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Plug-in Hybrid Success Table of Contents Executive Summary.........................................................................................3 Research Purpose and Objectives..................................................................4 Research Design...............................................................................................5 Hypothesis........................................................................................................6 Data Collection Methodology.........................................................................7 Boundaries/Limitations..................................................................................8 Benefits to Users..............................................................................................8 Statistical Method...........................................................................................9 Outcome…………..........................................................................................10 Introduction.....................................................................................................11 Research Results.............................................................................................12 Primary Data.......................................................................................12 Secondary Data...................................................................................31 Recommendations..........................................................................................35 Conclusion.......................................................................................................36 2 Executive Summary Over the last three to four years gas prices have increased 71%, even more in some parts of the world. Over the last five to six years the hybrid automobile has come to the forefront of America’s auto-buying public. These cars have low emissions and better performance than many of the lower-priced, gas-only conventional automobiles. The primary reason for the increased interest in hybrid vehicles is because of this flare-up in fuel costs. With all the interest for the appealing factors that make up a hybrid vehicle, we want to see whether or not plug-in hybrid vehicles would exceed those appealing factors. A plug-in hybrid electric vehicle (PHEV) is a hybrid which has additional battery capacity and the ability to be recharged from an external electrical outlet. In addition, modifications are made to the vehicle's control software. The vehicle can be used for short trips of moderate speed without needing the internal combustion engine (ICE) component of the vehicle, thereby saving fuel costs. In this mode of operation the vehicle operates as a pure battery electric vehicle with a weight penalty (the ICE). The long range and additional power of the ICE power train is available when needed. We also want to compute the relationship between age, income and hybrid sales success. 3 Research Purpose and Objectives The purpose of the study is to analyze why current consumers purchase hybrid vehicles. We also wanted to see if plug-in hybrids would penetrate that segment with its similarities or would be classified as another segment. Therefore discovered the possible market segment and whether or not a plug-in hybrid would be a viable commercial venture. We wanted to discover the market segments of college students and potential/current hybrid buyers for plug-in hybrids. Factors include consumers’ potential demand and the ability of producers to meet those demands while incurring a profit. Specifically, the research objectives are to: Discover the relationship between age and hybrid vehicles Compare the differences between plug-in and traditional hybrids Determine the type of vehicle consumers are looking for; an SUV, Hybrid, Convertible, Luxury, Sport, etc. Determine the budget of possible PHEV consumers Provide a demographic profile of possible hybrid consumers Investigate if the hybrid was at a lower price would this cause growth in sales Determine if gas were to increase would the plug in hybrid sales increase We hypothesize that the older and more educated the potential customer the more likely they will buy a plug-in hybrid vehicle. We will compare the relationship between the age, education and PHEV owners. 4 Research Design We used both primary and secondary research data to conduct our project. For primary research we utilized Survey Monkey, which is a web-based survey program, as well as surveys conducted on campus. We conducted 75 surveys on Survey Monkey and 81 on campus. Our secondary research was retrieved from the vast databases available at Cal State Los Angeles. The databases include Factiva, Business Source Premier, Lexus Nexus, ABI/INFORM Global and PsycInfo. Our statistical analysis is a simple correlation coefficient method describing the relationship between plug-in hybrid vehicles and age of possible consumers. This report answers the following problem: We wanted to answer the question: with the existing technology in the early part of 2007, is there an opportunity to market a PHEV profitably in the target segments of current hybrid buyers, potential hybrid buyers and college students. What is the relationship between age, education, income and hybrid owners? Therefore, the factors include consumers’ potential demand in the segments and the ability of producers to meet those demands while incurring a profit. The purpose of the study is to analyze why current consumers purchase hybrid vehicles and see if plug-in hybrids would penetrate that segment with its similarities or would be classified as another segment. Therefore we discovered the market segment and whether or not a plug-in hybrid would be a viable commercial venture. We discovered the market segments of college students and potential/current hybrid buyers for plug-in hybrids. Our objectives in list form: We wanted to discover if there is a correlation between the older correspondent and the likelihood that they will buy or have bought a hybrid vehicle We assumed the younger correspondents would choose a sportier, attractive vehicle: Convertible, Sport, etc. We assumed the bigger budget of possible automotive consumers, the more likely they are to buy a hybrid 5 Discover if the plug-in hybrid was at a lower price this cause growth in sales Hypothesis For the purpose of our research we have formed these hypotheses: H1: There is a relationship between age and vehicle selection; PHEV, Hybrid, Traditional Vehicle. H2: There is a relationship between possible PHEV consumers, and budget H3: There is a relationship with vehicle price and possible PHEV sales H4: There is a direct relationship with plug in hybrid sales and gas price Profile Analysis For example, H1 could be seen as: Age Vs Vehicle Type Traditional CSULA Respodents Vehicle Type (Majority 19-24 years) Hybrid Survey Monkey Respodents (Majority 40+ years) PHEV 0 20 40 60 80 Percentage of Respodents 6 Data Collection Methodology We used both primary and secondary research data to conduct our project. Our secondary research was retrieved from the vast databases available at Cal State Los Angeles. The databases include Factiva, Business Source Premier, Lexus Nexus, ABI/INFORM Global and PsycInfo. Primary research was mainly used to determine the potential demand of PHEVs while secondary research was mainly used to determine the feasibility of manufacturers to produce PHEVs. Primary research includes one survey conducted on two different target populations. The two populations vastly increased our understanding of the diversity of market segments. The extra work involved in conducting two surveys to two different populations was well worth the effort because of the contrasting information we attained. Furthermore, we have also learned a lot of differences about the two segments. One population represents a segment of current and potential hybrid buyers found on hybrid enthusiast forums. This population will be referred to as “Survey Monkey Respondents.” Because of limitations, we assume that enough current hybrid owners are seriously considering buying a PHEV, which will lead to the success of PHEVs if the automotive industry targets this segment. However, if the opposite occurs, then one would have to find another segment. Also adding to our primary research, we conducted two cross-tabulations in an effort to discover trends and patterns in our primary research. These cross-tabulations involved specific questions and responses from the data and we noted any relationships that could be found. The first cross-tabulation involved question five, what style of vehicle, and question three, the time plan in purchasing a vehicle. The second cross- tabulation involved question three, the time until the next vehicle purchase and question five, the type of next vehicle purchase, i.e. hybrid, traditional, etc. This report answers the following problem: With the existing technology in late 2006, is there an opportunity to market a PHEV profitably in the target segments of current hybrid buyers, potential hybrid buyers and college students. 7 Therefore, the factors include consumers’ potential demand in the segments and the ability of producers to meet those demands while incurring a profit. Boundaries/Limitations There are vast limitations that include, but are not limited to, time, willing participants, and resources. Only nine weeks were allocated in formulating, conducting surveys, creating primary research, gathering secondary research, creating a PowerPoint, and finally creating the final report. The limitation on time forced us to focus our research to only be relevant to the current year and the end of last year 2006. The location was limited to the United States, more specifically, the Los Angles area. Willing participants were hard to find, especially the Survey Monkey. Benefits to Users Those who can benefit from our research are those unaware of hybrids, students who want to help the environment, consumers that want to save money on gas, and car company’s understanding their target market. This report will help bring an understanding to all of those who are unaware to the benefits and disadvantages to owning a plug-in hybrid. Students who take the survey and read the report may develop an awareness of the options of vehicles for their next purchase. As stated in the report, The United States is continuing to search for alternative fuel sources for vehicles. This report will help build consciousness to one alternative source of fuel. Consumers looking for a new vehicle will have another option to choose from. Car companies will have a better understanding of what the possible consumer is seeking out when thinking of buying a new car. They will also discover what it is that current consumers are enjoying from their hybrid vehicle. 8 Statistical Method Our first strategy for our data analysis was to tabulate our data. This technique allowed us to organize the number/type of response for each question and put them into categories. This step aided us in establishing a frequency distribution for the variables that we are testing and allow us to easily calculate the percentages and mean. There are several statistical methods that we are planning to use for our study. To get a general understanding of our data we will use descriptive statistics. This step will help us summarize the frequency table. For this study the statistical package that we will be using is SPSS. There are four other statistical methods that we used that will allowed us to determine if there is a relationship between the variables we researched. Once we understood how strong of a relationship there is between for example, income and the number of hybrid owners, we were then able to clearly answer our research question and fulfill our objectives. The four methods are as follows: Correlation analysis Regression analysis T-test Cross tabulations We used correlation analysis because we wanted to see if there were any associations between two or more variables in our research. Not only did we want to see if there was any associations between the variables but we also wanted to see the strength of their relationships. We measured the degree to which there is a linear association between different variables, and one of the primary charts that we used was a Scatter chart. We believe that a Scatter chart will be beneficial because it allows us to see the relationship between variables and the direction of change. This relates directly to our profile analysis. We will select a pair of data collected that correspond directly to our problems at hand. Also because the groups mean values can be computed for each object on each scale it allows more powerful methods of analysis to be used. 9 The cross-tabulations involved specific questions and responses from the data and we noted any relationships that could be found. Outcome Following the collection and organizing of our data our group was able to see and find the reasons for people purchasing and or not purchasing a hybrid or PHEV. We found that the higher the income, the more likely it will be that the respondent will buy a hybrid. We believe that people don’t buy a PHEV because they would rather save money up front and purchase a more sporty regular gasoline vehicle. We also believe that they don’t purchase a PHEV because it is priced too high for people between the ages of 18- 24. Not only do we believe that these factors influence people whether they purchase a PHEV or not but, we believe that education, age, and gas price are huge factors in PHEV sales. Two of our hypotheses were accepted and two are still inconclusive. This study will be beneficial to the students at Cal State Los Angeles as well as those who are in the position to make decision on purchasing their next vehicle. The information that this study will prove could potentially improve Hybrid sales, awareness of alternative vehicles, and the wants and needs of potential consumers. The outcome shows that the older and more educated the potential customer the more likely they will buy a plug-in hybrid vehicle. The Survey Monkey correspondents were older and more interested in purchasing a plug-in hybrid. 10 INTRODUCTION Currently, the emphasis on hybrid vehicles by both manufacturers and consumers are quite profound. The first hybrid electric model in the U.S. market was the Honda Insight (61 mpg cit, 70 mpg highway) in 1999. Toyota then followed with the introduction of the Prius in 2002. Since then, the interest only has been rising and more car manufactures are following Honda and Toyota’s lead. This can be perceived by the flurry of different hybrid vehicles created by an ever-increasing amount of different manufacturers such as Chevrolet and Ford. Another major thrust to the development of fuel saving vehicles, such as a hybrid, is that over the last four years, the price of gasoline has moved upward beyond 71%, and in some markets, such as most of the world, even higher. Government interest has also increased in support for hybrid vehicles. In George W. Bush’s State of the Union address of 2006, he stressed that, “Alternative energy vehicles are an important economic and environmental component that will help reduce the United States’ consumption of fuel and green house gases…” With the growing success and interests of hybrid vehicles established, one may be able to ascertain whether a vehicle would be more successful when it not only has all the characteristics that make hybrids a success, but has emphasized those characteristics even more. Therefore, a plug-in hybrid vehicle, otherwise known as a PHEV, might be able to meet the needs of the consumers today. A plug-in hybrid electric vehicle (PHEV) is a hybrid which has additional battery capacity and the ability to be recharged from an external electrical outlet. In addition, modifications are made to the vehicle’s control software. The vehicle can be used for short trips of moderate speed without needing the internal combustion engine (ICE) component of the vehicle, thereby saving fuel costs. In this mode of operation, the vehicle operates as a pure electric vehicle with a weight penalty- the ICE. The long range and additional power of the ICE power train is available when needed. 11 RESEARCH RESULTS Primary Data The following are the results of our survey on two target populations. One will perceive that the college students are represented by CSULA and Survey Monkey represents potential and current hybrid buyers. Graphs and tables will help in comprehending the following information as well as brief summaries of each question. Survey Type: Survey Responses 48% Survey Monkey 52% CSULA CSULA SurveyMonkey Findings As demonstrated in the graph and chart, 75 Survey Monkey surveys were given and collected. The Survey Monkey population comprised 48.1% of our total respondents. In addition, 81 Cal State Los Angeles students made up 51.9% of our total respondents. 12 Question 1: What is your age? Age 70 60 50 CSULA 40 30 Survey 20 Monkey 10 Respondents 0 16-18 19-24 25-40 40+ Findings: As you can see, our expected outcome is true; survey monkey respondents are older in age than that of Cal State Los Angeles students. Over 60% of the survey monkey respondents are over the age of 50. The majority with over 50% of CSULA respondents are between the ages of 19-24. 13 Question 2: What is your gender? Gender 78.7 80 60.5 60 39.5 40 21.3 20 0 Male Female CSULA Survey Monkey Findings: The research shows that 78.7% of the Survey Monkey respondents were female and 39.5% were male. The CSULA respondents were 60.5% male and 21.3% female. 14 Question 3: Do you plan to purchase a car anytime within the next (Pick one): Plan to Purchase CSULA Survey Monkey 60 50 40 Percent 30 20 10 0 Within 6 m onths 7-12 m onths 1-2 years 3-4 years Time Findings: Although the research shows that the Survey Monkey correspondents have a higher percentage within the six month period, both groups have a high percentage in the 3-4 year bracket. This suggests that the majority of both groups are planning on purchasing a vehicle in three to four years. 15 Question 4: What is your planned budget for your next vehicle purchase? Budget: Next Vehicle Purchase CSULA Survey Monkey $40,000+ $35,000-39,999 $25,000-34,000 Dollars $20,000-24,999 $15,000-19,999 $10,000-14,999 $5,000-$9,999 $0-4,999 0 10 20 30 40 50 60 70 Number of Respondents Findings: This graph shows a huge difference between the Survey Monkey respondents and the CSULA respondents. 61 Survey Monkey respondents out of 75 marked $25,000- 34,000 dollars in planning for their next budget to buy a car. You can see that the Cal State LA respondents are more or less evenly spread with the majority being in the same large bracket, however there is an obvious choice by the Survey Monkey respondents. 16 Question 5: What type of vehicle are you looking for? Looking to Purchase This Type of Vehicle CSULA Students Surveym onkey Com pact Truck Sedan Luxury Type SUV Convertible Mini-Van Coupe Sporty 0 5 10 15 20 25 Number of Respondents Findings: This research has shown that the most common type of vehicle that both groups desire is the sporty type. This shows that both groups would much rather have sporty vehicles than mini-vans. On this particular question there was little difference in the two groups. 17 Question 6: Are you considering buying (please check one): Type of Vehicle They Are Considering To Buy Plug-in Hybrid Type Hybrid Traditional 0 10 20 30 40 50 60 70 80 Number of Respondents CSULA Respondents Survey Monkey Respondents Findings: This graph demonstrates the type of vehicle respondents would buy between a traditional, regular hybrid and a plug-in hybrid. As you can see, the respondents are almost mirroring each other. Survey Monkey respondents are interested in plug-in hybrids, approximately 67 of their respondents stated that they are planning on buying a type of plug-in hybrid. CSULA respondents are the exact opposite; it shows that approximately 63 respondents are more interested in a traditional vehicle. 18 Question 7: How likely would you buy a plug-in hybrid as your next vehicle purchase? CSULA Respondents: Next Vehicle Purchase is a PEHV 1.2 9.9 28.4 Very likely Somewhat likely Not sure Unlikely Very unlikely 28.4 32.1 Findings: According to the chart above, it shows an unlikely outcome for CSULA respondents in buying a plug-in hybrid. The data also shows a high percentage of CSULA respondents that are not sure how likely they would by a plug-in hybrid. This is possibly due to the fact that the plug-in hybrid is a new technology and is not well- known. 19 Question 8: Do you know anyone who owns a regular hybrid? Knows Owner of a Regular Hybrid ye s No 100% 1.3 90% 80% 70% 64.2 60% 50% 98.7 40% 30% 20% 35.8 10% 0% CSULA Surve y Monk e y Re s ponde nts Re s ponde nts Findings: It is obvious to see from the chart above that Survey Monkey respondents know more regular hybrid owners than that of CSULA respondents. This is probably due to age and experience. Respondents from CSULA are predominantly students that associate with other students, which have a smaller income therefore do not own a hybrid. 20 Question 9: Do you know anyone who owns a plug-in hybrid? Know s Ow ne r of a Plug-in Hybrid ye s no 100 90 80 70 60 93.8% 93.3% 50 40 30 20 10 6.2% 6.7% 0 CSULA Surve y Re s ponde nts M onk e y Re s ponde nts Findings: This chart gives similar detail to question 8; however, you can see that there are very few respondents that know of any plug-in hybrid owners. It is fair to say that the plug-in hybrid is such a new technological advancement in vehicles that there are very few people that own one. 21 Question 10: Are you a hybrid owner? Hybrid Owne r No, 98.80% 100.00% 90.00% No, 81.30% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% ye s , 18.70% 20.00% 10.00% ye s , 1.20% 0.00% CSULA Surve y M onk e y Re s ponde nts Rs ponde nts ye s No Findings: This graph shows that almost 99% of CSULA respondents and 81% of Survey Monkey’s respondents are not a hybrid owner. This shows that the majority of our sample size does not own a hybrid vehicle. 22 Question 11: Are you a plug-in hybrid owner? Plug-in Hybrid Owner Ye s No 100 No, 100 No, 98.7 90 80 70 60 50 40 30 20 10 Ye s , 0 Ye s , 1.3 0 CSULA Surve y M onk e y Re s ponde nts Rs ponde nts Findings: Again this graph shows that there are very few owners of a plug-in hybrid vehicle. Almost 100% of both groups do not know of any plug-in hybrid owners. 23 Question 12: Currently, the price of a plug-in hybrid can be up to ten thousand dollars more than a traditional, gasoline powered vehicle. Do you think that paying more for a hybrid now will be beneficial to you sometime in the future? Will it Be Beneficial in the Future? Ye s No 80 Ye s , 74.7 70 Ye s , 61.7 60 50 No, 38.3 40 30 No, 25.3 20 10 0 CSULA Survey Monkey Findings: This graph shows the majority of both groups of respondents believe it will be beneficial to pay more now for a plug-in hybrid and benefit in the future. This is excellent information for automobile makers to know and capitalize on. Now that we know possible consumers believe it is beneficial to own a plug-in hybrid, the next possible opportunity is to make a more sporty, luxury or more affordable plug-in hybrid to receive more sales. 24 Question 13: If you saw someone driving a plug-in hybrid, your first thought would be (pick one): First Thought: When Seeing Someone Drive A PHEV other 12.3 0 hybrids are too trendy 1.2 2.7 yeah, but how fast does it go? 13.6 9.3 w here can I buy one? 4.9 46.7 it looks cool 1.2 8 I'm jealous! 14.8 14.7 the ow ner obviously cares 51.9 18.7 about the environm ent 0 10 20 30 40 50 60 70 80 CSULA Respondents Survey Monkey Respondents Findings: The chart above shows in great detail the first thoughts of respondents when they see a plug-in hybrid car owner. About 52% of CSULA respondents first think that owner obviously cares about the environment. Where as about 48% of Survey Monkey respondents think, where can I buy one? This shows an obvious desire and liking of Survey Monkey respondents of plug-in hybrids. 25 Cross Tabulations Bar Chart 10 5. What style of vehicle are you looking for? sporty coupe 8 Mini-van Convertible SUV Luxury Count 6 Sedan Truck Compact 4 2 0 6 months 7 months 1-2 years 3-4 years 3. Do you plan to purchase a car anytime within the next... According to our data, consumers are willing to buy a luxury vehicle in 1-2 years. Followed by those who are willing to buy a compact or a Sedan. This is an interesting finding, according to public opinion; single consumers are willing to buy a small car. This cross tabulation shows that the most desirable style of vehicle is a luxury car within the next 1-2 years. 26 Bar Chart 25 4. What is your planned budget for your next vehicle purchase? 4,999or less 20 $5,000-$9,999 10,000-$14,999 15,000-19,999 20,000-24,999 Count 15 25,000 or more 10 5 0 6 months 7 months 1-2 years 3-4 years 3. Do you plan to purchase a car anytime within the next... Findings: Consumers are willing to spend more than $25,000 to acquire their Hybrid. They are willing to buy it in the next 1-2 years. But we have more concentration in the area of 3-4 years. 27 Cor relations 6. are you 1. w hat is considering your age? buying 1. w hat is your age? Pearson Correlation 1 .035 Sig. (2-tailed) .754 N 81 81 6. are you Pearson Correlation .035 1 considering buy ing Sig. (2-tailed) .754 N 81 81 We are measuring the strength between the age and the considering of buying the hybrid. Are there any relationship between age and considering buying hybrid? Our answer is: NO. As shown in this table, the correlation index for the relationship between age and considering buying a hybrid is .035<.01. 28 1.8 2.what is your gender? 1.5 1.2 0 2 4 6 8 10 5. what type of vehicle are you looking for? As we can see there is no relationship between gender preferences of a vehicle. We also know that male and female have different taste when it comes to car selection. 29 Paired Sam ples Te st Paired Dif f erences 95% Conf idence Interval of the Std. Error Dif f erence Mean Std. Deviation Mean Low er Upper t df Sig. (2-tailed) Pair 2.w hat is your gender? 1 - 5. w hat type of v ehicle -2.988 2.676 .297 -3.579 -2.396 -10.047 80 .000 are y ou looking for? The observed means difference is -2.988. Since the value of “t” is -10.047 at p<.001 the means difference (-2.988) between gender and type of vehicle consumers are looking for is statistically significant. Therefore, we can conclude that there is a relationship between gender and car preference. 30 RESEARCH RESULTS Secondary Research There are currently PHEVs that have the ability to have miles per gallon (MPG) of over 100. 1 The technology is available; however, the cost will be the main concern. There are many estimates of cost in various peer-reviewed journals. Some estimation is as high as $20,000 extra to a comparable internal combustion car in performance,2 while other estimates are as low as $2,000 above a comparable regular hybrid car due to economies of scale. 3 Currently, the cost to convert any 2004-2007 Prius into a PHEV is $10,000 to $12,000 according to the one and only commercial conversion service in the United States, EDrive Systems LLC. A precise consensus is hard to find on the premium it would be from manufacturers and calculations vary depending on the methods used by each researcher. Therefore, a broad range of 10-20% ($2,000-3,000) premium on a comparable regular hybrid for a sedan is estimated and $5,000 extra for a SUV. 4 Therefore, the lowest priced plug-in would be around $30,000. Many benefits might increase demand on the use of PHEVs. The first benefit is the decreased cost of operating a PHEV. A driver would pay 81-94 cents to the power company to drive 30 miles on plug-in power. To drive the same distance in the average U.S. car would cost $2.58 at the pump.5 Price can be further decreased by the fact that PHEVs are meant to plug-in at night. Which in many areas of the country is the off peak pricing of electricity. Furthermore, if a driver is driving local, they are more likely to never have to buy gas, because data shows that on average, people drive 29 miles. 6 Service costs will be reduced from vehicles that are mainly electric; however, with the limited battery technology, the replacement of the batteries will surely occur before the car has to be replaced.7 1 Rodney Tanaka, “Technology gives cars 100mpg,” San Gabriel Valley Tribune, sec P.27, Mar. 7, 2005. 2 Peter Huber and Mark P. Mills, “Dig More Coal, the Hybrids are Coming,” Forbes, 24 May 2004, 106. 3 Fareed Zakaria, “Imagine: 500 Miles per Gallon,” Newsweek, 7 March 2005, 27-28. 4 U.S. News & World Report 141, no. 13 (2006): 45-46. 5 U.S. News & World Report 141, no. 13 (2006): 45-46. 6 Sarh Connolly, Nile Malloy, and Nyack Fellowship, “Declaring Independence from Oil,” Nyack 72, no. ¾ (2006): 27. 7 “Plug it In Plug it In,” Autoweek, 24 April 2006, 5. 31 PHEVs are also cleaner even when they need coal operated electric plants. 8 This is because battery electric vehicles emit at least 67% lower greenhouse gases than gasoline cars. Furthermore, the advances in electric production are so profound that year by year the producers are finding ways to creating cleaner electricity. PHEV will decrease our dependence on foreign oil, especially the currently troubled region of the Middle East. This is because most electricity is produced domestically in the United States from domestic coal. The nationwide electrical grid is only 3% petroleum-fueled, whereas transportation is almost completely powered by oil and 60% of which comes form foreign sources and growing.9 Adoption of plug-in hybrids will transfer the overwhelming majority of our miles driven to nearly oil-free electricity. If all vehicles were plug-in hybrids we would cut our oil needs by 55% nearly enough to eliminate foreign sources altogether.10 This has a broad appeal to many political parties. Many disadvantages in owning a PHEV exist as well. The increased cost is not the only major factor. There are some that claim the battery will increase the weight of the vehicle.11 While other experts have claimed that, the reduction of mechanical parts such as the transmission, water pump, alternator, and fan belt will mitigate the problem.12 Furthermore, the driving pattern will be very crucial in determining the advantages of owning a PHEV. For example, if a person has to be on the road driving for more than 16 hours, then that style of driving will not take advantage of PHEV because the batteries will no longer offer an advantage from being charged. They will be at a disadvantage from being essentially dead weight. According to an article from Technology Review, major automakers and the Department of Energy are pouring money into research on plug-in hybrid vehicles. These cars promise to cut petroleum consumption by allowing commuters to drive to work using primarily electricity--stored on board in batteries--rather than gas. Although critics have warned that the vehicles could put too much pressure on an already strained 8 Promoting Plug-in Hybrids and Saving Sea Sponges,” Environmental Magazine, May 2006, 64. 9 Don Oldenburg, “Big companies Plug Big Causes for Big Gains,” Business and Society Review 43, no. 83 (2005):22-24. 10 “Plug and Play Vehicle Technology,” The Economist, 28 January 2006, 90. 11 “Plug and Play Vehicle Technology,” The Economist, 28 January 2006, 90. 12 “Plug and Play Vehicle Technology,” The Economist, 28 January 2006, 90. 32 electrical grid, experts are now arguing that rather than being a strain on the grid, plug-in hybrids may actually help prevent brownouts, cut the cost of electricity, and increase the use of renewable energy.13 During a survey conducted for the United States Government, they found that if gas prices continue to be around $2.50 per gallon, the 37% of the respondents would consider buying a hybrid version: 6 Q2.2.7: Assuming that prices for regular gasoline remain near $2.50 per gallon, for your next new vehicle purchase, would you …………. (aided question) Table 2.2.7. Gas Prices Near $2.50 a Gallon and Amount Willing to Pay for New Vehicle (May 2005) Type of Vehicle Percent Pay an additional $2,500 to buy a hybrid version of your vehicle that reduced your gasoline use by 30% 37 Pay an additional $4,000 to buy a plug-in hybrid version of your vehicle that could reduce your gasoline use by 45% if you traveled about 20 miles per day on its battery only 14 Neither 44 Don’t know 4 Total 99 Source: ORC for NREL (2005a), N = 1,012 Another interesting fact that was found is that if gas decline to around $1.50 per gallon, still 34% would spend money on a hybrid for their next purchase: Q2.2.8: Assuming that prices for regular gasoline decline to and remain at about $1.50 per gallon, for your next new vehicle purchase, would you …………. (aided question) Table 2.2.8. Gas Prices at $1.50 a Gallon and Amount Willing to Pay for New Vehicle (May 2005) 13 Bullis, http://www.technologyreview.com/Energy/17930. 33 Type of Vehicle Percent Pay an additional $2,500 to buy a hybrid version of your vehicle that reduced your gasoline use by 30% 34 Pay an additional $4,000 to buy a plug-in hybrid version of your vehicle that could reduce your gasoline use by 45% if you traveled about 20 miles per day on its battery only 10 Neither 51 Don’t know 5 Total 100 Source: ORC for NREL (2005a), N = 1,012 (Kubik, http://www.nrel.gov/docs/fy06osti/39047.pdf) 34 RECOMMENDATIONS With the current technology, car companies are not able to meet the consumers’ expectation on cost, which seems to be the major issue for both the college students and hybrid enthusiasts. Furthermore, the calculations on overall savings by using a plug-in hybrid are inconclusive from secondary research. The estimates have varied depending on the usage of the PHEV and the expected technological advancements. Therefore, advertising the return on investment of a PHEV might not be feasible. However, letting go of such an opportunity would not be our recommendation as many big automakers are recently researching and developing in the area of PHEV. Nevertheless, this timeframe could be a possible opportunity for the automotive industry to make improvements to PHEVs by finding ways to cut costs, improve vehicle performance, and improve general consumer perceptions and expectations of plug-in hybrids. Therefore, we suggest a “hedging” idea. This means that one should not completely ignore the fact that PHEVs are a viable future means of transportation, nor should one invest all their efforts in them. We believe automakers should invest their resources sparingly into the development of PHEVs depending on further research. To not invest at all would be a grave mistake, as it might put one far behind the competition if technology improves dramatically. Finally, there are many factors in determining the cost of producing a PHEV and quantifying demand. Most of which could not be studied due to limitations. Therefore, we suggest further funding for research to be conducted not only for this fact but also to periodically gauge the development of technology. 35 CONCLUSION The complexities of marketing such an advanced technology can be seen throughout this report. Both quantifiable data and qualifiable research are found throughout the course of study. From qualifiable research, there seemed to be many advantages one would have in owning a PHEV. These include the savings in gas at current prices, less dependence on foreign oil, environmentalism, and the availability of hybrid vehicles. We have also determined the feasibility of manufacturing a PHEV and its estimated cost of being 10- 20% higher than a comparable regular hybrid. From the quantifiable research on the surveys, we found that the best price range to include the maximum amount of customers for both hybrid enthusiasts and college students would be in the range of $22,000 to $28,000. Of course, the current technology would not be able to meet the expectation of cost for those people. Being that the lowest priced PHEV would be around $30,000. It would seem that PHEV would only be in the price brackets for 23.5% of the total participants of both surveys. The pool of likely buyers is further limited by the increase in demand for both trucks and mini-vans from Survey Monkey participants and sporty (43.9%) for CSULA students. All three of which are harder for PHEV to achieve. While there was a high response in the interest of purchasing a PHEV (61.7% at CSULA and 74.7% at Survey Monkey) they are most likely not aware of the disadvantages of a PHEV. We conclude that an alternative source of oil is needed in the United States today. A plug-in hybrid vehicle is an excellent start; however the market segments are very low. Further research development on newer technology, sportier, more luxurious bodies are required to have successful hybrid sales. We discovered that there is a correlation between the older correspondent and the likelihood that they will buy or have bought a hybrid vehicle, depending on what chart you look at. We were correct in assuming that the younger correspondents would choose a sportier, attractive vehicle: Convertible, Sport. We assumed correctly that the bigger budget of possible automotive consumers; the more likely they are to buy a hybrid 36 One point we did not discover wholly is if the plug-in hybrid was at a lower price this cause growth in sales, but we still assume this is true due to the fact that respondents with a lower budget were still very interested in buying a plug-in hybrid. Hypotheses H1: There is a relationship between age and vehicle selection; PHEV, Hybrid, Traditional Vehicle. Inconclusive; raw data shows H1 is accepted, correlation coefficient rejects H1 H2: There is a relationship between possible PHEV consumers, and budget We accept H2 H3: There is a relationship with vehicle price and possible PHEV sales We reject H3 H4: There is a direct relationship with plug in hybrid sales and gas price Undiscovered- more research is necessary to prove H4 37 Bibliography Bullis, Kevin. “How Plug-In Hybrids Will Save the Grid.” http://www.technologyreview.com/Energy/17930. 21 December 2006 Burns, Alvin C and Ronald F. Bush. Marketing Research. 5 ed. Englewood Cliffs, NJ: Prentice Hall, 2006. Connolly, Sarah, Mile Malloy, and Nyack Fellowship. “Declaring Independence from Oil.” Nyack 72, no. ¾ (2006): 27. Huber, Peter and Mark P. Mills. “Dig More Coal, the Hybrids are Coming.” Forbes, 24 May 2004, 106. Kubik, M. “Consumer Views on Transportation and Energy.” http://www.nrel.gov/docs/fy06osti/39047.pdf January 2006. Oldenburg, Don. “Big Companies Plug Big Causes for Big Gains.” Business and Society Review 43, no. 83 (2005): 22-24. “Plug and Play Vehicle Technology.” The Economist, 28 January 2006, 90. “Plug it in, Plug it in.” Autoweek, 24 April 2006, 5. “Pomoting Plug-in Hybrids and Saving Sea Sponges.” Environmental Magazine, May 2006, 64. Tanaka, Rodney. “Technology Gives Cars 100 mpg.” San Gabriel Valley Tribune, 7 March 2005, sec. P.27. U.S. News & World Report 141, no. 13 (2006): 45-46. Zakaria, Fareed. “Imagine: 500 Miles Per Gallon.” Newsweek, 7 March 2005, 27-28. 38
"Plug-in Hybrid Success.doc"