the pump the only green they care about is in their wallets. How much are consumers actually willing to pay to satisfy their desires to protect the environment? It is a topic of much debate, and while this report doesn’t seek to answer the question, it adds some fuel to that fire.
From those who said they would not consider an EV, economics and convenience dominated. Top concerns were lack of charging stations, short driving range, cost of battery replacement and overall cost to purchase the vehicle. All of which are turning in the consumers favor and within the next decade may no longer be relevant concerns.
But I will add one more element to this equation. A recent report by the firm Ipsos RDA found that dealerships who have EVs for sale seem to fail to promote them. The lack of support for the EV shopper lessens the likelihood that they will make the decision to go electric, Ipsos RDA told WardsAuto. The dedication of auto dealers to promote alternative vehicles is critical to their success. But I don’t blame dealers at all – they receive compensation based upon how many vehicles they sell, which incentivizes them to push the easy to sell vehicles rather than teach consumers about a new technology.
EVs have a hill to climb, but learning what consumers are concerned about and focusing on alleviating those concerns will help them gain market share. Already, costs are coming down, range is improving, charging is becoming faster and more convenient – but unless someone explains all this to the consumer, they will continue to view EVs with the same outdated perspective with which some continue to view diesel vehicles.
Finding the Nuggets of Truth
Bottom line is consumers say a lot of things and if you assume their comments will reflect reality you will be sadly mistaken. However, their comments do indicate potential trends.
Alternative vehicles like EVs have to demonstrate more than any other entrenched technology that they deliver value, convenience, reliability, and a number of other factors consumers don’t like to admit are important to them (status, reputation, personality, etc.) in order to move the consumer from the status of casually interested to actual buyer. A lot of trends are moving in that direction, but it takes time. Consumers do not quickly change how they make decisions on major purchases like a vehicle – they require time, consistency and evidence.
On the bright side for alternative vehicle marketers, the next generation of buyers is much more interested in all forms of alternatives than are their predecessors – so, as technology and capabilities mature and are proven, the next wave of consumers will be anxiously ready to consume. Then, and only then, we might see market share numbers begin to shift.
Keeping tabs on the consumer will help us better understand how the market evolves. So, even though very few consumers actually possess physical keys to alternative fuel vehicles, they without a doubt hold the metaphorical key to the future of the industry.