1. Introduction According to IEA (2012), global CO 2 emissions were about 29 Gtons in 2009; the transport sector was responsible for 22.56% (6.544 Gto

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1 Quality, environmental and economic factors influencing electric vehicles penetration in the Italian market Abstract Purpose Filippo Emanuele Ciarapica*, Dominik Tobias Matt**, Matteo Rossini**, Pasquale Russo Spena** * Department of Industrial Engineering and Mathematical Sciences, Polytechnic University of Marche, via Brecce Bianche, 60100, Ancona Italy (f.ciarapica@univpm.it) ** Faculty of Science and Technology, Free University of Bolzano, piazza Università 1, 39100, Bolzano Italy (dominik.matt@unibz.it, matteo.rossini@unibz.it, pasquale.russospena@unibz) This paper aiming at identifying the economic, qualitative, technical, and environmental factors influencing the Italian customers motivation when purchasing a vehicle, focusing on internal combustion engine vehicles and alternative powertrain such as hybrid electric, plug-in hybrid electric, and battery electric vehicles. This research attempts to ascertain which factors such as reductions in fuel costs and greenhouse gas emissions, incentives on the purchase price, road tax, and car insurance, could encourage the adoption of electric vehicles instead of conventional ones. This study also attempts to ascertain which aspects of a vehicle guarantee the full satisfaction of customer needs by providing the expected quality. Other questions ask respondents to indicate their favorite electric vehicle, body style and to indicate which fuel consumption is considered efficient for a hybrid vehicle. Finally, this research examines the main barriers to the electric vehicles market introduction. Design/methodology/approach To examine and to understand customers perceptions about electric vehicles, an empirical investigation was carried out. Data collection was based on an empirical investigation through a survey. 600 paper copies of a questionnaire were delivered to potential Italian car customers (in possession of a car or intentioned to purchase one) in 2012, from May to October. Further questionnaires were collected by an online-survey. After receiving the questionnaires back from the respondents, a statistical analysis was carried out to provide an overview of the main barriers considered when considering an electric vehicle and of the most important attributes of a motor vehicle. Three important categories of attributes for the surveyed customers were evaluated: economic, qualitative / technical and environmental / practical. These categories were obtained by an analysis of 22 factors. Originality/value Focus on customer satisfaction is an important goal in business practice. Against this background, our research has several implications for companies operating in the automotive industry. This paper provides information on the orientations and perceptions of passenger car enthusiasts and identifies potential socio-technical-economic barriers to the adoption of electric vehicles. It also determines if sustainability issues influence consumer decisions when purchasing an EV. The results of this study can provide a guide to the decisions of the engineers during the design phase to incorporate consumer preferences and then ensure the quality that customers expect from the product. The results are also useful for policy makers, who may use media and social networks to influence the appreciation of potential buyers for non-financial benefits such as energy security and reduction of greenhouse gas emissions. Keywords: electric vehicles; automobile demand; sustainable transportation; Italian road transport, vehicles quality aspects. 358

2 1. Introduction According to IEA (2012), global CO 2 emissions were about 29 Gtons in 2009; the transport sector was responsible for 22.56% (6.544 Gtons), while road transport sector for 16.81% (4.877 Gtons). Italy contributed to 1.34% of the CO 2 world s emissions (about 400 Mtons), with the transport sector responsible for Mtons, almost entirely due to road transport (104.5 Mtons). This value is 10% higher than the world average, considering that the number of motor vehicles per 1000 people is of about 690 (Sousanis, 2011), the tenth in the world. The Italian total oil demand decreased by 12% between 1999 and 2009 (up to 1,527,700 bbl/day of oil), and this trend is set to continue for the next years, especially in the transport sector (IEA, 2010). The Italian fleet of vehicles has increased significantly from 27,415,828 (1990) to 36,371,790 (2009) with an increase by +32% (Elaborations Fondazione Impresa of data ACI, 2009), in particular the demand of diesel vehicles grew by 60% between 1999 and 2009, while gasoline ones dropped by 31% (IEA, 2010). Since the road transport sector is one of the main factors responsible for both CO 2 emissions and oil consumption in Italy, more fuel-efficient vehicle should be taken into account. In a sustainable development perspective, electric vehicles (EVs) such as hybrid electric (HEVs), plug-in hybrid electric (PHEVs) and battery electric vehicles (BEVs) seem to represent the main alternatives to diesel and gasoline vehicles to cope with pollution and oil consumption. In fact, according to the Brundtland Report (1987), the "sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs." Several studies (Ciarapica et al., 2012; Dagsvik et al., 2002; Molin et al., 2007; Potoglou and Kanaroglou, 2007) have been carried out to examine the factors influencing the future market penetration of EVs and the choice of car customers to buy EVs, in the latter case using a stated preference approach. The study of Potoglou and Kanaroglou (2007) concluded that purchase tax relives, low gas emissions, and monetary costs are the main factors that encouraged people to buy more environmental friendly EVs. Conversely, free parking and permission to drive on high occupancy vehicle lanes are not significant. Dagsvik et al. (2002) ascertained, through a study carried out in Norway, that EVs would appear to be competitive with conventional vehicles if they had a superior driving range and if proper refuelling stations were available. Molin et al. (2007) assessed that, on average, customers still preferred the conventional vehicles in respect with EVs. Focus on customer satisfaction is an important goal in business practice. Against this background, our research has several implications for companies operating in the automotive industry. This paper provides information on the orientations and perceptions of passenger car enthusiasts and identifies potential socio-technicaleconomic barriers to the adoption of EVs. It also determines if sustainability issues influence consumer decisions when purchasing an EV. The results of this study can provide a guide to the decisions of the engineers during the design phase to incorporate consumer preferences and then ensure the quality that customers expect from the product. The results are also useful for policy makers, who may use media and social networks to influence the appreciation of potential buyers for nonfinancial benefits such as energy security and reduction of greenhouse gas emissions (GHG). 2. Theoretical framework Quality has become a philosophy that involves all members of the organization: it has become total. The quality coincides with the satisfaction of the customer and consists of three features. 1) The quality of the construction features: according to the Total Quality Management approach, quality no longer coincides with a standard, but it coincides with the customer satisfaction. This leads to revisit the whole concept of quality. The standards are continually redefined as a function of customer satisfaction which is actively involved in their definition. Quality control should be focused mainly on the process and not at the end of the operations: if the process has zero defects, the product will have the same number. Then, quality control is no longer the prerogative of a function, but of the entire company and customers who constantly redefine the quality standards. The error is no longer detected, but it is tried to eliminate the causes. 2) The quality of the technical characteristics (performance of the product): to define the technical characteristics is necessary to continuously monitor the customers and know what they want. This requires marketing operations, market and customer analysis, satisfaction surveys, various researches on the use of products. Performance depends on the innovative capacity of the organization. This is achieved through: time to market, or how much time passes from the identification of customer needs, to the production of the elements of satisfaction; differentiation, or the number of models and variants the product is offered and sold. Customer satisfaction enables that the production, since not centrally standardized, can be adapted and adjusted to the individual needs of customers. The innovation is not linear from top to bottom, but is provided with the aid of all the business functions. These are joined together and simultaneously design the product and the strategies. Often suppliers are also involved. 3) The quality of services related to the product: in this case the customer satisfaction, through after-sales services (transport, assembly, maintenance, etc...), is essential for a subsequent request from the customer of other services or products. 359

3 3. Survey design 3.1. Questionnaire layout The purpose of the questionnaire was to evaluate the main factors and barriers affecting the purchase of an EV in the Italian customers opinions. The questionnaire was divided into the following three sections: 1- the first section examined some general aspects related to EVs (HEV, PHEV, and BEV) regarding favorite EV, price (indicating a price range considered interesting to buy an EV, and how much money they would have spent more to buy an EV rather than a conventional vehicle), preferred car body style, and required fuel efficiency; 2- the second section asked respondents about economic, qualitative, technical, environmental and practical aspects of EVs related to the quality of the product. Economic aspects included purchase price, tax and monetary incentives to encourage the purchase of an EV, fuel consumption, fuel price, free parking, and charging flat contract. Vehicle price was defined as the sale price including registration costs and VAT tax. Tax incentives were the annual discount on road tax and/or vehicle insurance. Monetary incentives were the grant aids to purchase an EV. Fuel consumption was the number of kilometers driven with a liter of fuel. Free parking was defined as the opportunity to park the car free in parking lots. The charging flat rate contract the authors meant a pricing structure that charges a single fixed fee for car batteries charging. Qualitative and technical aspects included reliability, safety in the case of vehicle collision, acceleration, top speed, engine noise, driving range (number of kilometers covered on a full tank of fuel), passenger compartment size, hi-tech appearance, loyalty to a brand and alternative engine appeal. Environmental and practical aspects included GHG emissions, access to restricted traffic areas, not be subject to traffic blocks, high number of charging stations, and availability of a charging infrastructure at home. 3- the third section concerned the understanding of the barriers influencing the purchase of an EV: high purchase price, niche product, reliability, lack of specialized center for repairs and/or maintenance, limited use of the car, unconvincing design, lack of charging stations, loyalty to a brand that today does not offer EVs, and low driving range. Another option was also reserved for users already having an EV Data collection and elaboration. To examine and to understand customers perceptions about EVs, an empirical investigation was carried out. Data collection was based on an empirical investigation through a survey. 600 paper copies of the questionnaire were delivered to potential Italian car customers in 2012 (from May to October). 243 questionnaires were collected, but only 221 questionnaires were valid for the statistical analysis. The effective average response rate was about 36.8% (= 221/600). Further 1273 questionnaires were collected through an online-survey. Collecting data through the World Wide Web is a relatively new method, it can be used with low costs independently from the number of collected observations and response times are considerably shorter than conventional methods such as mail or telephone. After receiving the questionnaires back from the respondents, a descriptive statistical analysis was carried out to provide an overview of the main barriers considered when purchasing an EV. Three important categories of attributes for the surveyed customers were evaluated: economic, qualitative / technical and environmental / practical. These categories were obtained by an analysis of 22 factors. 4. Survey results and discussions The first question of the survey asked respondents to indicate their favorite EV among HEVs, PHEVs, and BEVs. The results are listed in Table % of respondents indicated HEVs as favourite EVs, while 30.7% indicated PHEVs. In a previous literature review (Ciarapica et al., 2012) it was found that PHEVs will probably be the most promising EVs over the next years, even though there are others studies in the literature forecasting different scenarios. Table 1. Survey results about the favorite EVs of the examined Italian car customers sample Electric vehicle N preferences - % hybrid electric plug-in hybrid electric battery electric The survey also asked to respondents how much they would be willing to spend more for an EV and what range price they consider when purchasing an EV. 44.6% of the surveyed people indicated they would be willing to spend 2,000-4,000 more for an EV, while 25.3% said less than 2, % of the respondents also indicated the 10,000-20,000 price range as proper to purchase an EV, while 28.9% of the respondents indicated a 20,000-35,000 price range (Table 2). Table 2. Costs for an EV Extra costs for an EV N % < 2, ,000-4, ,000-6,

4 6,000-10, > 10, average judgment expressed by respondents based on a 5- point scale ranging from 1 (= very unimportant) to 5 (= very important). Price range N % < 10, ,000-20, ,000-35, ,000-50, > 50, Another question asked respondents to rate their favorite car body style; 30.7% of the surveyed people preferred city cars, while 20.5% ones sedans (Table 3). Table 3. Favorite car body style Car body style N % city car sedan station wagon multi-purpose vehicle (mpv) cross-country vehicle sport-utility vehicle (suv) coupe convertible The final question of section 1 regarded the efficiency (expressed in fuel consumption, km/l) of an EV. 32.5% of respondents agreed that a vehicle is efficient if its fuel consumption is 25 km/l or more, while 30.7% of the respondents said km/l (Table 4). Table 4. Fuel consumption efficiency Fuel consumption efficiency N % < 10 km/l km/l km/l km/l > 25 km/l Section 2 analyzed the opinions about the main aspects considered by Italian customers when purchasing a vehicle (Table 5). The results are reported according to the Table 5. Main aspects considered when purchasing a vehicle (economic, qualitative and technical, environmental and practical aspects) Aspect Factor Mean (S.D.) Economic Qualitative and technical Environmental and practical consumption 4.45 (.599) fuel price 4.38 (.684) purchase price 4.24 (.764) tax incentives 4.08 (.820) monetary incentives 3.95 (.883) flat rate contract 3.17 (1.282) free parking 2.74 (1.288) average value 3.86 (.90) reliability 4.72 (.449) safety in case of collision 4.66 (.569) driving range 4.29 (.832) passenger compartment size 3.88 (.753) engine noise 3.75 (1.070) acceleration 3.75 (.784) alternative engine appeal 3.31 (1.133) top speed 3.04 (.869) hi-tech appearance 3.04 (1.208) brand 2.82 (1.192) average value 3.73 (.89) number of charging stations 4.10 (1.025) GHG 3.95 (1.161) charging at home 3.92 (1.101) no traffic blocks 3.75 (1.105) restricted traffic areas 3.40 (1.123) average value 3.82 (1.10) Descriptive statistical analysis performed on the data of Table 5 reveals that all the examined categories are important when purchasing a vehicle. In particular, economic aspects appear to be the most considered by Italian car customers: fuel consumption, fuel price, purchase price, and tax incentives received a value greater than 4. Monetary incentives (on purchase price) are also noteworthy, with a mean value close to 4. Other economic aspects such as a flat rate contract or free parking are less significant. Qualitative and technical 361

5 aspects are also considered by Italian customers when purchasing a new car. Reliability, safety in case of collision, and driving range were evaluated with values greater than 4 (4.6 for the first two factors). Top speed, hi-tech appearance, brand and alternative engine appeal do not have a remarkable impact on the purchase choice of a vehicle (mean lower than 3.5); it can be pointed out that only one third of the qualitative and technical aspects have a mean value higher than 4, while they were more than half concerning the economic aspects. Concerning environmental and practical aspects, the number of charging stations, low GHG emissions, and the possibility to recharge the vehicle at home represent the most important factors; instead, the restricted traffic areas aspect has a mean value lower than 3.5. It must be pointed out that overall the survey data exhibit a quite high standard deviation, ranging from.89 to 1.10 depending on the considered category. Finally, through a multiple-choice question the survey asked to indicate the main barriers that could negatively influence the purchase of an EV. If a factor was considered a barrier, it was attributed the value 1, otherwise the value 2. It was also possible to specify whether the respondent already owned an EV. Table 6 displays the obtained results. Table 6. Main barriers to EV market penetration according to Italian car customers opinions Barriers high purchase price low driving range no charging station no repair centre Yes No Mean (S.D.) N [%] N [%] reliability niche product design low car use loyalty to a brand (.458) 1.31 (.465) 1.52 (.501) 1.71 (.455) 1.72 (.449) 1.81 (.391) 1.83 (.381) 1.89 (.319) 1.97 (.171) On the basis of the above findings, it can be noted that there are three major barriers to the EVs market penetration: the high purchase price (70.5%), the limited driving range (68.7%), and the lack of charging stations (48.2%). On the contrary, elements such as loyalty to a brand do not seem to have any importance (3.0%). It must be emphasized that only the 0.93% of the respondents owned an EV. 5. Summary This paper aiming at identifying the economic, qualitative, technical, and environmental factors influencing the Italian customers motivation when purchasing a vehicle, focusing on internal combustion engine vehicles and alternative powertrain such as HEVs, PHEVs, and BEVs. In fact, results presented in this paper provide an insight into the motivations and barriers influencing Italian car customers when purchasing a new vehicle. The customers preferences were evaluated through a survey carried out by a paper and on-line questionnaire. Respondents consider all the examined categories as important in the choice of purchasing a new vehicle. Overall, fuel consumption, fuel price, purchase price, reliability, safety in case of collision, driving range, and the number of charging stations appear to be the most important factors. While the high purchase price and low driving range, followed by the lack of charging station, represent the main potential barriers to widespread EVs adoption. Access to restricted traffic areas, no traffic blocks, hi-tech appearance, brand, flat rate contract, free parking and technical performances (e.g., top speed, acceleration) are not considered as primary aspects in the Italian market. According to the Italian customers opinions, the HEVs are considered the most interesting EVs over the next years, followed by PHEVs and BEVs. It can be considered that most of the studies performed to date indicate PHEV as the most promising EVs over the next years. Gas emissions reduction does not seem to be among the most important factors affecting the customers car purchasing decision, as also found by Caulfield et al. (2010) and Egbue and Long (2012), probably due to the uncertainty associated with the EV battery technology and sustainability of fuel source. The lack of a widespread fuelling station network for alternative fuels may significantly hamper the adoption of EVs in coming years. Reliable electricity supply should be available for recharging of BEVs and PHEVs, and charging infrastructures should be convenient to access. Policies should promote low-cost infrastructure to facilitate PHEV and BEV market penetration. Innovative electricity charging systems (e.g., battery swapping centres), grid powering from batteries, smart metering, and implications for drivers and utilities may also promote the adoption of this type of vehicles. To make these efforts most effective, the role of utilities and governments (including policymaking and regulatory agencies) in developing the charging infrastructure should be clearly established. Italian customers are also attracted by monetary and tax incentives, thus incentives policies should be carried out to ensure a stronger market 362

6 development of EVs. Instead, other incentives such as free-parking and permission to drive on restricted traffic areas do not significantly affect individuals preferences towards more fuel-efficient vehicles. Acknowledgements The authors gratefully acknowledge the support of the Free University of Bolzano that has funded the project from which these results have been obtained. References Brundtland Report (1987). Available from: Brundtland_Report_1987.pdf Caulfield, B.; Farrell, S.; McMahon, B. (2010). Examining individuals preferences for hybrid electric and alternatively fuelled vehicles. Transport policy, Vol. 17 (6), pp Ciarapica, F.E.; Matt, D.T.; Luccarelli, M.; Rossini, M.; Russo Spena, P. (2012). Factors affecting future scenarios for alternative vehicles market. Advanced materials research, Vol , pp Dagsvik, J.K.; Wennemo, T.; Wetterwald, D.G.; Aaberge, R. (2002). Potential demand for alternative fuel vehicles. Transportation research B, Vol. 36, pp Egbue, O.; Long, S. (2012). Barriers to widespread adoption of electric vehicles: an analysis of consumer attitudes and perceptions. Energy policy, Vol. 48, pp Elaborations Fondazione Impresa of data ACI (2009). IEA (2010). Oil and Gas Security - Emergency Response of IEA Countries Italy. Available from: IEA (2012). CO 2 Emissions from Fuel Combustion Highlights. Available from: Molin, E.; Aouden, F.; Van Wee, B. (2007). Car drivers stated choices for hydrogen cars: evidence from a small-scale experiment. Transportation research board 2007 annual meeting, Washington, DC. Potoglou, D.; Kanaroglou, P.S. (2007). Household demand and willingness to pay for clean vehicles. Transportation research D, Vol. 12, pp Sousanis, J. (2011). World Vehicle Population Tops 1 Billion Units. Available from: _