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Diffusion of Battery Electric Vehicles: The Role of Total Cost of Ownership
KTH, School of Industrial Engineering and Management (ITM), Machine Design (Dept.), Integrated Product Development.ORCID iD: 0000-0001-5201-3362
2020 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Due to their high efficiency, zero tailpipe emissions and possibilities of using renewable electricity, Battery Electric Vehicles (BEVs) have been proposed as a way to alleviate the negative consequences of transport. However, as with other energy-efficient innovations market uptake or diffusion of BEVs have so far been limited. Three main barriers for BEV diffusion have been identified in the literature: limited range, lack of charging and high purchase price. Range and charging have been extensively studied. The high purchase price and other ownership costs of BEVs has not received the same amount of attention. The focus of this thesis is to go beyond the purchase price of BEVs, that in general is higher than for Internal Combustion Engine Vehicles (ICEVs). This thesis will center on costs; as the low running cost of BEVs validates further investigations regarding the Total Cost of Ownership (TCO) compared to ICEVs. The aim of this thesis is therefore to investigate the TCO of BEVs for both private and professional use-cases relative to the TCO of ICEVs, and further, to explore to which degree TCO is incorporated in the vehicle choice process. The main theoretical underpinnings of this thesis are innovation diffusion theory, a set of theories that describes the process by which an innovation is adopted among the members of a social system. In a narrower consumer behavior setting, rational choice and the emerging literature in behavior economics also forms an important theoretical basis for this thesis. The method choices in the four studies included in this thesis reflects the complex socio-technical system that BEVs inhabits. A mix of quantitative (e.g. surveys and driving data) and qualitative (interviews) methods have been used.

The results of Total Cost of Ownership (TCO) computations in this thesis indicate that the actual cost of BEVs can be lower than for equivalent ICEVs. This has been validated for different contexts and use-cases in both private and professional settings. However, the actual TCO of BEVs is likely to have a small influence on vehicle choice. The results indicate that only a small minority (4 %) of mainstream vehicle buyers conducted a complete TCO analysis and that the majority (58 %) did not calculate any ownerships costs into their vehicle choice process. In addition, vehicle buyers have a poor understanding of on-going vehicle ownership costs of their present vehicle. Thus, they are uninformed about vehicle costs in general and of TCO in particular. Calculating TCO is a challenging task for consumers, requiring both cognitive efforts and time. It can be suspected that vehicle buyers instead use purchase price as a proxy for TCO. Approximation of costs through purchase price could yield significant overestimation in the cost of owning and operating a BEV. This thesis argues that the market introduction of BEVs requires a new approach to evaluate vehicle costs among the stakeholders involved. The relationship between high effort costs and unknown ownership cost is radically altered due to the low ownership costs of BEVs. The potential rewards of being attentive to TCO are thus larger in the case of BEVs compared to ICEVs. Several aspects have been found to correlate to being more TCO attentive: higher income, higher educational level, having a larger comparison set of vehicles and increased stated importance of TCO in vehicle choice. However, vehicle buyers receive little assistance from vehicle

salespeople in estimating TCO of BEVs. Vehicle salespeople often focus on purchase price instead of taking the time to estimate TCO. Lower financial incentives for selling BEVs could be an underlying cause for vehicle salespeople not to emphasize the potential cost superiorities of BEVs in relation to ICEVs. In addition, the results allude that additional barriers related to BEV diffusion remains important. This is exemplified in the professional use-case of taxis that was investigated in this thesis, where range and charging limitations of BEVs negatively affected work conditions.

Four main conclusions can be drawn based on the results of this thesis: BEVs can be TCO competitive with ICEVs, TCO is rarely applied in the vehicle choice process, the market introduction of BEVs requires a new approach to evaluate vehicle costs among the stakeholders involved, and that improved understanding and application of vehicle TCO would improve the diffusion outlook of BEVs by improving their relative advantage. Based on these conclusions it is recommend that industry and public policy address the apparent misalignment between perceived and actual TCO of BEVs. This can be done by: improving knowledge of TCO among vehicle buyers, creating a comprehensive yet simple to use TCO computational tool and increasing the financial incentives of selling BEVs for vehicle salespeople.

Abstract [sv]

Transportsektorn står idag för en stor del av världens miljöproblem, både genom utsläpp som bidrar till dålig luftkvalitet och till den globala uppvärmningen. En möjlig väg för att minska transportsektorns negativa konsekvenser är en övergång till mer effektiva bilar. Batterielbilar som endast drivs av elektricitet har hög energieffektivitet, nollutsläpp i brukarfasen och kan laddas med förnyelsebar elektricitet. Batterielbilar kan därmed motverka transportsektorns negativa konsekvenser.

I likhet med andra energieffektiva innovationer har dock batterielbilar hittills haft en begränsad diffusion, dvs låga marknadsandelar. Tidigare forskning har identifierat tre huvudbarriärer som hindrar batterielbilar att nå större marknadsandelar: begränsad räckvidd, brist på laddning och höga inköpspriser. Både forskare och industrin har hittills främst fokuserat på problematiken rörande räckvidd och laddning. Det höga inköpspriset och andra ekonomiska aspekter som ägandekostnader har inte fått samma uppmärksamhet. Denna avhandling adresserar detta forskningsgap genom att undersöka de ekonomiska aspekter som kan påverka försäljningen av batterielbilar. Inköpspriset är generellt högre för batterielbilar jämfört med förbränningsmotorbilar. Batterielbilar har dock erkänt lägre driftskostnader, vilket gör det intressant att flytta fokus bortom inköpspriset och istället undersöker och jämför den totala ägandekostnaden för batterielbilar och förbränningsmotorbilar. Syftet med avhandlingen är att undersöka hur totalkostnaden för batterielbilar står sig mot totalkostnaden för förbränningsmotorbilar och vilken betydelse totalkostnadsbedömningar har i valet av bil och därmed för batterielbilens diffusion på marknaden. Både privata och professionella bilköpare samt olika aspekter av köpprocessen har undersökts. En viktig aspekt har varit huruvida totalkostnaden beaktas i bilvalsprocessen hos bilköpare.

Den huvudsakliga teoretiska bakgrunden till avhandlingen är innovationsdiffusionsteori, vilket är en samling teorier som beskriver processen för hur innovationer köps och sprids av medlemmarna i ett socialt system. Ytterligare teorier som utgör en viktig bakgrund för avhandlingen berör konsumentbeteende från ett rationellt eller beteendeekonomiskt perspektiv. Metodvalen i de fyra studierna som ingår i avhandlingen återspeglar det komplexa socio-tekniska system som batterielbilar befinner sig i. En blandning av kvantitativa (t.ex. enkät och kördata) och kvalitativa (intervjuer) metoder har använts.

Resultaten av studierna som undersökte totalkostnaden för ägande (TCO (dvs Total Cost of Ownership)) indikerar att den faktiska kostnaden för batterielbilar kan vara lägre än för motsvarande förbränningsmotorbilar. Dessa resultat har validerats för olika användningsfall i både den privata och den professionella kontexten. Den faktiska totalkostnaden för batterielbilar har dock troligen ett relativt litet inflytande i valet av bil hos bilköpare. Resultaten visar att endast en minoritet (4 %) av bilköparna genomför en fullständig totalkostnadsanalys och att majoriteten av bilköparna (58%) inte har beräknat någon av de olika ägandekostnader under bilvalsprocessen. Dessutom har bilköpare en dålig förståelse av de löpande kostnaderna för ägande av deras nuvarande bil. Således verkar bilköpare vara oinformerade om bilkostnader i allmänhet och om totalkostnaden i synnerhet. Att beräkna TCO kräver dock både tid och kognitiva ansträngningar, vilket delvis kan förklara detta beteende. Istället för att beräkna totalkostnaden verkar bilköpare använda inköpspriset som en representation för vad bilen kommer att kosta under ägandet. En tänkbar konsekvens av denna typ av ungefärlig kostnadsbedömning via inköpspriset är en överskattning av totalkostnaden för batterielbilar.

Denna avhandling visar att marknadsintroduktionen av batterielbilar kräver nya tillvägagångssätt för att utvärdera bilkostnaderna hos de berörda intressenterna. De lägre ägarkostnaderna för batterielbilar gör att en bedömning av kostnader baserat på inköpspriset ofta blir missvisande. De potentiella fördelarna med att vara uppmärksamma på TCO är därmed större när det gäller batterielbilar jämfört med förbränningsmotorbilar. Det finns emellertid ett antal aspekter som korrelerar med en högre beräkningsbenägenhet av totalkostnaden, dessa är: högre inkomst, högre utbildningsnivå, fler bilar som jämförs i bilvalsprocessen samt den uttryckta betydelsen av TCO i bilval. Det kan även tilläggas att bilförsäljare inte spelar en betydande roll i att informera eller assistera bilköpare rörande totalkostnaden. Istället fokuserar bilförsäljare ofta på inköpspriset. En underliggande orsak för varför bilförsäljarna inte betonar de potentiella kostnadsbesparingarna för batterielbilar i förhållande till förbränningsmotorbilar kan vara sämre ekonomiska incitament för att sälja batterielbilar. Dessutom bekräftar resultaten att befintliga marknadshinder för batterielbilar är fortsatt viktiga. Detta exemplifieras i det professionella användningsfallet (taxi) som undersöktes i avhandlingen. I taxiverksamhet har batterielbilars begränsade räckvidd och laddningsmöjligheter en stark negativ inverkan på förarnas arbetsmiljö och villkor.

Följande fyra slutsatser kan dras från resultaten i avhandlingen: batterielbilar kan vara ekonomiskt konkurrenskraftiga mot förbränningsmotorbilar om de jämförs utifrån totalkostnaden; totalkostnaden appliceras generellt inte i bilvalsprocessen; marknadsintroduktionen av batterielbilar kräver nya tillvägagångssätt för att korrekt kunna uppskatta den verkliga kostnaden och en ökad förståelse och applikation av totalkostnaden i bilvalsprocessen skulle förbättra batterielbilars relativa fördelar med ökad försäljning som följd. För att adressera dessa slutsatser förslås ett antal rekommendationer som syftar att minska gapet mellan faktiskt och upplevd totalkostnad för batterielbilar. Det kan göras genom att öka kunskapen om totalkostnad hos bilköpare; skapa en heltäckande men användarvänlig totalkostnadskalkylator samt öka de finansiella incitamenten för att sälja batterielbilar hos bilförsäljare.

Place, publisher, year, edition, pages
KTH Royal Institute of Technology, 2020. , p. 70
Series
TRITA-ITM-AVL ; 2020:33
Keywords [en]
Total cost of ownership, electric vehicles, e-taxis, vehicle salespeople
Research subject
Machine Design
Identifiers
URN: urn:nbn:se:kth:diva-279151ISBN: 978-91-7873-577-8 (print)OAI: oai:DiVA.org:kth-279151DiVA, id: diva2:1458540
Public defence
2020-09-11, https://kth-se.zoom.us/webinar/register/WN_3YT5jpkAQOuSzPPelxRQCw, Stockholm, 10:00 (English)
Opponent
Supervisors
Available from: 2020-08-17 Created: 2020-08-17 Last updated: 2022-06-26Bibliographically approved
List of papers
1. Total cost of ownership and its potential implications for battery electric vehicle diffusion
Open this publication in new window or tab >>Total cost of ownership and its potential implications for battery electric vehicle diffusion
2016 (English)In: Research in Transportation Business and Management (RTBM), ISSN 2210-5395, E-ISSN 2210-5409, Vol. 18, p. 11-17Article in journal (Refereed) Published
Abstract [en]

Battery electric vehicles (BEVs) have been slow to diffuse on the international as well as the Swedish market. Previous studies have indicated situational factors such as economic factors, size and performance to be of major importance for vehicle purchasers in their choice of vehicle. In this paper, the authors explore a consumer centric total cost of ownership (TCO) model to investigate the possible discrepancy between purchase price and the TCO between internal combustion engine vehicles (ICEVs), hybrid electric vehicles (HEVs) and BEVs. The creation and testing of the TCO model reveals that computation could be a challenging task for consumers due to bounded access of relevant data and the prediction of future conditions. The application of the model to the vehicle sample found that BEVs could be cheaper compared to ICEVs and HEVs. The findings in this paper could prove to be of importance for policy and marketing alike in designing the most appropriate business models and information campaigns based on consumer conditions in order to further promoting the diffusion of BEVs in society.

Place, publisher, year, edition, pages
Elsevier, 2016
Keywords
Battery electric vehicles, Diffusion of innovation, Sustainability, TCO, Total cost of ownership
National Category
Vehicle Engineering
Identifiers
urn:nbn:se:kth:diva-187290 (URN)10.1016/j.rtbm.2016.01.003 (DOI)000377615800003 ()2-s2.0-84956875250 (Scopus ID)
Funder
Swedish Energy Agency
Note

QC 20160519

Available from: 2016-05-19 Created: 2016-05-19 Last updated: 2024-03-18Bibliographically approved
2. The TCO Paradox: A Key Problem in the Diffusion of Energy Efficient Vehicles?
Open this publication in new window or tab >>The TCO Paradox: A Key Problem in the Diffusion of Energy Efficient Vehicles?
2017 (English)In: American Journal of Industrial and Business Management, ISSN 2164-5167, E-ISSN 2164-5175, Vol. 7, p. 1267-1284Article in journal (Refereed) Published
Abstract [en]

The aim of this paper is to explore how mainstream vehicle buyers perceive and apply Total Cost of Ownership in their vehicle choice process. All else equal, rational consumers ought to evaluate Total Cost of Ownership in order to acquire the real cost of owning a particular vehicle under consideration, unless bounded rationality is affecting their behavior. The results reveal that vehicle buyers generally are capable of understanding the relative size of indi- vidual costs that make up vehicle Total Cost of Ownership but fail to evaluate and apply multiple costs in their vehicle purchase process. Regression analysis exposes that income, educational level, stated importance of Total Cost of Ownership and the number of vehicles in the choice set have a positive asso- ciation with the degree that consumers conduct an evaluation of vehicle Total Cost of Ownership. Failure to consider Total Cost of Ownership can lead to uneconomic vehicle choices, which is here labeled as the TCO paradox. This could have an especially negative effect on the diffusion of battery electric ve- hicles, which require a more detailed cost analysis in order to extract its low operating cost structure.

Place, publisher, year, edition, pages
Scientific Research Publishing, 2017
Keywords
Total cost of ownership, electric vehicles, attention to cost
National Category
Transport Systems and Logistics
Identifiers
urn:nbn:se:kth:diva-279139 (URN)10.4236/ajibm.2017.712090 (DOI)
Funder
Swedish Energy Agency
Note

QC 20200817

Available from: 2020-08-17 Created: 2020-08-17 Last updated: 2022-06-26Bibliographically approved
3. Conditions for electric vehicle taxi: A case study in the Greater Stockholm region
Open this publication in new window or tab >>Conditions for electric vehicle taxi: A case study in the Greater Stockholm region
2019 (English)In: International Journal of Sustainable Transportation, ISSN 1556-8318, E-ISSN 1556-8334, Vol. 13, no 6, p. 450-459Article in journal (Refereed) Published
Abstract [en]

This study investigates the usability of electric vehicles (EVs) in a taxi company in Greater Stockholm, Sweden. By investigating cost and revenue data of both electric and conventional taxi vehicles, as well as by interviewing taxi drivers and carriers, an assessment has been made of the financial and operational implications of using EVs in a company's taxi fleet. Both the drivers' and the carriers' perspectives have been examined. The main findings are that the investigated e-taxis have a similar or lower Total Cost of Ownership and slightly higher profitability than the investigated conventional taxis. For taxi drivers, using e-taxis implies more advanced planning and revenue service time being sacrificed for charging. However, certain customers' preferences for EVs, as well as benefits such as corporate clients favoring e-taxis and a zero emission priority queuing system at Stockholm's main international airport (partly) compensate for time devoted to charging. In order to facilitate increased use of e-taxis, more fast charging facilities should become available at strategic locations. Besides that, there are signs that carriers' lack of information about the opportunities and consequences of shifting towards e-taxis hamper a wider deployment of e-taxis.

Place, publisher, year, edition, pages
TAYLOR & FRANCIS INC, 2019
Keywords
Electric vehicle, taxi, Total Cost of Ownership, driving patterns, taxi stakeholders, case study
National Category
Transport Systems and Logistics
Identifiers
urn:nbn:se:kth:diva-251268 (URN)10.1080/15568318.2018.1481547 (DOI)000465398700005 ()2-s2.0-85050570765 (Scopus ID)
Note

QC 20190513

Available from: 2019-05-13 Created: 2019-05-13 Last updated: 2022-06-26Bibliographically approved
4. Selling electric vehicles: Experiences from vehicle salespeople in Sweden
Open this publication in new window or tab >>Selling electric vehicles: Experiences from vehicle salespeople in Sweden
2020 (English)In: Research in Transportation Business and Management (RTBM), ISSN 2210-5395, E-ISSN 2210-5409Article in journal (Refereed) Submitted
Abstract [en]

Electric vehicles have thus far only captured a small share of the vehicle market. Much research has been focused on the perspective of existing or prospective adopters of Electric Vehicles. Less emphasis has been placed on intermediaries such as vehicle salespeople, who could be an important mediator in the product matching process by providing useful information, facilitating direct experience and having a direct influence on adoption decisions of vehicle buyers. This paper addresses this research gap by means of a qualitative investigation of vehicle salespeople at OEMs who sell both Electric Vehicles and Internal Combustion Engine Vehicles on the Swedish market. 15 interviews with vehicle salespeople at leading OEMs were conducted in the fall of 2017. The results reveal that the sales process of vehicles is mainly focused on the sales of Internal Combustion Engine Vehicles. Electric Vehicles are treated as a niche product which often requires the vehicle buyer to initiate the sales process. It can be concluded that relatively few steps have been taken by OEMs, dealerships and vehicle salespeople to influence mainstream buyers to consider Electric Vehicles as an alternative to Internal Combustion Engine Vehicles at the point of sale. Possible reasons for the bias towards Internal Combustion Engine Vehicles can be found in the apparent lack of training and experience regarding Electric Vehicles among vehicle salespeople, longer sales and delivery times for Electric Vehicles and a commission structure that that often favors Internal Combustion Engine Vehicles.

Keywords
vehicle salespeople, electric vehicles
National Category
Transport Systems and Logistics
Research subject
Transport Science
Identifiers
urn:nbn:se:kth:diva-279141 (URN)
Funder
Swedish Energy Agency
Note

QC 20200817

Available from: 2020-08-17 Created: 2020-08-17 Last updated: 2022-06-26Bibliographically approved

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