Factors influencing the payment of costs of converting oil-to CNG-fuelled cars in a market dominated by used-cars

Abstract

This paper examines the relationship between economic factors and car-owners’ willingness to incur full costs of converting their cars to natural gas vehicles (NGVs) or to secure commercial loans to supplement their savings for meeting the attendant costs. The paper applies logit models on data generated from 429 randomly selected vehicle-owners, who had visited three big oil refuelling stations in Kinondoni district of Dar es Salaam city in Tanzania. The results show that the better the vehicle condition in terms of mileage, the newness or near-newness, the higher the number of car-cylinders, the more likely the car-owners would be willing to incur conversion-to-NGVs costs and use commercial loans to foot the bills. Private/family- and male-car-owners were more willing to incur these costs or use commercial loans to finance such conversion relative to taxi-car- or female-car-owners. Policy instruments such as the creation of awareness of the benefits of utilising NGVs, and provision of commercial loans emerged to be important in enticing car-owners to convert their cars to NGVs and incur the conversion costs. For quick response, the policy instruments should target newly bought cars which are in good condition and with bigger engine capacity, male- and private/family car-owners.