THE FUTURE OF ELECTRIC CARS MS_E 201

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THE FUTURE OF ELECTRIC CARS MS_E 201 Powered By Docstoc
					           T H E 	
   F U T U R E 	
   O F 	
   E L E C T R I C 	
   C A R S 	
   	
   	
     	
  

                                          M S & E 	
   2 0 1 	
   	
  




       Berhane Azage

       Kazutora Hayashida

       Nanette Le

       Rotimi Ojo

       Farnaz Ronaghi Khameneh




                                                                                                     1	
  

	
  
                                                                                                                                                                                                                                                         1.	
  INTRODUCTION	
  

    Declaring “For the first time in history, we have set in motion a national policy aimed at both increasing gas mileage and
decreasing greenhouse gas pollution for all new trucks and cars,” President Obama recently set in motion a national program
aimed at improving fuel efficiency of new cars to an average of 35 miles per gallon (MSNBC). Although not the only policy
endorsing the urgency of addressing effects of massive greenhouse emissions, Obama’s policy along with macroeconomic,
technological, and structural changes are heralding future cars with much higher fuel efficiency. Strong showing of interest
by media, entrepreneurs, venture capitalists, automakers, and even the general public has focused on the need for a highly
energy-efficient transportation network that will also have minimal negative externality to our environment. The advent of
viable hybrid and electric cars is often seen as viable solution to the demand. The focus of the following paper is then to
understand the future of the car market within the U.S. market1 with focus on gasoline and hybrid, electric cars using a
dynamic systems model.


A.	
   H ISTORICAL	
   B ACKGROUND	
   O F	
   E LECTRIC	
   C ARS	
  


    To many people’s surprise, electric vehicles (EVs) are not a recent innovation. EVs’ history dates all the way back to 1830s,
when the first electric vehicles were assembled in Western Europe and United States (Westbrook, 7). By 1900, the U.S. car
market was evenly split between electric cars, steam-powered cars, and gasoline cars (PBS). The “golden-age” of the electric
car was nonetheless short-lived. By 1920, due to many factors, including desire for longer distance range, increased
horsepower, low price and availability of gasoline, as well as the massive production of substantially lower priced Ford Model
T, Electric Cars became a relic of the past (PBS &Westbrook). The modern era signaled interest in Electric vehicles. Following
governmental concerns of pollution in late 1960s, and the Arab Oil Embargo of 1973, electric vehicles such as CitiCar showed
signs of re-emergence but with very little traction even up to late 1990s (Westbrook, 25-27). Schiffer (2-3) notes there are three
dominant theories for the failure of Electric Vehicles in the modern era. The first is Vested Interest Theory, which notes that
desirable products can be prevented from reaching markets by actions of powerful corporations’ such as GM’s lack of
commitment in the success of the infamous EV1 vehicles. Such factor is not restricted to lack of commitment to making a
vehicle cool, reliable, appealing, but also to governmental commitment in upholding certain legislation. The EV1 came to
being only due to a need by GM to meet governmental restrictions such one legislated by California Air Resources Board
(CARB) which was later relaxed due to Automakers’ pressure.2 The second is the Technological Constraint Theory, that posits
that technological constraints, particularly range and power restrictions deriving from inability of battery technology to
surpass gasoline’s advantage of high energy density, has been a major source of failure for expansion of electric vehicles. A
third theory is that the products available were simply not meeting consumer performance needs. That is, products were not
cool enough to be adopted by the public and the ease of access to supporting infrastructure of a given product was not
present. In essence, not many electric cars can be produced without the proper charging stations, battery manufacturing
facilities, and etc. that are necessary for its adoption.

   These three theories are by no means are complete, but their inner relationship and effect is undeniable and worth
exploring. Understanding past failures should provide a rubric of understanding the current events surrounding electric
vehicles. As a result, we have identified the coolness factor, infrastructural support, intrinsic quality of product, as well as
governmental and corporate commitment as key factors that have often determined the success or failure of Electric Vehicles.


B.	
   R ECENT	
   T RENDS	
   A ND	
   B ACKGROUNDS	
  


    Three major recent trends seem to indicate that the future of electric cars maybe nearby. First, Since 1970s, concern about
climate change has been prevalent, but a consensus on the level of impact and the need to change has not been as strong as in
the last decade. In reality, in 1990, the Second World Climate Conference adopted the Climate Change Convention, which
“called climate change as a "common concern of humankind"” (Earth Summit +5). Alarming Greenhouse emissions have
prompted many governments to commit large amounts of research funding and companies are responding in anticipation of
future clean energy market (CNET News). Second, technological revolutions as well as general interest in Hybrid/Electric

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  
1      Justification for Choice of U.S. Market is provided in Appendix

2      Two percent of light duty vehicle sales in CA must be zero emissions by 1998	
  

                                                                                                                                                                                                                                                                                  2	
  

	
  
                                                                                                                                                                                                                                                                      Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  

vehicles as solutions to the emissions problem appear to have drawn the interest of investors and businesses. Several
promising companies, such as Tesla Motors with its battery technology and Better Place with its project of providing charging
infrastructure, have attracted partnership from major automakers such as Renault (CSR Europe). Concurrently, clean tech has
been a new investment trend in the venture world; with much focus various alternative energy technologies, including electric
and hybrid vehicles. Hydrogen cars have proven to be unviable at this point due to the high economic and technical costs for
producing them, and the bad benefit-cost ratio for producing hydrogen cars (Shinnar) and we expect such benefit-cost
analysis to continue for future products. Third, recent trends on hybrid car adoption in the mainstream along with well-
designed future Electric cars such as Tesla’s Roadster and the Volt indicate an increasing notion of acceptability for
hybrid/electric cars. Therefore, the focus of the paper is on relationship of gasoline, hybrid and electric. Exploring
technological improvement, funding levels and legislation that show governmental commitment, infrastructural changes, as
well as attractiveness of products that are available will provide us valuable insight into the dynamic future of the car market.


                                                                                                                                 2.	
  DYNAMIC	
  MODEL	
  FOR	
  THE	
  FUTURE	
  OF	
  ELECTRIC	
  CARS	
  


A.	
   E QUATIONS	
   A ND	
   D YNAMIC	
   M ODEL	
   D ESCRIPTION	
  


    To model the dynamics of electric cars market we use a modified competition model. We divide the potential car market
into three different segments namely: low-income, middle-income, and high-income. Carmakers usually have different
products for each income segment.

    The acceptability or intrinsic quality of a product P offered by a company to a consumer for a given market segment i is
described by:                (Eq. 1), where a is an attribute vector describing the normalized magnitude3 of a products principal
attribute. w is a vector of the weights of each attribute normalized with respect to 1. Our attribute vector consists of a car’s
initial price, running cost, performance, environment friendliness, and infrastructure support.

   Our initial approach was to expand the “new game in competition” to describe the dynamics of three competing brands
but ended up with analytically intractable systems of equation. We therefore decided to create a hybrid model that combines
elements of “new game in competition” with that of a generic competition model.

  For any given income segment, let G show the number of gasoline cars, E show number of electric cars and H show
number of hybrid cars respectively. We derive the system below:




                                                                                                                                                                                                                                                                    (Eq. 2)

                                        represents the intrinsic growth of a product in the absence of competition, while                                                                                                                                                           depicts the mutual
interference constants describing the effects of company I with strategy                                                                                                                                                                                 , and coolness factor q, on its’ competitors.(i.e. they
are a scalar multiple of the acceptability of company’s product from Eq. 1). (t) shows additional control measures employed
by company I that are not reflected in the acceptability of a product to a consumer or policies implemented by the government
that benefits I such as subsidies, tax breaks, etc. For instance, the government can foster a program that would put a certain
number of electric cars for public transportation. Quantitatively, at a particular time, we can set C(t) to be an impulse that
would bolster the growth rate of a certain product I. Setting                             shifts the phase portrait and alters the
marginal limit of I by a factor dependent on k. This transformation increases the marginal limit of I’s market share by k but
does not alter the general behavior of the system for an impulse signal (i.e. we control with a constant input or only input at
one time interval).



	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  
3      Normalization: a=[attribute1/max (attribute1) ; attribute2/max (attribute2)…]

                                                                                                                                                                                                                                                                                                                        3	
  

	
  
                                                                                                                                                                                                                                                                                    Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  


B.	
   A NALYTICAL	
   S OLUTIONS	
  


                        To understand the general behavior, we can first assume that                                                                                                                                                                           (t) = 0 and independent of i, and set the derivates to zero,

we immediately identify the equilibrium points4                                                                                                                                                                                                                                 ,                                  and the
intersection of the planes:




                                                                                                                                                                                                                                                                             (Eq. 3)

                        By evaluating the Jacobian of Eq. 2 we obtain the linear system:




C1.	
   V ISUALIZATION	
   A ND	
   L EVEL	
   S ETTING	
   P ROPOSAL	
  


   For example, setting                                                                                                                                                                                                                                  and                                              generates the 3D
vector field shown in Fig 1 and 2:




                                                                                                                                                                                     Fig 1.                                                                    Fig 2.

   Visualization limitations associated with working in 3D makes the direct interpretation of the phase portrait very difficult.
The only obvious conclusion we can derive from this image in that the axis with the greatest    eventually dominates the
market. Additionally, these figures shows that we can come to reasonable conclusions by setting the level of an arbitrary axis
and quantitative analyzing the behavior of the other two axes.

    Since Gasoline Cars currently dominate the market and we are mainly concerned with the future of electric cars, we will
proceed to analyze their dynamic behavior by level setting the Hybrid dimension. Simulation analysis is also provided to
illustrate the competition amongst all three car types. Consequently, for phase plot illustrations, we set H = f, such that
               , and we obtain the following dynamics:

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  
4      This model potentially has infinitely many equilibrium points!	
  

                                                                                                                                                                                                                                                                                                                                      4	
  

	
  
                                                                                                                               Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  




                                                                                                                                       (Eq. 4)

    Eq. 4 has the effect of reducing the marginal limits of both Gasoline and Electric car’s respective market shares by      .
This implies that the pattern of behavior at every level set of H is similar, which assumes H is static and hence the growth rate
of H is 0. However, H of course is itself often dynamic, so analysis using only phase portrait is limiting but remains insightful.
Therefore, we have used matlab simulation to demonstrate the behavior when H is both dynamic and static.


C2.	
   S TATIC	
   A NALYSIS	
   W ITH	
   S IMULATION	
   A ND	
   P HASE	
   P ORTRAITS	
   ( I.E.	
   H ’(T)=0)	
   	
  


  The figure below shows the approximate behavior of our system at every level set of H excluding the point where H is
max which is an equilibrium point, and arbitrary values of    and




       Fig 3. [G’=G(1-G-2E), E’=E(1-E-3G)]                         Fig 4. [G’=G(1-G-0.5E), E’=E(1-0.5G-E)]                          Fig. 5 [G’=G(1-G-0.75E), E’=E(1-E-2G)]




       Fig. 6 [G’=G(1-G-2E), E’=E(1-E-0.75G)]                      Fig. 7 [G’=G(1-G-0.5E), E’=E(1-E-2G)]                            Fig. 8 [G’=G(1-G-2E), E’=E(1-E-0.5G)]

       The G null cline is the orange line defined by                                             and G=0 while the E null cline is the yellow line defined

by                               and E=0. A line of separatrix defined by bold red arrow passes through the point of intersection of both
nullclines. Any trajectory originating at a given side of the separatrix stays on that side the separatrix, while trajectories
originating on the separatrix always end up at the point of intersection of the G and E nullclines. Intersection of the two null
clines equals to (Gnl,Enl) such that




  If Gnl is negative, G will always win (Fig. 5). If Enl is negative, E will always win without respect to initial condition (Fig. 6).
Due to the characteristics of the null clines, Enl and Gnl cannot be simultaneously negative. If Enl and Gnl are both positive, then
                                                                                                                                                                                 5	
  

	
  
                                                                                                                                                                                 Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  

we either have a saddle point (Fig. 1) when either                                                           or         is greater than 1 or an equilibrium point (Fig. 5) if both                                                               and

        are less than 1. When                                               ,	
  then      we have two parallel null clines. In such case, the car type with the larger
interference factor                          will eventually win. That completes all possible major combinations for phase portraits.

    Phase portraits are very informative for a static Hybrid case, and a simulation is not necessary for H’(t)=0 as it is not as
comprehensive. Nonetheless, we did run simulations to test our phase portrait results. The lesson from the phase portraits is
that given a very dominant gasoline car market that is the reality of our current times, the ways that electric car can win is if it
always has a better product/strategy, including quality of product, infrastructure, perception driven by advertising and other
factors as described in modeling section, and/or through our control input.


C3.	
   D YNAMIC	
   A NALYSIS	
   W ITH	
   S IMULATION	
   ( I.E.	
   H ’(T)	
   I S	
   N OT	
   A LWAYS	
   Z ERO)	
   	
  


                 Making H(t)	
  dynamic	
  makes	
  visualization	
  and	
  processing	
  of	
  phase	
  portraits	
  difficult.	
  Simulations	
  nonetheless	
  require	
  a	
  
huge	
  range	
  of	
  possible	
  values.	
  We	
  have	
  conducted	
  many	
  test	
  runs,	
  and	
  have	
  included	
  summary	
  of	
  insightful	
  graphs	
  below.	
  We	
  
assumed	
  our	
  current	
  potential	
  market	
  N	
  will	
  be	
  300	
  million	
  passenger	
  and	
  light	
  truck	
  cars.	
  We	
  expect	
  our	
  rg,rh,re	
  to	
  grow	
  at	
  
historical	
  annual	
  growth	
  rate	
  of	
  2%	
  and	
  will	
  behave	
  similarly	
  in	
  terms	
  of	
  adjustment	
  to	
  increase	
  rate	
  of	
  growth	
  for	
  an	
  early	
  stage	
  	
  
vs.	
  later	
  stage.	
  	
  

   We	
  assumed	
  a	
  variety	
  of	
  initial	
  G,H,E.	
  The	
  reason	
  for	
  our	
  assumption	
  is	
  that	
  we	
  can	
  have	
  an	
  impacting	
  shift	
  in	
  initial	
  condition	
  
depending	
  on	
  our	
  control	
  input,	
  and	
  having	
  an	
  E=0	
  does	
  not	
  provide	
  much	
  room	
  for	
  analysis	
  of	
  future	
  of	
  electric	
  car	
  either.	
  So	
  we	
  
used	
  some	
  reasonable	
  (G0,H0,E0	
  )	
  of	
  	
  (0.8,0.1,0.05),	
  (0.6,0.2,0.1)	
  and	
  ( , , ) of (3,2,1) ,(1,3,2), (2,3,1), (1,1,3).

       Simulations	
  for	
  (G0,H0,E0	
  )	
  =	
  (0.8,0.1,0.05)	
  	
  




       Fig.	
  9	
  	
  (   ,       ,       ) of (3,2,1)                   Fig.	
  10	
  	
  (       ,       ,       ) of (1,3,2)          Fig.	
  11	
  	
  (       ,       ,       ) of (2,3,1)     Fig.	
  12	
  	
  (       ,       ,    ) of (1,1,3)


As	
  expected,	
  with	
  a	
  high	
  market	
  share,	
  and	
  a	
  dominating	
  strategy	
  (Fig.	
  9)	
  or	
  close	
  enough	
  (Fig.	
  11)	
  (just	
  like	
  past	
  historical	
  cases),	
  
gasoline	
  car	
  continues	
  to	
  dominate.	
  	
  However,	
  as	
  shown	
  in	
  Fig.	
  10	
  and	
  Fig.	
  12,	
  if	
  either	
  hybrid	
  car	
  or	
  electric	
  car	
  has	
  a	
  significantly	
  
more	
  dominant	
  strategy,	
  combined	
  with	
  infrastructure,	
  acceptability	
  as	
  well	
  as	
  other	
  factors	
  that	
  enhance	
  its	
  ability	
  to	
  interfere,	
  
then	
  Electric	
  car	
  or	
  Hybrid	
  car	
  will	
  win.	
  We	
  think	
  Electric	
  car	
  can	
  win	
  as	
  once	
  battery	
  technology	
  improves,	
  and	
  needed	
  
infrastructure	
  and	
  services	
  are	
  available,	
  the	
  hybrid	
  car	
  will	
  lose	
  out	
  in	
  its	
  environmental	
  friendliness	
  as	
  it	
  is	
  not	
  a	
  zero	
  emission	
  
machine,	
  and	
  has	
  a	
  redundant	
  engine.	
  Such	
  acknowledgment	
  of	
  course	
  cannot	
  definitively	
  be	
  determined	
  now	
  

Simulations	
  for	
  (G0,H0,E0	
  )	
  =	
  (0.6,0.2,0.1)	
  	
  




                                                                	
  	
  

       Fig.	
  13	
  (          ,       ,   ) of (3,2,1)     Fig.	
  14	
  	
  (                 ,       ,       ) of (1,3,2)       Fig.	
  15	
  	
  (          ,       ,       ) of (2,3,1)       Fig.	
  16	
  	
  (     ,       ,       ) of (1,1,3)	
  



                                                                                                                                                                                                                                                           6	
  

	
  
                                                                                         Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  

       	
  



                                                   3.	
  CONCLUSION	
  
    Currently, there are about 247 million registered gasoline cars (which is about 83% of overall potential market). There are
1.3 million hybrid cars on the road, accounting for .43% of the market. We assume that a control input, such as a government
pilot project of electric fleet can introduce into the market about 300,000 electric vehicles at some point in time, which makes
the Electric vehicle share to be 8.33%. Using such data and analysis on current available products and estimations of our
factors (refer to appendix for detail), we have come up with a winning strategy for electric car. As shown in our previous
simulations, our model predicts that it is impossible for Electric Cars to dominate the market by offering an equally or
marginally superior product. The winning strategy will then have to rely on governmental support to jumpstart it through our
control, and then the natural dynamics provided by maximizing           with respect to       and .




                                                                Fig. 17

From available data we have estimated (see Appendix)                      1.06. We also estimated         to be 0.81. Our task is a

value of      , such that                      for which trajectory passing through (G, E) = (.83N,0.0043N,0.001N) terminates
at      . We can numerical verify that             (Fig 17) satisfies the conditions. Details for configuration of a product that
achieves such number is provided in appendix. The table in appendix shows that even with superior and less expensive
product line Electric cars needed some cool factor or substantial governmental support to cause enough interference in the
growth of gasoline cars as to eventually dominate the market. Clearly early models for the introduction of electric cars failed
in almost all of the above respect. As Fig. 17 demonstrates, Hybrid cars increase in number, but eventually plateau, further
purporting the argument that hybrid car will be a redundant and less superior product if a great electric car with the
appropriate infrastructural support and product quality can be produced.

As our analysis has shown, given the initial distribution of the market, the success of Electric cars within the future
intrinsically much depends on the strategies pursued and is responsive to governmental incentives and environmental
programs to jumpstart its growth. We have provided a more detailed set of recommendations and strategies to companies and
governments based on the analysis of our dynamic model in the appendix as well.




                                                                                                                                           7	
  

	
  
                                                                                     Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  



                                     WORK	
  CITED	
  AND	
  CONSULTED	
  


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       •   Bureau of Transportation Statistics. Household and Demographic Characteristics, National transportation
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       •   CNET News. “Obama commits $1.2. billion in energy R&D.” 23 March, 2009. <
           http://news.cnet.com/8301-11128_3-10202041-54.html>

       •   Consumer Reports. Car Ownership Costs. <http://www.consumerreports.org/cro/cars/pricing/what-
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       •   MSNBC. “Obama unveils mpg rule, gets broad support.” May 19, 2009.
           <http://www.msnbc.msn.com/id/30810514/>

       •   National Automobile Dealers Association. NADA Data- Sales Data and Growth Rate. 2008. <
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       •   PBS.Org. “Timeline: Life & Death of the Electric Car.” 06/09/2006.
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       •   Westbrook, M. “History of Electric Cars Upto 1990.” The Electric Car. Institution of Engineering and
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       •   Schiffer, et. Al. Taking Charge: The Electric Automobile in America. Smithsonian Institution Press: 1994.

       •   Shinnar, Reuel. The hydrogen economy, fuel cells, and electric cars, Technology in Society, Volume 25, Issue 4,
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       •   U.S. Department of Labor. Current Population Survey. 2007. <http://www.census.gov/>




                                                                                                                                       8	
  

	
  
                                                                                                      Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  


	
  

                                                                   APPENDIX	
  

1.      WHY	
  T HE	
  U .S.	
  C AR	
  M ARKET?	
  

    Our focus is on the U.S. vehicle market because we have a free-market economy as opposed to countries like China, where
all vehicles could be the same if the Chinese government decided to do so. Our model will analyze a people’s true preferences
towards owning a hybrid or electric car. This can only be done in a free-market economy where each consumer is allowed to
express their preference on these alternative fuel vehicles. Furthermore, there is much more data on the U.S. vehicle market.


3.	
  	
  S TRATEGY	
  D ISCUSSION	
  

       A.	
  T able	
  1 .	
  W inning	
  S trategy	
  C onfiguration	
  for	
  E lectric	
  C ar

       Coolness                                        Electric = 5                       Gas = 3                              Hybrid

       Strategy                                        5                                  3

       Low Income:

          Initial cost                                     13000                              13742                            22751.25

          Running cost                                     30000                              33888                            37527

          Performance +                                    130                                120                              120

          Environment +                                    70                                 27.33                            45

          Infrastructure +                                 3                                  1                                3

       Middle Income:

        Initial cost                                       35000                              38154                                40129

        Running cost                                       45000                              47973                                57044

        Performance +                                      160                                160                                    160

        Environment +                                      70                                 19.25                                   31

        Infrastructure +                                   3                                  1                                        2

       High Income

        Initial cost                                       75000                              86717                                80012

        Running cost                                       90000                              11247                            103054

        Performance +                                      180                                180                                    180

        Environment +                                      50                                 15                                      26

        Infrastructure +                                   3                                  1                                        2


                                                                                                                                                        9	
  

	
  
                                                                                               Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  

       Cross Model Interference                          2.91                           1.05                            0.81

       Table 1. Winning Strategy.

       B.	
  N otes	
  o n	
  S trategies	
  for	
  G overnments	
  a nd	
  C ompanies	
  

The U.S. government can push the market to shift towards hybrid and electric cars that the market takes off and reach its
equilibrium on its own. With this model, the U.S. government can determine how much pressure they can place on the
market before it takes off on its own. After a period of time, through word-of-mouth, the coolness factor, peer pressure, etc.,
hybrid and electric cars will play a competitive role in the vehicle industry. Once hybrid and electric cars have a large enough
presence in the market, the cost to manufacture and produce them will decrease significantly and the U.S. government will be
able to lift their incentives. At this equilibrium point, there would be little to no deterring factors for consumers to purchase
these alternative fuel vehicles.

    Another motivating incentive is for environmental programs to reward bonuses to consumers who trade in their gasoline
cars for an alternative fuel vehicle. This will also promote the market movement towards hybrid and electric vehicles.
Bonuses give consumers the opportunity to apply it towards the high initial cost of the hybrid or electric car. Thus, a bonus
would have the same affect on the market as a U.S. government subsidy.

I.	
  S TRATEGIES	
  T HAT	
  T HE	
  C OMPANIES	
  T O	
  E NCOURAGE	
  S WITCH	
  
                    • Favorable Trade-in's for Gasoline Cars: Used/New car dealers associated with the manufacturer can
                 provide services where a driver can trade in his current gasoline car and get an electric vehicle from the same
                 manufacturer under favorable conditions, including warranty, price, maintenance, etc.
                    • Provide EV's for Rental Cars/Fleet Services: One reason that's inhibiting consumers from buying EV's is
                 due to their lack of knowledge and trust in EV's. Manufacturer can provide EV's for fleet services so that
                 consumers will get first-hand experience of the technologies.

II.	
  S TRATEGIES	
  T HAT	
  T HE	
  G OVERNMENTS	
  C AN	
  T AKE	
  
                     • Tax incentives for EV's: As the US government did for hybrid vehicles; they can implement a similar tax
                 incentive for consumers who purchase electric vehicles.
                     • Subsidies for EV technologies: One of the obstacles that prevent normal consumers from purchasing
                 electric vehicles is the high initial cost. However, with government's subsidies for key EV technologies, such as
                 batteries, the price tag can be driven down to the level that normal consumers will be able to afford.


3.	
  S IMULATION	
  C ODE	
  

SIMULATION CODE:
clear;

%Set Up
year=200;
period=365; % Weekly
maxtime = period*year;
halftime=maxtime/2;
N = zeros(maxtime, 1);
G = zeros( maxtime , 1 );
H = zeros( maxtime , 1 );
E = zeros( maxtime , 1 );

dG = zeros( maxtime , 1 );
dH = zeros( maxtime , 1 );
dE = zeros( maxtime , 1 );

alpha_G= ones(maxtime , 1);
alpha_H= ones(maxtime , 1);
alpha_E= ones(maxtime , 1);

%Initial Conditions
N(1) = 300e6 ;
                                                                                                                                               10	
  

	
  
                                                                                               Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  

G(1) = 0.83*N(1); %Current Level is 247 million cars
H(1) = 0.044*N(1); %Approximate, but very close to current level of 1.3 million hybrids
E(1) = 0.1*N(1); %Needs one big push to achieve 2.5 million Electric Cars, Reasonable

%Natural Growth Rate for Period
avg_year_rate=2e-2;

mod_factor_g=N(1)/G(1);
mod_factor_e=N(1)/E(1);
mod_factor_h=N(1)/H(1);% When something is small, it will grow faster than usual.

RG = ((1+avg_year_rate*mod_factor_g)^(1/period)-1);
RH = ((1+avg_year_rate*mod_factor_h)^(1/period)-1);
RE = ((1+avg_year_rate*mod_factor_e)^(1/period)-1);

%Strategy
alpha_G(1:maxtime)=1.06;
alpha_H(1:maxtime)=1.0;
alpha_E(1:maxtime)=2.9;

% Dynamics
for i=2 : maxtime
  dG(i) = RG * G( i-1 )*( 1 - G( i-1 )/N(i-1) - alpha_H( i ) * H( i-1 )/N(i-1) - alpha_E( i ) * E( i-1 )/N(i-1) ) ;
  dE(i) = RE * E( i-1 )*( 1 - E( i-1 )/N(i-1) - alpha_H( i ) * H( i-1 )/N(i-1) - alpha_G( i ) * G( i-1 )/N(i-1) ) ;
  dH(i) = RH * H( i-1 )*( 1 - H( i-1 )/N(i-1) - alpha_G( i ) * G( i-1 )/N(i-1) - alpha_E( i ) * E( i-1 )/N(i-1) ) ;

       G( i ) = G( i-1 ) + dG(i) ;
       H( i ) = H( i-1 ) + dH(i) ;
       E( i ) = E( i-1 ) + dE(i) ;

       mod_factor_g=N(1)/G(1);
       mod_factor_e=N(1)/E(1);
       mod_factor_h=N(1)/H(1);% When something is small, it will grow faster than usual.

       RG = ((1+avg_year_rate*mod_factor_g)^(1/period)-1);
       RH = ((1+avg_year_rate*mod_factor_h)^(1/period)-1);
       RE = ((1+avg_year_rate*mod_factor_e)^(1/period)-1);


 N(i) = N(i-1);
end

 %PLOTTING
t=(0:1/period:year-1/period).';
plot(t , H , 'g');
hold on
plot(t , G , 'r');
hold on
plot(t , E , 'b');
hold off

xlabel('Time ');
ylabel('# of Cars');
legend('Hybrid','Gasoline','Electric');




                                                                                                                                               11	
  

	
  
                                                                                   Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  




                                    TABLES	
  AND	
  SUPPORTING	
  DATA	
  

       Table 2: Population and Car Market
       1. Potential Market of Adults
                                                                Proposed Segments by
       Segments (income/Worker)                                 Income/Person                                 # of Potential Customers
       Low                                                      $0-$25,124                                                          50,635,856
       Middle                                                   25124-$56047                                                        50,066,696
       High                                                     $56,047and above                                                    50,360,331



       2. Estimate of Electric/Hybrid Passenger Car and Light Truck Users

       Total Hybrid/Electric Cars                                                               1320800
       Total # of Cars                                                                        248700997
       Total Gasoline Cars                                                                    247380197

                                                                Refer to 2-4
       Segments                                                 Percentage Distribution                       # of Cars

       Low                                                                                             0.2    264,160

       Middle                                                                                         0.23    303,784

       High                                                                                           0.75    990,600

       Assumed that # of Hybrid Vehicle Ownes in the High Income Category Make up more than ~(0.71+0.42)/2=56%, so I am
       using about 75% to include people making >$75,000
       http://www.hybridcars.com/hybrid-drivers/profile-of-hybrid-drivers.html

       3. Estimate of Gasoline Car Users                        (Refer to 2-4)
                                                                                                              # of Gasoline Cars in
       Segments                                                 Average # of Cars/Person                      Segment

       Low                                                                                  1.068574333       62,939,769

       Middle                                                                               1.370071161       80,698,142

       High                                                                                 1.761308391       103,742,286




                                                                                                                                   12	
  

	
  
                                                                        Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  



Table 3: GASOLINE INITIAL & RUNNING COST, SPECIFICATIONS


                                Price           Fuel efficiency      Running
                                                                     Cost
Luxury   2009 Lexus LS    $56,803 -     24 (Est) mpg Hwy, 16      $98,166     56803         94370      75586.5           16
                          $94,370       (Est) mpg City
         2009 Mercedes    $89,350       22 (Est) mpg Hwy, 14      $123,78     89350                      89350           14
         S                              (Est) mpg City
         2009 Cadillac    $86,215 -     24 (Est) mpg Hwy, 15      $115,45     86215       104215         95215           15
         XLR              $104,215      (Est) mpg City
         Average             86717.17   15                        $112,47                                86717           15


Middle   2008 Audi A3     $25,930 -     21 (Est) mpg City         $52,193     25930         34915        30423           21
Income                    $34,915
         2008 Buick       $24,250 -     17 (Est) mpg City         $51,987     24250         32380        28315           17
         LaCrosse         $32,380
         2010 Chevrolet   $22,245 -     17 (Est) mpg City                     22245         33430        27838           17
         Camaro           $33,430
         2009 Honda       $20,905 -     22 (Est) mpg City         $39,740     20905         31155        26030           22
         Accord           $31,155
         Average          28151.25      19.25                     $47,973                                28151           19

Low      Hyundai          $10,775 -     32 (Est) mpg Hwy, 27      $33,261     10775         15595        13185           27
Income   Accent 2008      $15,595       (Est) mpg City
         2009 Chev        $11,965 -     27 (Est) mpg City         $33,921     11965         14100      13032.5           27
         Aveo             $14,100
         2008 Honda Fit   $13,950 -     28 (Est) mpg City         $34,482     13950         16070        15010           28
                          $16,070
         Average              13742.5   27.33                     $33,888                                13742           27
                                                                                                                          3




                                                                                                                        13	
  

	
  
                                                                          Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  


Table 4: HYBRID INITIAL COST, RUNNING COST, SPECIFICATIONS

HYBRID CARS (edmunds.com)               MSRP (Manufacturer's              True          EPA - City        EPA -
                                        Suggested Retail Price)           Cost to                         Highway
                                                                          Own (5
                                                                          year
                                                                          total)



Honda Insight                                                     19800
Toyta Prius                                                       22000    $38,818                 48                      45
Honda Civic                                                       23650    $37,289                 40                      45
Chevrolet Malibu                                                  25555
Toyota Camry                                                      26150    $48,866                 33                      34
Saturn Aura                                                       26325
Ford Fusion                                                       27270
Mazda Tribute                                                     28175
Ford Escape                                                       29645    $45,406                 34                      31
Mercury Mariner                                                   30090    $47,402                 34                      31
Lexus HS                                                          32000
GMC Sierra                                                        38390
Toyota Highlander                                                 41020    $53,294                 27                      25
Lexus RX                                                          42000
Lexus LS                                                          42080
Dodge Durango                                                     45040
Chrysler Aspen                                                    45070    $60,172                 20                      22
Chrysler Silverado                                                47305    $60,614                 21                      22
Chevrolet Tahoe                                                   50455    $75,381                 21                      22
GMC Yukon                                                         50920
Lexus GS                                                          56550
Cadillac Escalade                                              73135      $103,054      not listed        not listed
Mercedes Benz S Class                                         110350

	
  




                                                                                                                          14	
  

	
  
                                                                                            Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  




Table 5:                           1990           1991           1992           1993          1994            1995             1996            1997             19


Highway, total (registered       193,057,376   192,313,834    194,427,346    198,041,338   201,801,921    205,427,212      210,441,249     211,580,033       215,4
vehicles)

Passenger car                    133,700,496   128,299,601    126,581,148    127,327,189   127,883,469    128,386,775      129,728,341     129,748,704       131,8


Light Trucks                      48,274,555     53,033,443    57,091,143     59,993,706    62,903,589      65,738,322      69,133,913      70,224,082        71,3


Total                            181,975,051   181,333,044    183,672,291    187,320,895   190,787,058    194,125,097      198,862,254     199,972,786       203,1


Growth Rate                                         -0.35%         1.29%          1.99%         1.85%            1.75%           2.44%               0.56%


Average(Last 10 years)                1.79%


Projections                            2007           2008


Passenger/Light Truck            238,731,945   243,014,645


http://www.bts.gov/publications/national_transportation_statistics/html/table_01_11.html


NADA predicts it is nearly 248 million, using that number now. http://www.nada.org/NR/rdonlyres/0FE75B2C-69F0-4039-89FE-1366B5B86C97/0/NADADa
numbers are not off.




                                                                                                                                            15	
  

	
  
                                                                                    Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  



Table 6:      HYBRID CARS SOLD

YEAR                           # of Cars Sold

       1999                          0



       2000                        9500

       2001                       20,300

       2002                       35,000

       2003                        48000

       2004                        88000

       2005                       200000

       2006                       250,000

       2007                       350,000

       2008                       320,000

Total                             1320800

Sources

              http://www.hybridcar.com/index2.php?option=com_content&do_pdf
              =1&id=66

              http://www.hybridcars.com/files/dec08-us-total-sales.gif

              http://www.bts.gov/publications/journal_of_transportation_and_stati
              stics/volume_05_number_23/html/paper_02/table_02_01.html




                                                                                                                                    16	
  

	
  
                                                                                  Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  



Table 7 - Distribution of Households by Number of Household Vehicles, for Each Income Class

            Household income                                         Number of Household Vehicles


                                         0 vehicles         1 vehicle         2 vehicles             3 or more             Total Percent
                                                                                                      vehicles

                                       Percent     SE     Percent       SE   Percent     SE       Percent        SE

0-24,999                                   19.5    0.61       47.9   0.73        22.2   0.53            10.4    0.41                       100.0

25,000-49,999                                3.3   0.29       33.7   0.61        40.6   0.54            22.5    0.51                       100.0

50,0000-74,999                               1.4   0.23       20.6   0.69        45.7   0.85            32.4    0.65                       100.0

75,000-99,999                                0.8   0.24       11.8   0.89        47.9   1.22            39.5    1.02                       100.0

100,000 +                                    1.3   0.26        9.6   0.66        48.2   1.10            40.9    0.98                       100.0

Overall                                      7.2   0.20       30.8   0.31        37.7   0.26            24.3    0.24                       100.0

Note: Sample covers about 26 thousand households, SE = standard error. Numbers may not add to 100 percent due to rounding.

Source: Calculated from the 2001 National Household Travel Survey, Household File, U.S. Department of Transportation, Bureau
of Transportation Statistics and Federal Highway Administration.


http://www.bts.gov/publications/journal_of_transportation_and_statistics/volume_05_number_23/html/paper_02/table_02_01.html




                                                                                                                                  17	
  

	
  
                                                                                           Azage,	
  Hayashida,	
  Le,	
  Ojo,	
  Ronaghi	
  	
  



Table 8: INCOME LEVELS
Total                                         116783            Average               U.S.Worki     151,062,8
Avg # of People/Household                   1.293545            Household             ng Age       Cumulati83     # of          Income/Wor
Income Levels, Number of Households               95            # of workers
                                                                Source:               Percentag
                                                                                      Populatio    ve       0           0
                                                                                                                  Workers       ker
Under $2,500                                    2420   2.07%            3,130,381
                                                                (factfinder.census.        2.07%
                                                                                      e (16+)
                                                                                      n                2.07%
$ 2,500 to $ 4,999                               993   0.85%            1,284,491          0.85%       2.92%      3,130,381
                                                                gov)
$ 5,000 to $ 7,499                              1868   1.60%            2,416,344          1.60%       4.52%      4,414,872
$ 7,500 to $ 9,999                              3174   2.72%            4,105,715          2.72%       7.24%      6,831,216
$10,000 to $12,499                              3565   3.05%            4,611,491          3.05%      10.29%      10,936,93
$12,500 to $14,999                              3486   2.99%            4,509,301          2.99%      13.28%      15,548,42
                                                                                                                  1
$15,000 to $17,499                              3753   3.21%            4,854,678          3.21%      16.49%      20,057,72
                                                                                                                  2
$17,500 to $19,999                              2974   2.55%            3,847,006          2.55%      19.04%      24,912,40
                                                                                                                  3
$20,000 to $22,499                              3731   3.19%            4,826,220          3.19%      22.23%      28,759,40
                                                                                                                  1
$22,500 to $24,999                              3070   2.63%            3,971,186          2.63%      24.86%      33,585,62
                                                                                                                  7
$25,000 to $27,499                              3728   3.19%            4,822,339          3.19%      28.05%      37,556,81
                                                                                                                  7
$27,500 to $29,999                              2586   2.21%            3,345,110          2.21%      30.27%      42,379,15
                                                                                                                  3
$30,000 to $32,499                              3797   3.25%            4,911,594          3.25%      33.52%      45,724,26
                                                                                                                  2                25123.9626
$32,500 to $34,999                              2421   2.07%            3,131,675          2.07%      35.59%      50,635,85
                                                                                                                  2
$35,000 to $37,499                              3384   2.90%            4,377,359          2.90%      38.49%      53,767,53
                                                                                                                  6
$37,500 to $39,999                              2404   2.06%            3,109,684          2.06%      40.55%      58,144,89
                                                                                                                  1
$40,000 to $42,499                              3548   3.04%            4,589,501          3.04%      43.59%      61,254,57
                                                                                                                  0
$42,500 to $44,999                              2202   1.89%            2,848,388          1.89%      45.47%      65,844,07
                                                                                                                  5
$45,000 to $47,499                              2906   2.49%            3,759,045          2.49%      47.96%      68,692,46
                                                                                                                  6
$47,500 to $49,999                              2077   1.78%            2,686,695          1.78%      49.74%      72,451,50
                                                                                                                  4
$50,000 to $52,499                              3256   2.79%            4,211,786          2.79%      52.53%      75,138,20
                                                                                                                  9
$52,500 to $54,999                              1927   1.65%            2,492,663          1.65%      54.18%      79,349,98
                                                                                                                  4
$55,000 to $57,499                              2595   2.22%            3,356,752          2.22%      56.40%      81,842,65
                                                                                                                  9
$57,500 to $59,999                              1787   1.53%            2,311,567          1.53%      57.93%      85,199,40
                                                                                                                  2
$60,000 to $62,499                              2789   2.39%            3,607,700          2.39%      60.32%      87,510,97
                                                                                                                  4
$62,500 to $64,999                              1659   1.42%            2,145,993          1.42%      61.74%      91,118,67
                                                                                                                  1
$65,000 to $67,499                              2112   1.81%            2,731,969          1.81%      63.55%      93,264,66
                                                                                                                  0
$67,500 to $69,999                              1449   1.24%            1,874,348          1.24%      64.79%      95,996,63
                                                                                                                  3
$70,000 to $72,499                              2189   1.87%            2,831,572          1.87%      66.66%      97,870,98
                                                                                                                  2                56046.7141
$72,500 to $74,999                              1505   1.29%            1,946,787          1.29%      67.95%      100,702,5
                                                                                                                  0
$75,000 to $77,499                              1998   1.71%            2,584,505          1.71%      69.66%      102,649,3
                                                                                                                  52
$77,500 to $79,999                              1314   1.13%            1,699,719          1.13%      70.79%      105,233,8
                                                                                                                  39
$80,000 to $82,499                              1872   1.60%            2,421,518          1.60%      72.39%      106,933,5
                                                                                                                  44
$82,500 to $84,999                              1220   1.04%            1,578,126          1.04%      73.44%      109,355,0
                                                                                                                  63
$85,000 to $87,499                              1573   1.35%            2,034,748          1.35%      74.78%      110,933,2
                                                                                                                  81
$87,500 to $89,999                              1123   0.96%            1,452,652          0.96%      75.74%      112,967,9
                                                                                                                  07
$90,000 to $92,499                              1566   1.34%            2,025,693          1.34%      77.08%      114,420,6
                                                                                                                  55
$92,500 to $94,999                               987   0.85%            1,276,730          0.85%      77.93%      116,446,3
                                                                                                                  07
$95,000 to $97,499                              1216   1.04%            1,572,952          1.04%      78.97%      117,723,0
                                                                                                                  00
$97,500 to $99,999                               972   0.83%            1,257,327          0.83%      79.80%      119,295,9
                                                                                                                  30
$100,000 and over                              23586    20.20          30,509,575         20.20%     100.00%      120,553,3
                                                                                                                  82
Total                                         116782   100.00
                                                           %          151,062,883        100.00%     200.00%      151,062,8
                                                                                                                  08
Income Segmentation (#Population, Households in            %                                                      302,125,7
                                                                                                                  83
Standard Income -Wages and Salaries
thousdands)                                                                                                       66
tp://www.census.gov/macro/032008/rdcall/
Reported Before Tax- A good indicator for
1_001.htm, discretionary spending that
amount of Data as of 2007
will be available after taxes, credits, and
other forms of expenses




                                                                                                                                           18	
  

	
  

				
DOCUMENT INFO
Shared By:
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posted:9/16/2010
language:English
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Description: EV refers to the vehicle power supply as a driving force, with the motor drive the wheels moving in line with road traffic, vehicle safety regulations requirements. Because of the smaller environmental impact than conventional cars, is widely optimistic about its prospects, but the current technology is not yet mature.