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Alternative Fuel Vehicles - UK - January 2011

The market for Alternative Fuelled Vehicles (AFVs) has remained small for many years on the grounds of cost and the lack of available models as well as low public acceptance of an AFV over a vehicle powered by petrol or diesel. The result is that sales of new AFVs accounted for only around 0.8% of total car sales in 2009, or 15,000 units.

  • Our research also shows, however, that some 7% of car owners would consider buying an AFV as their next car, but would need to be satisfied that there were ample recharging or refuelling points for the car and that they could achieve a decent number of miles per tank/charge.
  • Hybrids and electric cars both have potential for success and can target different markets.
  • One third of petrol car drivers currently drive fewer than 5,000 miles per year and would be more than suitable for electric car ownership.
  • Price is the biggest barrier to greater uptake of electric vehicles. The Nissan Leaf is priced at £23,990 (including the £5,000 government incentive) and our research shows just 8% of those who would consider buying an AFV would be prepared to spend more than £20,000 on their next car.
  • Within the trade, there are expectations that sales of new AFVs will rise to 130,000 units in 2015 and 430,000 units in 2020 with the result that AFVs are likely to represent just under a fifth of total sales by the end of this coming decade. Mintel, however, forecasts a slower rate of take-off for the market, with our expectations of sales standing at around 79,000, or at best, a level of 102,000 by 2015. Hybrids will drive the market and offer entry-level access to the AFV sector.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Definition
          • Abbreviations
          • Future Opportunities

              • All the young dudes
                • I’ll Take You There
                • Market in Brief

                  • AFVs fail to make any significant impact in the market
                    • Competition from traditionally-powered cars persists
                      • UK government strategy set to help boost sales
                        • Market dominated by Japanese manufacturers
                          • Consumer profile focused on older adults
                            • The future for AFVs looks positive
                            • Internal Market Environment

                              • Key points
                                • Car sales suffer as consumers feel chill of recession...
                                  • Figure 1: New car registrations and used car sales, 2005-10
                                • ... although with some benefits for small cars
                                  • AFVs are only a limited feature of overall car sales
                                    • Figure 2: New car registrations and used car sales, by fuel type, 2005-10
                                  • Convincing consumers to switch to AFVs is a major barrier
                                    • Government support for AFVs moving into top gear
                                      • Office of Low Emission Vehicles (OLEV) created
                                        • Plugged-In Places seeking to develop a recharging infrastructure
                                          • Consumers get financial incentives...
                                            • ... as does industry
                                              • Changes to Vehicle Excise Duty signal shift in policy towards AFVs...
                                                • Figure 3: 12-month Vehicle Excise dDty rates (on/after 1 April 2001)
                                                • Figure 4: 12-month Vehicle Excise Duty rates (on/after 1 April 2010)
                                              • ... with company-owned cars also benefiting
                                                • Rising fuel prices acting as an important carrot
                                                  • Figure 5: Monthly UK petrol diesel and oil price trends, Indexed (Jan 09 = 100), Jan 2009-Nov 2010
                                                  • Figure 6: Price of Saudi Arabian crude oil (Arab Light) in US$ per barrel, 2000-10*
                                                • Use of petrol and diesel
                                                  • Figure 7: Purchasing of fuel (petrol/diesel) in the last 12 months, 2005-10
                                                • Car replacement cycles illustrate inertia
                                                  • Figure 8: When obtained (only car or most recently obtained car), 2010
                                                • EU pushing car manufacturers to lower their carbon footprint
                                                  • ... with good progress in the last two years
                                                    • Figure 9: Average new car Emissions, 1997-2009
                                                • Broader Market Environment

                                                  • Key points
                                                    • Recession impacts badly on car market
                                                      • Figure 10: GDP, PDI, consumer expenditure and savings, at current prices, 2005-15
                                                      • Figure 11: GDP quarterly percentage change, Q1 2004-Q3 2010
                                                    • Recovery from recession will assist market
                                                      • Figure 12: Employment and unemployment, by gender, 2005-15
                                                    • Smaller households should shift interest towards smaller cars
                                                      • Figure 13: Number of Households and persons per household, 2000-31
                                                    • Informed and affluent drivers can act as early adopters
                                                      • Figure 14: Forecast adult population trends, by socio-economic group, 2005-15
                                                    • Mixed opportunities from population change
                                                      • Figure 15: Trends in the age structure of the UK population, 2005-15
                                                  • Strengths and Weaknesses in the Market

                                                    • Strengths
                                                      • Weaknesses
                                                      • Who’s Innovating?

                                                        • Key points
                                                          • Ford
                                                            • General Motors
                                                              • Honda
                                                                • Mitsubishi
                                                                  • Nissan
                                                                    • PSA Peugeot Citroën
                                                                      • Toyota
                                                                        • Other notable innovators
                                                                        • Competitive Context

                                                                          • Key points
                                                                            • AFVs face strong competition from minis and superminis
                                                                              • Figure 16: UK sales of small and alternatively fuelled cars (AFVs), 2005-10
                                                                            • Leading minis and superminis
                                                                              • Mini segment led by Hyundai
                                                                                • Figure 17: Top five selling mini cars, 2009
                                                                              • Supermini market shows polarisation
                                                                                • Figure 18: Top five selling supermini cars, 2009
                                                                              • ... as well as eco-models
                                                                                  • Figure 19: Lowest-emission petrol/diesel cars in UK market, 2010
                                                                                • Direct cost advantages to owning an AFV are hard to find at present
                                                                                  • Figure 20: Comparison costs for petrol and electric vehicles, 2010
                                                                                • Cost of LPG may well have hindered full shift towards other alternative fuels
                                                                                  • Figure 21: Petrol, diesel and LPG prices, duty and VAT, September 2009 and November 2010
                                                                                • Improvements to petrol/diesel technology brings numerous benefits
                                                                                  • Existing alternative fuels
                                                                                    • Biofuels
                                                                                      • Biodiesel
                                                                                        • Ethanol and bio-ethanol
                                                                                          • Gas
                                                                                            • Liquefied Petroleum Gas (LPG)
                                                                                              • Compressed Natural Gas
                                                                                                • Hybrid technology
                                                                                                  • Electric
                                                                                                    • Hydrogen fuel cells
                                                                                                    • Market Size and Forecast

                                                                                                      • Key points
                                                                                                        • AFVs show growth, although remain a small sector
                                                                                                          • Figure 22: UK volume sales of alternatively fuelled cars (AFVs), 2005-15
                                                                                                        • Scrappage scheme woes...
                                                                                                          • ... followed by joy as new models begin to stimulate interest in AFVs
                                                                                                            • Forecast
                                                                                                              • Figure 23: Best and worst case forecast volume sales of alternatively fuelled cars (AFVs), 2005-15
                                                                                                            • AFV sales beyond 2011 set to benefit from much faster growth
                                                                                                              • Government forecasts are set to be surpassed
                                                                                                                • Progress in the short- to medium-term (2010-15)
                                                                                                                    • Figure 24: Forecasts for AFVs, 2010-15
                                                                                                                • Segment Performance

                                                                                                                  • Key points
                                                                                                                    • HEVs dominate AFV sales
                                                                                                                      • Figure 25: UK sales AFVs, by type, 2005-10
                                                                                                                    • Hybrids have come to dominate AFV sales
                                                                                                                      • Alternatives to petrol/diesel fail to perform
                                                                                                                        • Pure EVs disappoint
                                                                                                                        • Market Shares

                                                                                                                          • Key points
                                                                                                                            • Japanese manufacturers dominate the AFV market
                                                                                                                              • Figure 26: Manufacturers’ volume share of AFVs, 2009
                                                                                                                              • Figure 27: Key HEV brands available in the UK market, 2010
                                                                                                                              • Figure 28: EV brands available in the UK market, as of December 2010
                                                                                                                            • AFVs receiving financial support from January 2011
                                                                                                                              • Figure 29: Vehicles eligible for UK government financial support, as of December 2010
                                                                                                                          • Companies and Products

                                                                                                                            • Major car manufacturers
                                                                                                                              • Toyota
                                                                                                                                • Honda
                                                                                                                                  • Ford
                                                                                                                                    • PSA Peugeot Citroën
                                                                                                                                      • Smart
                                                                                                                                        • Small, specialist, EV manufacturers
                                                                                                                                          • Aixam-Mega
                                                                                                                                            • Global Electric Motorcars LLC
                                                                                                                                              • REVA Electric Car Company
                                                                                                                                                • Micro-Vett S.p.A
                                                                                                                                                • Brand Communication and Promotion

                                                                                                                                                  • Key points
                                                                                                                                                    • Focus on the traditional rather than the alternative
                                                                                                                                                      • Promotion of small cars showing signs of decline
                                                                                                                                                        • Figure 30: Main media advertising expenditure on small-sized passenger cars, 2005-10
                                                                                                                                                      • Small segment dominates expenditure
                                                                                                                                                        • Figure 31: Adspend on small-sized passenger cars, % by type, 2007-10
                                                                                                                                                      • Mass media remain the most popular channels for car manufacturers
                                                                                                                                                        • Figure 32: Adspend on small-sized passenger cars, % by media type, 2007-10
                                                                                                                                                      • Strong evidence of link between promotional spend and success
                                                                                                                                                        • Figure 33: Top 10* small-sized passenger cars, by adspend, 2007-10
                                                                                                                                                    • Channels to Market

                                                                                                                                                      • Key points
                                                                                                                                                        • Car dealer network in decline
                                                                                                                                                          • Figure 34: Number of franchised and independent car dealers in the UK, 2004-09
                                                                                                                                                        • AFVs suffer from poor distribution
                                                                                                                                                          • Figure 35: Size of car manufacturer dealer networks, winter 2009
                                                                                                                                                      • The Consumer – Driving Habits

                                                                                                                                                        • Key points
                                                                                                                                                          • Most drivers do less than 200 miles per week
                                                                                                                                                              • Figure 36: Average miles driven per year, by fuel type, November 2010
                                                                                                                                                            • Older women appear a good target for AFVs
                                                                                                                                                              • Mid-range drivers (5,000-10,000 miles pa) offer better prospects
                                                                                                                                                                • Regionally, Scotland presents a challenge to AFV sales
                                                                                                                                                                  • Petrol and diesel continue to dominate demand
                                                                                                                                                                      • Figure 37: Fuel type of vehicle currently driven most often, November 2010
                                                                                                                                                                  • The Consumer – Vehicle Preferences

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Attitudes towards cars and driving
                                                                                                                                                                        • Figure 38: Attitudes towards cars and driving, 2006-10
                                                                                                                                                                      • Interest in future purchase of AFVs suggests growth
                                                                                                                                                                          • Figure 39: Preferences if replacing current car or buying a new car now or in the future, November 2010
                                                                                                                                                                          • Figure 40: Preference if replacing current car or buying a new car now or in the future with an AFV, November 2010
                                                                                                                                                                          • Figure 41: Leading preference if replacing current car or buying a new car now or in the future, November 2010
                                                                                                                                                                      • The Consumer – Attitudes Towards AFVs

                                                                                                                                                                        • Key points
                                                                                                                                                                          • Silver drivers need to be courted
                                                                                                                                                                              • Figure 42: Consumers who would potentially buy an AFV, by gender, age and social grade, November 2010
                                                                                                                                                                            • Target London and major cities
                                                                                                                                                                                • Figure 43: Drivers who drive less than 5,000 miles a year, by gender, age and social grade, November 2010
                                                                                                                                                                              • Potential AFV buyers hone in on hybrids
                                                                                                                                                                                • Vehicle range is the most important factor for those considering an AFV
                                                                                                                                                                                  • Figure 44: Factors that are also important to those choosing an AFV, November 2010
                                                                                                                                                                                  • Figure 45: Factors that are also important to those choosing an AFV vs. petrol/diesel, November 2010
                                                                                                                                                                                • Features viewed as extremely important vary depending on the distance travelled by drivers
                                                                                                                                                                                  • Figure 46: Factors that are also extremely important to those choosing an AFV, by miles driven per year November 2010
                                                                                                                                                                                • Costs of more direct importance to non-AFV purchases
                                                                                                                                                                                    • Figure 47: Factors that are also important to those choosing a petrol or diesel car, November 2010
                                                                                                                                                                                • Appendix – Internal Market Background

                                                                                                                                                                                    • Figure 48: Monthly UK petrol diesel and oil price trends, Jan 2009-Nov 2010
                                                                                                                                                                                • Appendix – Driving Habits

                                                                                                                                                                                    • Figure 49: Miles driven in a year, by demographics, November 2010
                                                                                                                                                                                    • Figure 50: Fuel type of the vehicle driven most often, by demographics, November 2010
                                                                                                                                                                                • Appendix – Vehicle Preferences

                                                                                                                                                                                    • Figure 51: Car brand preferences related in replacing current car or buying a new car now or for future consideration, by demographics, November 2010
                                                                                                                                                                                    • Figure 52: Price preferences related in replacing current car or buying a new car now or for future consideration, by demographics, November 2010
                                                                                                                                                                                    • Figure 53: Transmission type preferences related in replacing current car or buying a new car now or for future consideration, by demographics, November 2010
                                                                                                                                                                                    • Figure 54: Body type preferences related in replacing current car or buying a new car now or for future consideration, by demographics, November 2010
                                                                                                                                                                                    • Figure 55: Fuel type preferences related in replacing current car or buying a new car now or for future consideration, by demographics, November 2010
                                                                                                                                                                                    • Figure 56: Engine size preferences related in replacing current car or buying a new car now or for future consideration, by demographics, November 2010
                                                                                                                                                                                    • Figure 57: Number of doors preferences related in replacing current car or buying a new car now or for future consideration, by demographics, November 2010
                                                                                                                                                                                    • Figure 58: Age of car preferences related in replacing current car or buying a new car now or for future consideration, by demographics, November 2010
                                                                                                                                                                                • Appendix – Attitudes Towards AFVs

                                                                                                                                                                                    • Figure 59: Importance of expected vehicle lifespan, by demographics, November 2010
                                                                                                                                                                                    • Figure 60: Importance of servicing costs and service intervals, by demographics, November 2010
                                                                                                                                                                                    • Figure 61: Importance of availability of a government purchase incentive scheme (eg scrappage), by demographics, November 2010
                                                                                                                                                                                    • Figure 62: Importance of number of miles achievable per tank of fuel, by demographics, November 2010
                                                                                                                                                                                    • Figure 63: Importance of cost of engine replacement parts, by demographics, November 2010
                                                                                                                                                                                    • Figure 64: Importance of low rate of Vehicle Excise Duty, by demographics, November 2010
                                                                                                                                                                                    • Figure 65: Importance of low insurance group, by demographics, November 2010
                                                                                                                                                                                    • Figure 66: Importance of the car’s carbon footprint in its manufacture, CO2 emissions and scrappage, by demographics, November 2010

                                                                                                                                                                                Companies Covered

                                                                                                                                                                                • AB Volvo
                                                                                                                                                                                • Aldi Stores Ltd (UK & Ireland)
                                                                                                                                                                                • Apple Computer UK Ltd
                                                                                                                                                                                • Asda Group Ltd
                                                                                                                                                                                • Audi United Kingdom
                                                                                                                                                                                • Automobile Association (AA)
                                                                                                                                                                                • Bank of England
                                                                                                                                                                                • BMW (GB) Ltd
                                                                                                                                                                                • BP p.l.c.
                                                                                                                                                                                • British Broadcasting Corporation (BBC)
                                                                                                                                                                                • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                                                                • Channel 4
                                                                                                                                                                                • Chrysler LLC
                                                                                                                                                                                • Co-operative Group
                                                                                                                                                                                • Daimler AG
                                                                                                                                                                                • Driver and Vehicle Licensing Agency
                                                                                                                                                                                • Facebook, Inc.
                                                                                                                                                                                • Fiat Auto
                                                                                                                                                                                • Financial Services Authority (The)
                                                                                                                                                                                • Ford Motor Company Limited (UK)
                                                                                                                                                                                • Freeview
                                                                                                                                                                                • General Motors Corporation
                                                                                                                                                                                • Government Actuary's Department (GAD)
                                                                                                                                                                                • Honda Motor Co. Ltd (UK)
                                                                                                                                                                                • Hyundai Car (UK) Ltd
                                                                                                                                                                                • J. Sainsbury
                                                                                                                                                                                • Kantar Media
                                                                                                                                                                                • Kia Motors UK Ltd
                                                                                                                                                                                • Land Rover UK
                                                                                                                                                                                • Lidl (UK)
                                                                                                                                                                                • Marks & Spencer
                                                                                                                                                                                • Mazda Motors UK Ltd
                                                                                                                                                                                • Mercedes-Benz UK
                                                                                                                                                                                • Mitsubishi Motors Corporation
                                                                                                                                                                                • NEC Corporation
                                                                                                                                                                                • Netto Foodstores Ltd
                                                                                                                                                                                • News International PLC
                                                                                                                                                                                • Nissan Motor (GB) Ltd
                                                                                                                                                                                • Orange plc (UK)
                                                                                                                                                                                • Peugeot Motor Company Plc
                                                                                                                                                                                • Piaggio SpA
                                                                                                                                                                                • PSA Peugeot Citroën S.A.
                                                                                                                                                                                • Renault (UK) Ltd
                                                                                                                                                                                • Society of Motor Manufacturers and Traders
                                                                                                                                                                                • Spotify AB
                                                                                                                                                                                • Suzuki GB PLC
                                                                                                                                                                                • T-Mobile (UK) Ltd
                                                                                                                                                                                • talkSPORT
                                                                                                                                                                                • Tesco Plc
                                                                                                                                                                                • The Scottish Rugby Union plc
                                                                                                                                                                                • Toyota (GB) PLC
                                                                                                                                                                                • Twitter, Inc.
                                                                                                                                                                                • Vauxhall Motors Ltd
                                                                                                                                                                                • Virgin Media Ltd
                                                                                                                                                                                • Virgin Mobile
                                                                                                                                                                                • Vodafone Group Plc (UK)
                                                                                                                                                                                • Volkswagen AG
                                                                                                                                                                                • Volkswagen UK
                                                                                                                                                                                • Waitrose Ltd
                                                                                                                                                                                • Wm Morrison Supermarkets
                                                                                                                                                                                • YouTube, Inc.

                                                                                                                                                                                Alternative Fuel Vehicles - UK - January 2011

                                                                                                                                                                                £1,750.00 (Excl.Tax)