Transition challenges for alternative fuel vehicle and transportation systems

Abstract

Automakers are now developing alternatives to internal combustion engines (ICE), including hydrogen fuel cells and ICE-electric hybrids. Adoption dynamics for alternative vehicles are complex due to the enormous size and importance of the auto industry and vehicle fleet. Diffusion of alternative vehicles is both enabled and constrained by powerful positive feedbacks arising from scale and scope economies, R&D, learning by doing, driver experience, word of mouth, and complementary resources such as fueling infrastructure. We describe a dynamic model of the diffusion and competition among alternative fuel vehicles, including the coevolution of the fleet, technology, driver behavior, and complementary resources. Here we focus on the generation of consumer awareness of alternatives through feedback from driving experience, word of mouth and marketing, with a reduced form treatment of network effects and other positive feedbacks (which we treat in other papers). We demonstrate the existence of a critical threshold for sustained adoption of alternative technologies, and show how the threshold depends on economic and behavioral parameters. We show that word of mouth from those not driving an alternative vehicle is important in stimulating diffusion. Nevertheless, marketing and subsidies for alternatives to ICE must remain in place for long periods for diffusion to become self-sustaining. Expanding the model boundary to include endogenous learning, technological spillovers and spatial coevolution of fueling infrastructure adds additional feedbacks that further suppress the diffusion of alternative vehicles.