Demand for mini cars and large cars; decay effects, and gasoline demand in Japan

Abstract

Explaining a) why consumers underinvest in new car fuel economy by opting to buy large vehicles, b) why macro shifts in vehicle classes have occurred in the last decades and how c) the effects of vehicle fuel economy and shifts in vehicle mix influence the growth path of gasoline demand is key to design effective energy efficiency goals for transport. As of 2008, 1.9 EXJ (Exajoules) of energy are consumed in Japan by private vehicles producing 124 MtCO2 emissions. For the period 1980 to 2008, we estimate (1) gasoline demand for three vehicle sizes, (2) vehicle sales (3) new car fuel economy changes (the 'real' technical change), and (4) vehicle stocks. Using a data sample for 1980-2008 we find that a) in the short run consumers buy fuel economy, that is sales of mini and small cars increase, but fail to do so in the long run and (b) consumers are increasingly trading in their cars for larger cars. A further finding is that gasoline demand is projected to increase to 2.3 Exajoules by 2035 even with strong penetration of mini cars. The policy implication is clear: Japan's policy to reduce oil dependency to 80 % by 2030 is in peril so long as buyers prefer larger cars and drive ever longer distances.

Energy Efficiency or Conservation for Mitigating Climate Change?

“…In recent decades, air travel has shown rapid growth: growing nearly eight-fold from 1977 to 2017 [21]. Even within the private vehicle market, sports utility vehicles are gaining market share over lighter conventional cars in North America, the European Union and Japan [73][74][75]. Even in China, now the world's largest auto manufacturer, the average weight of light duty vehicles is rising [76].…”