A new study investigating the barriers preventing people from buying electric vehicles has identified two separate issues that hold people back — range anxiety and resale anxiety.
The study, published in the “Articles in Advance” section of Manufacturing and Service Operations Management (M&SOM), found that a legitimate business model plays a critical role in the electric vehicle industry. Additionally, owning or leasing electric batteries in combination with improved charging technology can go a long way to reassuring people and increasing the rate of electric vehicle adoption.
The authors of the report — Michael K. Lim of the University of Illinois at Urbana-Champaign, Ho-Yin Mak of Hong Kong University of Science and Technology, and Ying Rong of Shanghai Jiao Tong University — identified two specific psychological barriers that prevent people from purchasing electric vehicles:
- range anxiety — the concern that an electric vehicle’s driving range will not be enough for the needs of the driver (however, at least one writer has intelligently noted that “range anxiety anxiety” seems to be the real issue)
- resale anxiety — the concern that the price of used electric vehicles will drop in the future, making resale a difficult option
Subsequently, two models in contrast to the current American business model for electric vehicles were proposed that the authors believe would allay many consumer fears.
The report was based upon a two-stage game-theoretic modelling framework — the first stage of which examined the early phase of electric vehicle availability, and the second stage investigated the maturity phase, in which both new and used electric vehicles are available on the market.
The authors then calibrated the model specifically to the San Francisco Bay area — the area’s freeway network, auto market figures, and industry reports — which allowed them to develop several business options. Two models were particularly promising (from the press release):
1. The first model represents the case in which battery enhanced charging service is made available through additional support infrastructure. This includes, for example, Tesla’s supercharger stations and other quick charging stations that are being introduced in the US by firms such as Chargepoint and NRG eVgo
2. In the second model, consumers lease the batteries and are also offered enhanced battery charging services. One example is a business model that offers enhanced charging in the form of battery swapping coupled with the battery leasing service. In a second example, Renault is selling its ZOE in Europe with battery leasing and the support of quick charging infrastructure.
The key findings from the report were also made available:
- Despite the qualitative similarity between the two anxieties, their impacts on electric vehicle adoption can be quite different. While range anxiety typically hurts adoption, resale anxiety can actually help adoption (depending on the EV production cost level).
- Further, interestingly, anxieties do not necessarily harm consumers; in fact, they typically benefit consumers since the presence of anxieties forces the firm to cut vehicle prices and invest more in public charging infrastructure.
- The battery leasing service improves the firm’s profit at the expense of total adoption and consumer surplus, when not offered with the public charging option.
- Most importantly, increasing the driving range of electric vehicle through public charging infrastructure typically yields more socially desirable adoption outcomes (greater adoption and emission savings) than increasing the battery capacity