The cost of fuel economy in the Indian passenger vehicle market

To investigate how fuel economy is valued in the Indian car market, we compute the cost to Indian consumers of purchasing a more fuel-efficient vehicle and compare it to the benefit of lower fuel costs over the life of the vehicle. We estimate hedonic price functions for four market segments (petrol...

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Bibliographic Details
Published in:Energy policy 2011-11, Vol.39 (11), p.7174-7183
Main Authors: Chugh, Randy, Cropper, Maureen, Narain, Urvashi
Format: Article
Language:English
Subjects:
Applied sciences
Automobiles
Automotive engineering
Benefits
confidence interval
Confidence intervals
Consumer behavior
Consumer behaviour
Consumers
Cost
Cost control
Cost engineering
Costs
Economic data
Economics
Energy
energy content
energy costs
Energy economics
Energy efficiency
Energy paradox
Energy policy
Energy resources
Environmental economics
Exact sciences and technology
Fossil fuels and derived products
Fuel
Fuel consumption
Fuel economy
Fuels
gasoline
General, economic and professional studies
Ground, air and sea transportation, marine construction
India
Indian
Indian car market
Market segments
Market theory
Marketing
Markets
Oil
Prices
Purchasing
Road transportation and traffic
Saving
Studies
Transportation planning, management and economics
Vehicles
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Summary:To investigate how fuel economy is valued in the Indian car market, we compute the cost to Indian consumers of purchasing a more fuel-efficient vehicle and compare it to the benefit of lower fuel costs over the life of the vehicle. We estimate hedonic price functions for four market segments (petrol hatchbacks, diesel hatchbacks, petrol sedans, and diesel sedans) to compute 95% confidence intervals for the marginal cost to the consumer for an increase in fuel economy. We find that the associated present value of fuel savings falls within the 95% confidence interval for most specifications, in all market segments, for the years 2002 through 2006. Thus, we fail to consistently reject the hypothesis that consumers appropriately value fuel economy. ► We examine the tradeoffs faced by new vehicle consumers in India. ► We use hedonic price functions and instrumental variables. ► We find no support for the hypothesis that consumers undervalue fuel economy. ► Some consumers are willing to forgo substantial potential savings to own their preferred vehicle.
ISSN:0301-4215
1873-6777
DOI:10.1016/j.enpol.2011.08.037