UMTRI Agent-Based Simulation Study Concludes US PHEV Annual Sales Could Reach 4-5% With Fleet Penetration of 2+% by 2020 If Subsidies Are in Place
07 August 2009
| Fleet penetration of PHEV by 2020 in different scenarios. The first character of the scenario represents the price of gasoline at simulation termination, the second represents “yes” or “no” on a manufacturer subsidy, and the third represents “yes” or “no”on a sales tax exemption. Source: Sullivan et al. 2009. Click to enlarge. |
Annual sales of plug-in hybrid electric vehicles (PHEVs) in the US could reach 2% – 3% with fleet penetration of around 1% by 2015, according to a new study by researchers at the University of Michigan Transportation Research Institute (UMTRI). By 2020, sales could reach around 4% – 5% with fleet penetration a little more than 2%. And in 30 years, they could be around 20% of sales with a fleet penetration of about 16%.
However, the team notes in the study, “PHEV marketplace penetration: An agent based simulation”, to achieve that level of penetration given the additional cost of the vehicles, subsidies in addition to the Federal tax credit already in place are critical. In the base case (which includes the current tax credit), “both fleet penetration and sales penetration are feeble at best”. Fleet penetration would be less than 1% in ten years, the study finds.
The researchers developed an agent-based model (virtual automotive marketplace, VAMMP) to characterize the penetration of new vehicle penetration into the marketplace under a variety of consumer, economic and policy conditions. Agent-based modeling (ABM) is a simulation method that creates a virtual (computer-based) market built out of finite collection of heterogeneous individuals that participate in the market. For this study, the agent-based model comprises four classes of decision makers: consumers, government, fuel producers and vehicle producers/dealers.
Agents can choose from twelve models of vehicles produced by three OEMs. At the end of each cycle, car dealers review sales and revenues, replenish the new car lots consistent demand and adjust the prices of used cars based on virtual market supply and demand. Government monitors system wide fuel use and carbon emissions and vehicle introductions and implements policies (fuels, vehicle tax incentives, etc.) to meet policy objectives. Finally, fuel producers provide fuels for automotive application and change prices both exogenously (petroleum induced gasoline price shock) and endogenously (competition between two fuel types).
The model was developed to address the general question of how do new technologies migrate into their appropriate marketplaces, and in particular the vehicle marketplace.
To validate the model, exercises included:
- Establish and demonstrate normal system behavior under stress free conditions (no fuel price increases, no vehicle price changes, no new vehicles being added) in the marketplace.
- Consumer response under a gasoline price shock.
- Consumer response to a vehicle model price change.
- The introduction and penetration of vans and SUVs into the US marketplace.
- The introduction of HEVs to the marketplace.
After validation was completed, they applied the model to PHEVs.
All scenarios in the PHEV study start with the base case: the assumption that the current federal tax rebate program for PHEVs (a tax credit ranging from $2,500 to $7,500 based on battery pack capacity) is in force.
In the first year of simulation time, a PHEV-10, PHEV-20, and PHEV-40 (10-, 20-, and 40-mile electric range, respectively) are introduced to the marketplace. The price of gasoline is $2 per gallon at the start of all simulations; for some scenarios, the price rises in steps to $4 per gallon by simulation termination. Electricity prices (9.5¢/kWh) are constant for all scenarios, and only home charging is available. All simulations run for 360 cycles or 30 years of simulation time (i.e., each cycle is one month).
It is clear from the figures that both fleet penetration and sales penetration are feeble at best based solely on base case circumstances...Even a sales tax exemption added onto the base case has comparatively little impact. This is not surprising, as PHEVs cost considerably more than their conventional counterparts—and price is important.
...our simulations show that large increases in gasoline prices, whether induced by higher taxes or higher petroleum costs, result in consumers moving toward more fuel-efficient vehicles and a few agents being forced out of vehicle ownership. However, the trend toward purchasing more fuel efficient vehicles is not observed for PHEVs. In fact, the market penetration level at 2040 is 19.8% ± 3.4% for scenario 2-Y-Y [gasoline at $2/gallon] and 12.7% ± 4.5% for 4-Y-Y [gasoline at $4 per gallon]. The reason for this is that unlike inexpensive, fuel efficient, conventional vehicles, PHEVs range from cost parity to more expensive to own and operate than their conventional counterparts at a time when some consumer agents need to down-size to more fuel efficient vehicles. This results in PHEV sales being greater in periods of low to intermediate gasoline prices and less so at higher prices.
—Sullivan et al.
The researchers suggest that a gasoline tax increase of about 5¢ per gallon would support government funding to incentivize PHEV sales. They also note that because the individual vehicle replacement rate is a limiting factor in any market turnover scenario, it will take time to turn over the fleet even if new vehicle technologies have marketplace acceptance.
While the VAMMP model characterizes at least qualitatively the automotive marketplace, more calibration is needed to provide semi-quantitative to quantitative results, they concluded. Such expansion and calibration could include other dynamic factors, such as OEM competition, fuel producer competition, OEMs behaving strategically, and others.
Resources
Sullivan, J. L.; Salmeen, I. T.; and Simon, C. P. PHEV marketplace penetration: An agent based simulation (UMTRI-2009-32)
Awesome. So not only am I helping buy people's cars for them now via cash-for-clunkers, but I'll probably be buying them for the rest of my life.
Posted by: Matthew | 07 August 2009 at 08:24 AM
It really comes down to the price (and expected price) of fuel.
High efficiency vehicles are rate int eh US becasue fuel is very cheap.
Europe has about 50% diesel cars, but gasoline varies from e1 - e1.30 / litre (say $1.40 - $1.80 / litre). Diesel is a bit cheaper, but gets 30% better MPG. Diesel has been accepted in all areas (BMW, Merc all sell loads of diesels), especially SUVs + MPVs.
The price we pay for this is urban air quality, but this will improve as newer standards kick in.
As a rule, people are rational and will only buy high mpg cars if fuel is expensive, and in the US, it is not.
Also, as we have seen, fuel prices do not increase in an orderly manner, they shoot up (and down) - which makes planning difficult, but barring a miracle, or a massive crash, I can see gasoline above $4 by 2020.
China and India will see to that.
Posted by: mahonj | 07 August 2009 at 08:40 AM
The crucial number that is not mentioned is what will be the absolute price of the hybrids? Without them stating what they are assuming it to be, their numbers don't have much meaning. Even manufacturers don't know what they're going to price them at. I think this study grossly underestimates the public's willingness to switch over, and for manufacturers to significantly reduce cost. At a NiMH price of $500 / kW-hr, a good PHEV could be brought to market for under $25,000, and with further cost reductions due to efficiency in manufacturing this could reasonably drop to below $20,000.
Posted by: Mark_BC | 07 August 2009 at 09:06 AM
It is obvious that buyers are more interested in the initial vehicle price than the net cost over 5 to 8 years.
This may not change unless fuel price is raised enough for most of us to take notice. That seems to be well above $4/gal. We could get there with a variable progressive gas tax to keep fossil fuel between $5 and $6/gal regarless of crude oil price.
Part of the revenues from this variable gas tax could be used to offset the extra cost of PHEVs and BEVs, mainly the battery pack, for the next 10 years.
Local production of alternative fuels would quickly become profitable. Crude oil imports would drop quickly. GHG would also drop. Trade deficits would drop. Government deficits would drop. Sales of ICE vehicles would drop while electrified vehicles sales would multiply.
The above study would have to be redone and corrected.
Posted by: HarveyD | 07 August 2009 at 09:46 AM
All research funding for alternative energy vehicles will be ineffective unless fossil-fuel prices remain consistently at a high level. The government should protect its investment in energy research funding by maintaining a progressive increase in fuel prices of at least $4-6$ per gallon.
This increase in fuel price should be gradual enough to avoid undue stress on the fragile economy, but announced well in advance so that people and businesses can take appropriate action. A time table for fuel prices stabilization will be announced well in advance, perhaps ten years in advance. This will be a win-win situation for both the government and the people. The government may get some additional revenues that will help balance the budget and paying off the huge debt burden, and the people will be insulated from economic devastation due to rapid fuel price escalation that will catch 'em with their pants down!
How will this benefit the oil industry, when their protential huge profits will be affected? Well, they are people, too, whose fortune and well-being will be tied to the economic well-being of the world. What good will do when one have a lot of money but live in fear of escalating crime, corruption and government instability? Remembering the Bolshevik revolution and other in the past century, when the rich and aristocratic were deposed? And then, there is that Global Warming thing looming in the future that will affect the rich and poor, alike...!
Posted by: Roger Pham | 07 August 2009 at 10:34 AM
"Fleet Penetration of 2+% by 2020"
I know I have said this before, but it is worth repeating. If 2% of the cars on the road get 40% better mileage, that amounts to about 1% ethanol mixed with the gasoline, when it comes to reducing oil imports. We are at 5% now and with cellulose ethanol we can get to 10%. Make all vehicles that are manufactured from now on FFVs, so that they can use cellulose E85 and we will make progress.
Posted by: SJC | 07 August 2009 at 11:02 AM
Matthew, instead of complaining about how you're buying cars for other people why don't you get in on it and let these "other people" buy you a new car?
Posted by: ai_vin | 07 August 2009 at 01:49 PM
'Based on AESC’s testing, the cells will retain more than 80% capacity after 7 years, including 70,000 km (43,496 miles).'
http://www.greencarcongress.com/2008/05/aesc-lithium-io.html
This seems to be the battery used in the Nissan Leaf.
If the batteries in plug-in hybrids have similar lifespans, then it sounds to me as though they are a waste of money, save perhaps in areas like London where if you only do around 16miles a day then exemption from the congestion charge will pay for your $10k battery over 7 years.
For the Leaf it works out at around 23cents/mile, just for the battery.
For the GM Volt if the battery has the same lifespan it would work out at 15cents a mile for their 16kwh battery.
Toyota clearly appears to be correct in it's assessment that plug-ins and pure EV's are not ready for prime-time.
The only area this might work is in the luxury segment where the high cots can be borne.
Posted by: Davemart | 08 August 2009 at 02:00 AM
I think they should delete ideas they feel threatened by.
Posted by: Reel$$ | 08 August 2009 at 03:33 AM
"If the batteries in plug-in hybrids have similar lifespans, then it sounds to me as though they are a waste of money............For the Leaf it works out at around 23cents/mile, just for the battery."
Nissan has stated that the monthly costs of running the Leaf will be less than a gasoline powered car. They plan on leasing the batteries, which is a good idea as it provides some comfort for buyers who are unsure about investing in new technology. It's also good for Nissan since they retain control of the batteries. Then if the battery pack only lasts 8 years hopefully the contract will have Nissan responsible for replacing it with a newer pack (which Nissan would feel obligated to do if it wants to continue selling new EV's), which of course by that time will be even better and cheaper, and then you continue to lease it, or maybe you'd have the option then of buying your own battery pack since by then the technology will have been proven.
You are also not taking into consideration that the spent battery packs are quite valuable since they are full of lithium. The resale value of the old battery pack will significantly help offset the initial cost. They will not get dumped into the ravines like lead acid batteries!
Posted by: Mark_BC | 08 August 2009 at 12:19 PM
Lead acid batteries are 98% recycled. If we could get to that level with NiMH or Lithium, we would be doing well. It is probably good that they are leasing the batteries until they get some more data on longevity. Like I say, put the first mass EVs in rental, let the people decide whether they like them or not.
Posted by: SJC | 08 August 2009 at 01:33 PM
ai_vin - Besides the fact that I don't own anything that qualifies as a 'clunker', it's no more right for you to buy me a new car than it is for me to buy you one.
Posted by: Matthew | 10 August 2009 at 06:24 AM
"I don't own anything that qualifies as a 'clunker'"
That's good to hear, however even though you don't have a clunker now your complaint of "I'll probably be buying them for the rest of my life" suggests that in time your car will have aged to the point it becomes a clunker - at which point you can get a new more fuel efficient one from this program.
"it's no more right for you to buy me a new car than it is for me to buy you one."
Spoken like a true American; every man for himself.
Posted by: ai_vin | 10 August 2009 at 08:56 AM
Spoken like a true American; every man for himself.
Indeed so - and proud of it.
If you don't understand why forcing everyone to buy each others' cars for them is wrong, you must be from some place far away.
Posted by: Matthew | 10 August 2009 at 12:11 PM
I'm Canadian, eh.
Posted by: ai_vin | 10 August 2009 at 01:34 PM
Which in cylon language is: Nacadian, eh.
Posted by: Reel$$ | 10 August 2009 at 02:24 PM
Actually it's the ethic of reciprocity (more commonly known as the Golden Rule) an ethical code that states one has a right to just treatment and a responsibility to ensure justice for others. Or in the language of the Bible; "do unto others as you would have them do unto you" or as Matthew ;^) quoted Jesus; "Therefore, whatever you want men to do to you, do also to them, for this is the Law and the Prophets." (Matthew 7:12)
Posted by: ai_vin | 10 August 2009 at 03:58 PM
http://www.religioustolerance.org/reciproc.htm
Posted by: ai_vin | 10 August 2009 at 04:02 PM
I rather prefer; "Regard your neighbor's gain as your own gain, and your neighbor's loss as your own loss." T'ai Shang Kan Ying P'ien
Posted by: ai_vin | 10 August 2009 at 04:06 PM
The American myth of the rugged individual for right winders lasts about as long as their unemployment extension. They scorn big government, but are more than willing to send their kids to public schools, take their social security check and rely on Medicare when needed.
Posted by: SJC | 10 August 2009 at 04:09 PM
ai_vin - If I remember the Golden Rule correctly, it's usually expressed "Do unto others as you would have them do unto you." Well, I wouldn't dream of forcing other people to pay for my car, so it's entirely reasonable that I 'do unto' them in the same fashion. And if you want to get all religious, Christianity is pretty big on the concept of free will...you should be decent to your neighbor because it is the right thing to do, not because you're compelled to.
SJC - You probably scream like a stuck pig every time we "right winders" suggest privatizing Social Security and vouchering education, don't you?
Posted by: Matthew | 10 August 2009 at 07:59 PM
I think it is you that screams like a suck pig when they talk about not extending unemployment. See, I can say stupid things like you to make a point. You do not know me and I do not know you...so let's keep it that way and not sling baseless insults.
Posted by: SJC | 10 August 2009 at 10:36 PM
Then may I suggest, SJC, that next time you feel the need to share your snotty little opinions, you keep them to yourself instead?
Posted by: Matthew | 11 August 2009 at 06:23 AM
"Well, I wouldn't dream of forcing other people to pay for my car"
But we are not talking about somebody being "forced" to buy you a car. We are talking about the many helping the few for the greater good. Everyone in the community chips in a few bucks to get the clunkers off the road so that we are not forced to breathe their dirty air nor live in a hotter world. "Regard your neighbor's gain as your own gain"
Posted by: ai_vin | 11 August 2009 at 09:10 AM
But we are not talking about somebody being "forced" to buy you a car.
Unless there's a secret opt-out form by which I can receive a refund of my share of the taxes that have gone to this program, then yes, I am being forced to buy cars for people.
You can dress it up all you like with pithy quotes from dead Chinese guys (speaking of which...if my neighbor walks over and steals my lawnmower, is his gain still my gain? Or is that only if the government steals my lawnmower and gives it to him?) and whatnot, but it's still just garden-variety socialism.
Incidentally, the fact that the modern environmental movement is so firmly in bed with the socialists is part of why the movement is in such trouble today. People are growing tired of finding do-gooders' hands in their pockets every time they turn around, whether it's in the form of 'health care reform' or cap-and-trade legislation.
At some point you (or at the very least, your American fellow travelers) are going to have to decide which of your -isms is more important - socialism, or environmentalism.
Posted by: Matthew | 11 August 2009 at 09:50 AM