Role of car segment and fuel type in the choice of alternative fuel vehicles: A cross-nested logit model for the English market

Abstract

In this article, we study the role of car segment and fuel type in the choice of alternative fuel vehicles and in the prediction of its market. For this purpose, we propose a joint choice cross-nested logit model to understand the demand for alternative fuel vehicles (AFV) and to study substitutional patterns between fuel types and vehicle segments with a full revealed preference approach, using only publicly available real data at disaggregate (household) level in England. Our results show that, as hypothesised, fuel type choice is not independent from car segment choice. The correlation patterns in the chosen specification reveal that individual car alternatives belonging to the same car segment are strongly correlated, while a weaker correlation exists between alternatives from different segments which share the same fuel type. The results suggest that creating awareness for cleaner fuel alternatives might be more effective if a targeted approach that considers these substitutional patterns is used. From a policy standpoint, while purchase prices play an important role and government policies have been concentrated in reducing the gap between ICE vehicles and AFVs in this dimension, our models stress the relevance of the operating cost variable, suggesting that its effect might also be crucial in the purchase decision.