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Achieving a considerable reduction in LDV fleet GHG emissions and petroleum use through adoption of alternative fuels and powertrains is not likely to be accomplished by appealing to altruism. Once early adopters have made their choices, the remaining 84 percent of consumers are going to have to be persuaded either that the alternative fuels and vehicles offer them an improvement over their present preferences, or that there is a pretty immediate economic benefit to be had in making the switch.

Environmental benefits simply do not appear to be a determinant for consumers in large purchases, such as motor vehicles. Conventional wisdom holds that American consumers want big cars and trucks with large and powerful engines and that fuel economy just is not that important because gasoline and diesel prices in the United States are so much lower than in much of the rest of the world. Those attitudes certainly have shaped U.

Those statements reflect consumer choices influenced at least in part by continued low pricing of gasoline. History, however, has shown that the march toward efficiency stops when fuel prices have stabilized or dropped after a run-up see Figure 4. Still, such attitudes may be generational. Most Americans under 40 have now been exposed to smaller vehicles, mainly from the import brands, and, as sales trends show, acceptance of compact cars in the U. The recession of and the continued economic slump that has followed certainly have influenced that growth, as have increasing fuel prices in recent years.

See details in Section 4. Numerous studies have attempted to quantify the needs and desires that drive LDV-purchase decision making. Their findings are fairly consistent and are exemplified by a recent stated-preference study by Capgemini that ranked the most important factors gathered from 2, online respondents in the United States, Europe, and Asia and found reliability, safety, vehicle price, fuel economy, and the variety and cost of options all in the top Consumers who identified themselves as planning to purchase a new vehicle within the next 15 months were asked to rank the most important factors they would apply to their car-purchase decision making see Table 4.

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In addition,, respondents were asked about their interest in so-called green vehicles, and 72 percent of U. Only 13 percent. TABLE 4. Capgemini is not the only one finding that income tax credits, although currently the preferred federal policy for incentivizing AFV purchases via subsidies, may not be the best route to take.

In addition to providing immediate gratification, direct rebates, sales-tax credits, or other types of cash subsidies, including subsidies enabling the manufacturer to lower the retail price of the vehicle, would enable consumers to rationalize that the cost of the vehicle is less than its so-called sticker price. When applied to the amount being financed, such direct subsidies lower the monthly payment and can help a greater number of consumers qualify for loans to purchase new AFVs.

Tax credits, in contrast, do not affect the qualifying terms or monthly payments for purchasers although they may be used to lower monthly lease costs, as has been the case with the Chevrolet Volt PHEV and Nissan Leaf BEVs. Even in the aftermath of publicity about the possibility of future oil shortages and the need for increased national energy security, gasoline as a fuel is not seen by most car-buying consumers as a negative. Indeed, there is a consensus in consumer preference surveys that unless there is intervention through government policy, internal combustion engines powered by petroleum or a competitively priced drop-in biofuel if such a fuel is commercialized are likely to remain the predominant powertrain in LDVs in the United States for decades to come.

A sampling of recent studies bears this out. Hybrid-electric vehicles HEVs were second in popularity, with 26 percent of respondents identifying them as their first choice, followed by compressed natural gas vehicles CNGs at 13 percent, hydrogen fuel cell electric vehicles FCEVs at 18 percent, and BEVs at just 9 percent. A stated-preference survey of 3, consumers in the United States, Germany, and China, conducted in the first quarter of by Gartner, Inc.

Respondents in the Gartner study were permitted to make more than one selection and FCEVs were not included in the choices. Although such surveys have value in indicating trends, they do not reflect present realities. Hybrid vehicles, for instance, still account for less than 3 percent of annual U.

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Reasons for the strong preference for continued use of gasoline-powered vehicles appear to be based strongly on up-front cost—they are demonstrably less costly to purchase than alternatively fueled vehicles. Convenience, especially the ready availability of fuel, is the second most-stated reason for preferring petroleum. The United States has a widespread gasoline service station network that serves even the smallest communities, and gasoline prices in the United States remain among the lowest in the world. Both factors make it incredibly convenient for consumers to continue purchasing and using gasoline-fueled vehicles.

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Perceived reliability of ICEVs versus alternative vehicles is another key factor, with some researchers finding that consumers believe conventional ICEVs are far more reliable than alternative vehicles Synovate, Many consumers responding to attitudinal surveys say that they place fuel economy at or near the top of the list of factors they will consider when buying their next vehicle.

But when it comes to applying potential fuel economy savings to the purchase decision, most research has shown that consumers just do not do it. So even though a case can be made for long-term fuel and maintenance savings making some AFVs less costly to own than gasoline vehicles over a period of years, a tendency by consumers to ignore such savings potential would make it more difficult for manufacturers and policy makers to persuade consumers to consider alternative fuels and vehicles with higher prices than conventional ICEVs.

Given the uncertainty in future fuel savings it is reasonable for a consumer to be reluctant to pay more for higher fuel economy. One of the most well established findings of behavioral economics is that when faced with a risky bet, typical consumers count potential losses approximately twice as much as potential gains and exaggerate the probability of loss.

This approach can result in an undervaluing of future fuel savings by half or more relative to what would otherwise be expected Greene, a. Other possible explanations have been proposed, including shortsightedness and the lack of information or the necessary skills to estimate future energy savings. There is not an established consensus on this subject, however, and the published literature contains evidence to support both views—that consumers accurately value and that they undervalue future fuel savings Greene, b.

Anderson et al. Because the evidence for undervaluing appears to be stronger, the analyses and modeling in Chapter 5 assume that consumers behave as though they required a simple 3-year payback for an expenditure on higher fuel economy. Overall, there is little doubt that a significant portion of consumers are interested in fuel efficiency. A variety of recent studies and surveys have shown that fuel economy is a top concern of 60 to 80 percent of prospective auto buyers Consumer Reports, a.

Just how important, however, seems to depend on what it will cost the consumer to achieve a higher degree of efficiency. Omatoso, Troy, Michigan, September30 Global Manufacturing Industry Group, But as more AFVs come into the marketplace, the issue seems to remain a fertile field for future research. In a survey of consumer adoption literature, researchers at the University of Wisconsin found broad agreement that there is consider-. Now that there are some of these vehicles in the marketplace most notably conventional hybrids, although at this writing there is one compressed natural gas passenger car, two BEVs, and one PHEV in the market, pricing for several more BEVs and PHEVs has been announced, and there are several test programs utilizing fuel-cell electric vehicles , it has become clear that initially these vehicles will cost more and in most cases provide a reduced user experience—based on range and fueling convenience issues—than conventional ICEVs.

As a result, more recent studies have predicted relatively slow and low adoption rates for AFVs, typically—in the aggregate—below 20 percent of the U. Although cost and convenience are the most-often cited reasons for anticipated low adoption rates, they are but are two of several significant barriers to AFV adoption cited when consumers are asked to list, or to pick from a prepared list, those things that most concern them about alternatively fueled vehicles Table 4. Such efforts will be needed to help overcome objections to vehicles that at least initially could offer less performance, range, utility, and fueling convenience and will cost consumers more to purchase than conventional ICEVs with advanced-technology gasoline powertrains that will not have the higher initial costs.

Power ; Nixon and Saphores Power and Associates set out to determine the perceived drawbacks to specific types of AFVs. Researchers found that while there are differences in degree and in rankings, the top reasons in all cases HEVs, clean diesel, PHEVs, and BEVs [fuel-cell electric vehicles were not asked about] were the so-called initial cost premium consumers attached to most AFVs and the perceived long-term cost of ownership exclusive of the purchase price premium , which some respondents believed to be higher for an AFV than for a conventional ICEV.

This should not be an issue with PHEVs because they can be driven using their gasoline engines or engine-generators and are not solely dependent on batteries, showing continuing consumer confusion about the differences among the advanced powertrain technologies. Range also could be an issue with AFVs using compressed natural gas. The only factory-built model currently in the market is the Honda Civic Natural Gas. Its design retrofits the CNG fuel storage and delivery system into a vehicle designed for petroleum-based gasoline.

However future CNGV are likely to be designed from the ground up and could better house larger fuel tanks, thus enabling them to deliver improved range. The move to more efficient, lower-emission LDVs almost certainly means that cars and trucks, regardless of the fuel source or powertrains, will have to be lighter than they are today. Present and proposed federal Corporate Average Fuel Economy CAFE policy is devised to enable larger vehicles to continue to meet the standards and does not necessarily lead to downsizing of the fleet to go along with the lightweighting.

But downsizing has occurred, principally for economic reasons stemming from the recession of and subsequent slow economic recovery and prolonged period of high unemployment. While that raises concern among those who find that consumers today do not want to give up size for efficiency, it might not be as big an issue in the future. Sales of larger vehicles could begin climbing as the economy improves in the future. But as younger consumers who today are in the used-car market or still are too young to be car purchasers begin replacing Baby Boomers and Gen-Xers in the new-car market, there may be a generational shift toward a preference for smaller cars.

In the past decade, according to sales data from online automotive information provider Edmunds. For decades, sales activity for small cars and trucks seemed to correspond closely to fluctuations in retail gasoline prices. But as Hughes et al. Price run-ups may no longer lead as rapidly as in the past to the behavior changes once commonly associated with periods of unusually high gas prices—driving less and buying smaller and more efficient vehicles are two examples.

In addition, fleet fuel efficiency has increased in recent years, dampening the impact of rising gasoline prices. Both Edmunds. Each recently compared small-car consideration rates to fluctuations in gasoline prices. Both indicate that while consideration rose sharply and in lockstep with price run-ups in the first half of and the last half of , consumers may not be increasing their consideration of small cars at the same pace in the most recent series of gasoline price hikes, which began in September Figure 4.

That data and the previously mentioned small-vehicle sales versus fuel price data see Figure 4. This would mean that policies based on only modest increases in fuel taxes or other fuel-efficiency related fees would be less likely to succeed than policies such as CAFE standards, or. Consideration spike in the period of February to September in corresponds to the U. Peterson, Troy, Michigan, August 25, Undoubtedly, the tipping point will continue to increase with economic recovery and improving fuel efficiency for ICEVs. Advanced alternative fuels and powertrains are still rare and consumers have had very little real-world experience with them.

In fact, there is some concern that this lack of knowledge has led to confusion in the marketplace about the characteristics, values, and drawbacks of the various types of AFVs and has caused some degree of consumer paralysis Synovate, Researchers on both sides of the country, however, have found that word of mouth can be a powerfully influential tool, pointing to the potential value both of public demonstration and deployment programs and of public information campaigns. Zhang et al. Such studies show that getting AFVs into the market, even in small numbers, would generate word-of-mouth reports that could help put to rest although there is also the possibility that some will reinforce the negative concerns about barriers that appear to be limiting AFV acceptance at this point.

Price disparity, however, still can be a strong disincentive, as has been shown by the slow market penetration of conventional hybrid vehicles, which still account for less than 3 percent of the U. LDV market more than a decade after introduction. Consumers do not have many negative attitudes about hybrids any longer. But because most HEVs still have a price premium when compared to comparably sized and equipped ICEVs, sales have risen and fallen with gasoline prices in recent years but overall have leveled off in the range of 2.

It should be pointed out again that these early positive reports are coming from a unique and generally accepting group of AFV purchasers, the so-called early adopters whose interest in and desire to possess advanced technologies invariably make them prone to acceptance. For example, the heating system on a BEV is a significant drain on the battery charge, reducing range when in use. It is uncertain whether a potential mainstream buyer would see that as a plus or a minus. The availability of fuel, including battery-charging facilities for BEVs, is also a major issue affecting consumer willingness to acquire AFVs.

There are so few of the vehicles and so little infrastructure available at present that it is not possible to determine the necessary balance. There often is no financial incentive for the owner of a flex-fuel vehicle to purchase E While a gallon of E85 may cost less than a gallon of gasoline, it delivers significantly fewer miles. The CNG conversion program ended—dropping from 2, a month in to a month in —following a change of administrations that saw significant curtailment of government subsidies for the program. To painlessly achieve any necessary transition to alternative light-duty cars and trucks, the new-generation vehicles intended to replace petroleum-burning LDVs will have to provide utility, value, creature comforts, style, performance, and levels of convenience in fueling and repair and maintenance service that closely replicate those of the liquid-fueled vehicles being phased out.

Most people do not want to pay more for a green vehicle, and of those who are willing, most would expect fuel and other savings to recoup the additional purchase expense over their period of ownership. Only 6 percent of U. So although consumers overwhelmingly say that they want fuel efficiency and energy security, they have not demonstrated a willingness to pay much extra for it or to accept inconvenience in order to attain it.

Vehicle purchase price, the long-term cost of ownership, the time it takes to refuel, the availability and cost of fuels, and the perceived need to downsize and to surrender performance attributes such as speedy acceleration and cargo and towing capacity all are cited in various studies as reasons people are not interested in AFVs. Some of this is due to lack of information, and studies such as those conducted by Axsen and Kurani and Zhang et al. Some of these barriers, of course, are likely to change over time. As additional advanced-technology vehicles are placed into service, public familiarity with and knowledge of their advantages, and will improve, perhaps mitigating perceived disadvantages.

AFVs also will develop a track record for resale value—a key component in determining overall cost of ownership and one that is missing now because few of the vehicles have been in the market long enough to develop a resale value history. Early estimates published by the manufacturers and a few ratings companies and analysts show that BEVs and PHEVs are thought to have lower lease residual values, an indicator of marketplace resale value.

Pike Research analyst David Hurst estimated in that both the Nissan Leaf and the Chevrolet Volt would have residuals of around of 42 percent at 3 years—lower than either the popular Toyota Prius, which has a 60 percent residual value at 3 years, or corresponding conventional ICEVs such as the Nissan Versa a Leaf counterpart or the Chevrolet Cruze a Chevrolet Volt counterpart , both at 52 percent Hurst, The relatively rapid rate of performance improvement and cost reduction that is characteristic of some new technologies can both help and harm rapid adoption of AFVs, fostering a larger market by lessening both cost and convenience barriers.

Rising production volumes for biofuels could bring down their costs and make them more widely available, similarly addressing two barriers in ways that can accelerate expanding demand. Improved batteries and battery-charging rates could help reduce or even eliminate BEV range anxiety, fostering a larger market by lessening both cost and convenience barriers. Improvements in materials and engineering could make it possible to produce AFVs that are competitive with gasoline vehicles with respect to cargo capacity, towing ability, and other performance characteristics, and without the cost premiums that would inhibit widespread adoption.

Conversely, rapid rates of technology advancements could inhibit diffusion beyond an early-adopter segment. Such progress would hasten the obsolescence of earlier generations of an advanced AFV technology and also suppress residual values. For example, if ongoing improvements in battery technology, such as steadily decreasing costs and rising performance, reduce the purchase price of a newer BEV relative to older BEVs still operating within their battery life expectancies see Chapter 2 , then early AFV models could depreciate more rapidly than is typical in the car market.

This could lead to expectation among consumers of additional advances in the future, and a corresponding uncertainty about how well new generations of BEVs would hold their value if additional advances do indeed occur. This uncertainty could inhibit purchases by consumers concerned about resale value or could result in unfavorable lease terms. However, because of the time it takes for automakers to bring new technologies into their fleets and for the national LDV fleet to turn over, these barrier modifications would have to be in place by or before to have a great impact on the fleet in Absent a national emergency that requires consumers to abandon the gasoline or diesel ICEV, achieving the volumes needed to realize sufficient consumer acceptance in the early years of a planned transition to AFVs is unlikely without significant government policy intervention.

The simulations described in Chapter 5 suggest that the types of AFVs that might be needed to achieve the desired levels of petroleum and GHG reduction are those that initially will carry a large price premium because of their technology content. See Figure 2. In addition, the superior energy efficiency of those alternative vehicles would return more than enough benefit to consumers, in terms of reduced fuel consumption, to offset any cost premium that did exist. The trick will be to persuasively convey this information to consumers.

Anderson, Soren, R. Kellogg, and J. Cambridge, Mass. Automotive News. Leasing Boom? Not So Fast. March 7, Accessed April 3, Axsen, J.

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Davis, Calif. Beresteanu, A. Gasoline prices, government support, and the demand for hybrid vehicles in the U.

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International Economics Review 52 1 Boston Consulting Group. Boston, Mass. Listening to the Voice of the Consumer. Caulfield, B. Farrell, and B. Transport Policy 17 6 Consumer Reports. Accessed on May 30, Accessed on August 12, Crain, K. If you build it, they will come. Automotive News 85 April 4 Deloitte Development LLC. Gaining Traction. Automotive Market.

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Access to knowledge for consumers: Reports of Campaigns Research 2008-2010 Access to knowledge for consumers: Reports of Campaigns Research 2008-2010
Access to knowledge for consumers: Reports of Campaigns Research 2008-2010 Access to knowledge for consumers: Reports of Campaigns Research 2008-2010
Access to knowledge for consumers: Reports of Campaigns Research 2008-2010 Access to knowledge for consumers: Reports of Campaigns Research 2008-2010
Access to knowledge for consumers: Reports of Campaigns Research 2008-2010 Access to knowledge for consumers: Reports of Campaigns Research 2008-2010
Access to knowledge for consumers: Reports of Campaigns Research 2008-2010 Access to knowledge for consumers: Reports of Campaigns Research 2008-2010
Access to knowledge for consumers: Reports of Campaigns Research 2008-2010 Access to knowledge for consumers: Reports of Campaigns Research 2008-2010

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