Monday, October 5, 2009

Buying Cars

So the other week I had a conversation with a colleague at work about why people buy hybrid cars. He maintained that people mostly bought hybrid cars because they expected to save money on gasoline, but given the price premium for hybrids and with the price of gas at around $3.00 per gallon (what it is currently in the Bay Area), they would be sadly disappointed.

Most studies of consumer behavior show that, paradoxically, the more expensive the purchase, the less likely a person is to rationally do a cost/benefit analysis. If you are buying a mobile phone, for example, you'll likely go through a pretty thorough comparison of the feature set with the cost, even if only mentally. With houses and cars, on the other hand, people are more likely to go with their intuition. And, even more paradoxically, most people are happier with purchases that they approach intuitively, or maybe its just that they don't mind suffering buyer's  remorse over a $200 iTouch while for a $20,000 car it would be too much.

At any rate, I pointed out to him that most people bought hybrid cars largely for the same reasons that people bought any car, though of course saving on gas was definitely a factor. These are (in order of most important to least important):

  1. Because the car's image fit the image they wanted to project to the world,
  2. Because they liked the styling, technology, comfort, ride or some other physical characteristic of the car,
  3. Because the car had a reputation for reliability and efficiency.
So people buy a Lexus because they want to advertise they've made it, it has a comfortable ride and the latest in automotive technology, and like all Toyota products, it has a reputation for reliability.

And people buy a Prius because they're concerned about saving the planet and want to show it to their friends and neighbors, the hybrid technology is the latest in drivetrain technology and the car has a nice ride (though of course not as cushy as the Lexus), and in addition to the standard Toyota reliability, it near the top of the charts for vehicle efficiency (some diesels are higher).

As another data point, consider that the only hybrid which has sold really well is the Prius, which is a brand specifically identified with hybrids. Toyota tried to turn their hybrid drivetrain technology into a brand ("Hybrid Synergy Drive") but the hybrid Highlander, Camrey, and Lexus which have the drivetrain brand haven't sold nearly as well as the Prius. Similarly with the hybrid Honda Civic (the Insight doesn't count, it was too small to really be competitive for most people). People buy a Prius because they identify with the brand and they want others to know it.

As an engineer, rationally, I find this a little puzzling but then I think about my own auto purchasing behavior. My Plug-in Prius (converted by adding an A123 Systems booster battery) has milage up to 110 mpg with all-city driving, cost about as much as a Lexus, and has a ride more like a BMW because they had to add special shocks to handle the extra battery weight.  It's also got a lot of decals on it identifying it as a plug-in hybrid electric vehicle (PHEV). I got the decals put on so that people would know that, despite all the delay (especially at Toyota), PHEV technology could be here today if the auto companies just put in a little effort. OK, so maybe I wanted to project a particular image to the world a little too. :-)

No comments:

Post a Comment