Automotive Fuel Economy How Far Can We Go? (1992) / Chapter Skim
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6 THE AUTOMOBILE, FUEL ECONOMY, AND THE CONSUMER
6 THE AUTOMOBILE, FUEL ECONOMY, AND THE CONSUMER
Pages 107-121
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From page 107... ...
Throughout the period, the ratio of licensed drivers to automobile registrations remained virtually unchanged at a value of 1.2; the ratio of licensed drivers to automobiles on the road has changed from 1.37 in 1978 to 1.34 in 1989 (Motor Vehicle Manufacturers Association iMVMA]
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From page 108... ...
. 24 O ,,_1 1 1 1 1 1 1 1 1 1970 1972 1974 1976 1978 1980 1 982 1984 1986 1988 Year FIGURE 6-1 Trends in the sale and scrappage of automobiles and light trucks.
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From page 109... ...
The price of 1967-comparable cars has dropped significantly over the past two decades, even including mandated emissions and safety equipment. But consumers have chosen to spend more and more on their vehicles.2 Although some of the increase in expenditure may have been to attain additional fuel economy, undoubtedly much of it was to purchase greater performance, quality, and comfort.
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From page 110... ...
There is some suggestion that consumers watt not continue to increase their demand for optional equipment and performance. Many consumers are faced with imperfect capital markets in the sense that the size of monthly payments on a new car loan (amortized over less than the car's lifetime)
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From page 111... ...
In sum, analysis of the available information suggests that the total number of sales of new vehicles watt not grow significantly between now and 2006. Moreover, although the prices of new cars have increased significantly in constant dollar terms since the 1970s, there are reasons to believe that future price increases watt not be readily accommodated by consumers.
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From page 112... ...
. Figure 6-5 illustrates how the rational consumer trades off the increased cost of technology to improve automobile fuel economy with the resulting fuel savings.
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From page 113... ...
When the fuel price dropped substantially in the mid-19SOs, the cost of owning and operating a car dropped, as well as the additional cost associated with increased performance (since performance is inversely related to fuel economy)
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From page 114... ...
Although this figure does not reflect other factors that influence miles traveled, it does show the effect on miles traveled of changes in the price of gasoline.8 THE AGING POPUIATION MAY DEMAND FEWER SMALL CARS The mix of cars sold in the United States has changed substantially over the past two decades. Figure I-5, in Chapter i, shows the allocation of the fleet among light trucks and four automobile classes for mode} years 1975-1991.
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From page 115... ...
These demographic changes may affect aggregate consumer preferences. 1987 1 00+ 95-99 90-94 85-89 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 L 25-29 20-2 15-19 10-14 5-9 Under 5 100+ 95-99 90-94 85-89 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 Under 5 Male r r Female 1 5 4 3 2 1 0 1 2 3 4 5 Percent 2010 Male ~ F .
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From page 116... ...
30 40 50 60 Percent of Sales SOURCE: Presented to the Impacts Subgroup of the Committee on Fuel Economy of Automobiles and Light Trucks, September 16, 1991, by Chrysler Corporation based on data from Consumer Attitude Research (1991~. 9There are several reasons why older people might prefer larger cars.
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From page 117... ...
Many of the options negatively affect fuel economy through increased weight and through energy consumption. IMPACTS OF MANDATED FUEL ECONOMY ON THE CONSUMER Probably the most subtle impacts of mandated fuel economy are those associated with the consumer.
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From page 118... ...
As was noted earlier, however, total costs of owning and operating an automobile are relatively insensitive to fuel economy. Thus, because consumers must expend effort to determine the optimum in the trade-off of vehicle cost and fuel economy, error and even bias in consumer decisions may result.
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From page 119... ...
Because the total cost curve is relatively flat in the vicinity of the optimal fuel economy level, the consumer should not be expected to exert much effort to find the optimum, and the manufacturer has little incentive to take significant risks to produce cars that provide more fuel efficiency. ~ As a result of the aging of the U.S.
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From page 120... ...
Moreover, there has been increasing consumer demand for options that negatively affect fuel economy. · Consumer decisions on the desirable fuel economy level in new cars are based on current and projected costs of gasoline.
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From page 121... ...
1986. Gasoline prices and the used automobile market: A rational expectations asset price approach.
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