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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

Sullivan
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:

  1. 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.
  2. Consumer response under a gasoline price shock.
  3. Consumer response to a vehicle model price change.
  4. The introduction and penetration of vans and SUVs into the US marketplace.
  5. 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.

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Comments

SJC

Mathew,

Go and take your "snotty little opinions" and shove them where the sun don't shine. We use to have some good people commenting on this site, now we have idiots like you.

Matthew

Aw, he's all mad! Poor little guy.

aym

Mathew,

no man and certainly no country is an island. Virtually everything you own was created by collective action and partially subsidized in some fashion. The very gasoline you used is a result of US foreign affairs butting in someplace.

There exists crossovers in environmentalism to conservatives like oldtime beliefs of Teddy Rooselveldt's or to libertarianism. It's the small minded that instantly equates the socialism to environmentalism.

The idea that the environmentalists are firmly in bed with the socialists is a delusion, created and maintained by neo-conservative ideologues who sell that anything done, escpecially for social reasons must be inherintly evil or bad. Why is that? Frankly a leftover brainwashing of the American volksgeist from the 50's that frankly the more intelligent, read and educated portion of the world's population recognize as the ugly american.

The US spends far more in health care and receives so much less than many other countries that it is considered a joke.

Matthew, your view on this is so small considering the bigger picture, you deserve the disdain that others are heaping on you. The vehicle you drive has already received so many hidden subsidies, even before the bailout, that your outrage frankly is full of hypocrisy. You think it's bad you are supporting things? Guess what, people who don't like you or your beliefs are presently supporting you. Like it or not.

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