Consumer preferences and policy implications for the green car market

Abstract

Purpose The purpose of this paper is to understand consumer preferences for green vehicles with low fuel consumption and emission. It will examine six important vehicle attributes, including fuel efficiency and CO2 emissions, and determine the impacts of increasing demand for green attributes on the domestic car industry in Sweden. Design/methodology/approach Responses to an adaptive choice-based conjoint experiment from a sample of 100 residents in Northern Sweden were analyzed using monotone regression and market simulation. Findings The authors found that consumer preferences were sensitive to changes in fuel efficiency and emission levels. However, engine power was the most important attribute for existing owners whereas price was the most important one for potential customers, while both market segments valued emission more than fuel efficiency. Also, the domestic producer will benefit from both an increase in market size and market share if all new vehicles have higher fuel efficiency but its market share will decrease if all new vehicles have lower CO2 emissions. Social implications Although promoting green vehicle purchase is beneficial for the environment, policy makers also need to balance this benefit against any potential adverse effect on the domestic industry and the economy. This study will provide evidence-based recommendations to increase the share of green cars in new vehicle purchase, and thus contribute to improving the environment. Moreover, it will also predict the changes in the market shares of different vehicles, and the potential impact on the domestic automobile manufacturing sector and the economy. Originality/value This study will contribute significantly to the understanding of consumer preferences by exploring the preferences of a sample of consumers from a country with a well-established alternative fuel and green car market but has adverse weather and driving conditions and a domestic automobile manufacturing industry. It will also examine the differences in preference between existing owners and potential green car buyers. Finally, it will simulate the effects of changing fuel efficiency and emission levels on consumer utility and preference shares to predict changes in market share of different vehicles, and thus the potential impact on the domestic automobile manufacturing sector and the economy.