Student: Nicole Kriesten

15-05-2013

Aarhus University

Department: Business administration and social sciences

Title: Danish consumers’ perception of electric vehicles and the affect on Quality of life by owning an electric vehicle.

Supervisor: Geertje Schuitema

Number of characters excluding blanks: 95.699

Table of contents

Abstract

Introduction

Problem statement

Literature review: Consumer behaviour theory and Past research

Marketing of EVs

Sustainable Consumption

Figure 1: Quality of life

Literature review: Quality of life and subjective well-being

Research questions

Hypotheses

Methodology

Sampling

Interview guide

Coding procedures

Results

Participants

Coding and analysis of the interviews

Figure 2: Word cloud on coding

Answers to research questions

Answers to hypotheses

Discussion and Limitations

Conclusion

References

Appendices

Appendix 1: interview 1: Male

Appendix 2: Interview 2: Female

Appendix 3: Interview 3: Male

Appendix 4: Interview 4: Male

Appendix 5: Interview 5: Female

Abstract

The research aims to explain why Danish consumers do not adapt Electric vehicles (EVs) more and to figure out if consumers perceive owning an EV would affect Quality of life (QOL). The literature review is based on consumer behaviour, past research on EVs and QOL. The research settings is grounded theory which means the aim is to build new theory. The research design was explorative research. The chosen method wasqualitative interviews,were five participants sampled after some predetermined characters about car ownership was interviewed. Four out of the five matched the sample characteristics. The problem statement was the base for six research questions and six hypotheses were based on the literature review. The interviews were conducted face to face and transcribed verbatim. The results were coded by open coding, axial coding and selective coding according to the grounded theory method. In the axial coding nine codes were identified. The nine codes were: Price, range, appearance, technology, brand, image, QOL, green and trend.The most important codes were price, range and technology. Next were image, brand and appearance and lastly QOL, trend and green. Some participants showed more general knowledge about EVs than others. In the interviews they were introduced to a battery driven electric vehicle (BEV); the Nissan Leaf. The participants were asked to imagine how their life would change if they owned the Nissan leaf. These perceived changes were the foundation of exploring, how owning an EV would affect the daily life and the QOL of the participants. The results of the interviews were a deeper insight to why Danish consumers do not adapt EVs at a higher rate. The main reasons are the premium price of EVs, the limited range and the perception that EVs are a technology under development. Participants found the price of the introduced BEV; Nissan leaf was high and most of them assumed a worse financial situation if they bought this BEV. The code; range, was a concern about the limited range of EVs and the Nissan leaf. The range limit meant change in habits for participants and a feeling of less freedom to drive longer distances. Participants assumed that the technology behind EVs is still under development and that the capabilities are of EV will improve within a range of years. The range of years when this improvement would occur differed a lot within the sample. In general the perception of EVs getting better and reaching something comparable to internal combustion vehicles (ICVs) was expressed by the participants. The other aim of the research was to figure out if QOL was affected by owning an EV. This is only assed by the perception of the participants, but based on this, the participants did not expect their QOL would change. The interview did also touchupon some factors that are proven to affect QOL and mostly the answers to these factors support the fact that QOL was not affected by owning an EV. So the theory build is that consumers perceive that their QOL is not affected by owning an EV. Furthermore the few factors that were chosen to include in the interview that affect QOL supported this. In addition to this the adaptation of EVs are affected by some other factors than price, range and technology. They were brand, image, appearance, green, trend and QOL. Brand means that the participants putted a lot of emphasize on brand and that a brand like Volkswagenwould give them more confidence in EVs. Image refers to the image of participants if they own an EV, which they assumed would be unaffected. Appearance refers to participants believing that EVs has a worse design than ICVs. Green is the environmental profile of EVs which participants questioned and trend refers to the fact that participants believe EVs is an increasing trend in society. QOL is the factor that included the perceived affects on QOL by owning an EV.

Introduction

At the year shift 2011-12 the number of personal cars in Denmark was 2,198,000 (dst: motorparken 2011) of which 565,000 were diesel cars, 1,632,000 gasoline cars, and 750 Electric Vehicles (EVs). These numbers increased at the year shift 2012-13. The number of personal cars increased to 2,237,000 (dst: motorparken 2012) out of this the number of gasoline cars is 1,616,000, diesel cars 620,000 and EVs increased to 1,274 cars. For some time EVs has been discussed as a more sustainable substitute for the internalcombustion engine vehicle (ICV) (Gårling & Thøgersen 2001). In recent years most of the bigger car manufactures have introduced their own version of an EV. However, the sale successes of the EV are yet questionable. For example, looking at the Danish market, not even 1 percent of all sold cars are electric.

In general, the internal combustion engine vehicle (ICV) hasa very ineffective technology. Looking at the Well-to-wheel (WTW) numbers the effectiveness gained, from the oil is being taking out of the ground until it is put into a car and transformed into energy, is only 0.20. Meaning that in the production process there are a lot of energy losses. However, the biggest energy losses take place in the combustion engine (Persson& Persson 2011). This also means that the environmental effect is a lot greater than the energy gained from this process; gasoline emits 165g of CO2 per km from WTW (Persson& Persson 2011).

It seems like a wise choice to choose an EV because of the environmental benefits, the increasing trend of sustainability in society and the numerous discussions in the media about global warming and environmental changes. If the temperatures on earth increase with 1.5 degrees the worlds ocean level will increase with 0.65 meters and hundreds of peoples will be in danger of not having access to water. Furthermore the diversification of animals and plants will change and some even die out. If the temperature increases with 2 degrees the risk of decreased diversification is even bigger and an increased risk of dry out of the Amazons. In addition the water level will increase with 0.8 meters (Burlund, A., 2013). In short an increase in water level will change the settings of the environment we know today and a big factor influencing this is the emission of CO2 (Burlund 2013). Passing the 2 degree temperature increase will increase water level and change the climate to the more extreme (OECD). The transportation sector is the most obvious place to start, since it is emitting a large portion of the worlds CO2 emission (Persson & Persson 2011). According to the OECD is the transportation sector that accounts for 23% of the energy-related CO2 emission and is the fastest growing major contributor to global climate change (OECD 2010). This fact made politicians create laws and regulations on the transportation sector (Burlund 2013). These laws and regulations fostered new technologies both in the regular car and new types of cars and even new types of fuels.

The increased knowledge about how damaging emission and green house gases are. Lead to a higher recognition of the problem with consuming products that increase emission. A solution to this problem of emission of green house gases has been suggested to be the EV, since it is perceived to be less environmentally harmful. In reality this comes down to how the electricity is produced: if electricity is produced by coal-burning the CO2 emission is about 800-1200 grams per kWh, while wind-power is a clean source of electricity (Persson & Persson 2011).

A number of improvements in ICVs have been seen recently. Firstly the shape of cars today reduces the wind resistance and the fuel efficiency has been increased. Other factors that has been improved are the injection system, the valve control mechanism, electrification of the help systems and overcharge with turbo and compressor (Persson & Persson 2011). These improvements lead to better driving and more environmental friendly driving due to better fuel efficiencies.

The next step in making the transportation sector more environmentally friendly is the development of EV, fully or partly dependent on electricity. There is two major types of EVs are hybrid electric vehicles (HEVs) and battery electric vehicle (BEV). The HEV is a car which combines an electric engine, batteries and its normal drive unit with a combustion engine. This means that the hybrid combines the advantages of electricity driven vehicles with the advantages of fuel driven vehicles (Persson & Persson 2011). There are three types of HEVs: full hybrid; mild hybrid and plug-in hybrid. The full hybrid has an electric motor and battery that is able to generate enough power to move the car on its own without support from the combustion engine, for a short range. The most known example of a full-hybrid is the Toyota Prius. The mild hybrid has a smaller electric motor and battery, than a full hybrid and therefore the electric motor cannot run the car on its own, but is supports the combustion engine. An example on this is the Mercedes s400 bluehybrid. Lastly there is the plug-in hybrid, the plug-in means that the hybrid is rechargeable by a normal electricity outlet, examples on this is Opel ampere (Persson & Persson 2011). The hybrid technology reduces the amount of energy waste by turning of the combustion engine, when waiting for red lights and waiting in traffic. This is called the idle-off technology and the hybrids has regenerating brakes, and using less combustion engine in general.

The other type of electric vehicle is the BEV. A BEV is a vehicle without any combustion engine or gearbox; the vehicle is only driven by electricity from the battery pack. The BEV is charged by plug-in technology and examples of these types of cars are Nissan Leaf, Tesla Model S, VW e-Up! and Mitsubushi i-MiEV (Persson & Persson 2011). The benefits of BEVs compared to combustion engine vehicles is that the Well-to-wheel (WTW) efficiency is about 90%, which is significantly higher compared to the 20% efficiency of ICV. This means that the BEVs are better for the environment. Another advantages is that the saving on fuel, because of the increased prices on gasoline and the comparably lower prices on electricity. An example is the Tesla Roadster uses 0.11 kWh per km which can be translated into gasoline, where 1 litre of gasoline is equal to 9.6 kWh,which means a Tesla Roadster uses in comparing son 1.16 litres of gasoline per 100 km (Persson & Persson 2011). Besides, a BEV is also more silent than a regular car, which reduces noise nuisance. There are also some disadvantages of BEVs: the environmental gain is dependent of the source of electricity that is used, the range of the batteries is limit the car range and the use of electric cars demands infrastructure changes and investments to establish charging stations.

Although the advantages seem obviously, the adaptation of the EVs is in generally low in Denmark despite the large scale media attention and public discussions. In the recent years the business ‘Better Place’ made a deal with Dong energy[1] to introduce BEVs to the Danish market with a supportive infrastructure ( but this implementation failed. Now the future of the BEV is up to the car manufacturer and the government. In the last couple of years more and more car manufactures have introduced their version of the BEV and the trend seems increasing.Even though the manufactures seems to adapt the EV technologies the customers seem to be lagging behind, when the sales numbers are being used as measure of success. The success of EVs is dependent on the consumers’ adaptation of the technology. When looking at consumers’ adaptation of EV it is important to focus on consumers’ needs, motivations, expectations and attitudes towards EVs.

Problem statement

The aim of this research is to examine what Danish consumers think about EVs and how they perceive an EV will change their everyday life, both in terms of social status, self perception, and economic terms and in relation to quality of life and subjective well-being. Research questions that are addressed are the perceived environmental friendliness of EV, benefits and disadvantages and habit changes. This will in turn translate into factors which effect the adaptation of EV and may come with part of the explanation to why the EV’s are not adapted more by the Danish consumers.

Literature review: Consumer behaviour theory and Past research

The act of buying an EV is consumption of a good. The buying rate or the number of people who buy is the degree of adaptation. Consumption is a result of a need recognition[2] or opportunity recognition[3] (Solomon, Bamossy, Askegaard & Hogg 2010), which is recognized due to a difference between the individuals actual state and ideal state. This ideal state is also called the desired end-state and is the consumers’ goal. The goal is reach through motivation (Solomon, et al. 2010). Motivation occurs when a need is aroused; this need might be utilitarian[4] or hedonic[5]. This need is being satisfied through consumption. In the hunt for satisfying needs the consumer engage in a buying behavior. The consumers buying behavior is characterized by the decision making, which can be described as the six stage model; problem recognition, information search, consideration set formation, evaluation of alternatives, choice and post-choice processes (Phan & Higgins 2005; Solomon, et al. 2010).

The consumer value goods according to attributes when choosing among them, this help them find the best solution or best buy to satisfy the need recognized earlier. The intention of consumers to adopt EV’s is significantly correlated with the perception of EV’s instrumental attributes and these were significantly related to the perceived hedonic and symbolic attributes of EV’s (Schuitema, et al. 2012). Instrumental attributes are functional or utility attributes such as costs, price, driving range, performance and reliability. Hedonic attributes are connected with feelings and symbolic attributes are self perception or identity acquired by having the new technology (Schuitema, et al. 2012). The attributes consumers attach to EVs affect the adoption of EVs, which means that the attributes decide whether or not the consumers perceive the EVs to satisfy their needs. Referring back to the different needs, utilitarian or hedonic, the decisions to buy a car include both utilitarian and hedonic needs. Utilitarian needs such as getting an easy transportation method and hedonic needs such as having a car other people perceive as being a good car, getting recognition and confirmation from friends in the post-buying stage of the buying decision process.

Car buying is an high involvement decision, which is characterized by high risk, more expensive product categories, infrequent purchasing and unfamiliar product class and brands (R. Solomon M. et al. 2010), which also demands a decision pattern closely to the theoretical six stage model mentioned above. Research by Van Rijnsoever et al. 2009 shows that there is a gap between behaviors and attitudes with regard to environmental attitudes: even though people intent to act environmentally friendly, their buying behaviours are often not. This intention-behaviour gap might be caused by a low involvement in the purchase decision. To increase the involvement of the consumer the information search stage has to be conducted. The pre purchase information search consists of an internal and external search. The internal search is the individual’s current knowledge through memory. The external search is done through car dealership, friends, media and the internet (van Rijnsoever, Farla & Dijst 2009, Phan & Higgins 2005). Information search is an important step in consumers’ buying behaviour, especially with “luxury goods”, like car buying decisions is categorized as.

When making the decision on which product to buy, the attitudes and belief about the product and brand effect the decision making of the consumer. Attitudes are formed by beliefs, affect and behavioural intent. Attitudes can be based on three hierarchies of effects; cognitive information processing (beliefs, affect and behaviour), behavioural learning processes (beliefs, behaviour and affect), and hedonic consumption (affect, behaviour and beliefs) (Solomon et al. 2010). The affect is the way the consumer feels about an object, in this case the car, the behaviour is to some degree affected by the intentions of the person and the beliefs are self-explanatory. Attitudes can be formed through conditioning, classical[6] or instrumental[7] or by a complex cognitive process[8] (Solomon et al. 2010). As shown by research by Van Rijnsoever et al.2009 there is a gap between attitudes and behaviour of consumers and the research suggest it is due to the degree of involvement. Consumer involvement is affected by the personal factors, the objective factors and situational factors (Solomon et al. 2010). Involvement is also affected by the individual perception of the importance of the buying decision. In the case of car buying assumable the involvement would be high dependent on the interest in the cars in general (van Rijnsoever F. et al. 2009).