Consumers' willingness to pay for alternative fuel vehicles: comparative analysis between US and Japan

Abstract This paper conducts conjoint analysis using a mixed logit model to estimate consumers' willingness to pay (WTP) for electric vehicles (EV) and plug-in hybrid electric vehicles (PHEV) on the basis of an online survey carried out in the US and Japan in 2012. We also carry out a comparative analysis across four US states. We find that on average the US consumers are more sensitive about fuel cost reduction and fuel station availability, whereas Japanese consumers are more sensitive about driving range and emissions reduction. As for the comparative analysis across the four US states, we find that WTP for fuel cost reduction varies significantly, and is the greatest in California. We use the estimates obtained in the conjoint analysis to consider EV/PHEV diffusion rates under several scenarios. In a base case scenario with relatively realistic attribute levels, conventional gasoline vehicles still dominate both in the US and Japan. However, in an innovation scenario with significant 1 Keywords: willingness to pay; conjoint analysis; discrete choice model; electric vehicles (EV); plug-in hybrid electric vehicles (PHEV) JEL Classifications: D12, O33, Q42, R40 purchase price reduction, we observe a high penetration of alternative fuel vehicles both in the US and Japan. We illustrate the potential use of conjoint analysis for forward-looking policy analysis, with the future opportunity to compare its predictions against actual revealed choices. In this case, increased purchase price subsidies are likely to have a significant impact on the diffusion rates of alternative fuel vehicles.