| Abstract: | Key to the mass adoption of electric vehicles (EVs) is the establishment of successful business models based on sound understanding of consumer behavior in adopting this new technology. In this paper, we study the impact of two major barriers to mass adoption of EVs: (i) range anxiety, the concern that the driving range of EVs may be insufficient to meet the needs of drivers, and (ii) resale anxiety, the concern that the secondary market for used EVs may not be efficient. Using a stylized model calibrated to data based on the San Francisco Bay Area, we study the impact of the two consumer anxieties on the interests of three parties involved in the EV market: the firm, the consumers, and the government. We show that, while consumer anxieties typically harm firm's profit and EV adoption, they typically improve the consumer surplus. In addition, we show that a business model that requires consumers to own the EV batteries rather than to lease them is more effective in achieving a greater level of adoption. Further, a business model that offers enhanced battery charging service through additional charging infrastructure provides greater levels of firm's profit and consumer surplus. Hence, the combination of battery owning and enhanced charging service, referred to as the (O,E) model in our paper, typically yields the best balance among the objectives of mass adoption, profitability, and consumer surplus. In order to induce the private sector to adopt such EV business model, policy makers should carefully balance the surplus from consumers to the firm through proper policies. |
| Date: | 19 June 2013 |
| Time: | 4:30pm - 5:30pm |
| Speaker: |
Dr. Michael Lim University of Illinois at Urbana-Champaign |
| Venue: | Room P7512, Knowledge Discovery Centre, Department of Management Sciences, 7/F, Academic 1 Purple Zone, City University of Hong Kong |
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