Abstract
"This thesis examines the drivers of demand and pricing of automobiles in the UK car market through three distinct chapters.
Chapter 1 investigates the most likely characteristics of potential electric vehicle (EV) buyers, their preferred vehicle attributes, and the key barriers preventing a widespread EV adoption. Applying the adaptive Lasso, binomial and ordered logit regressions, I find that the likelihood of considering an EV purchase increases primarily with youth, education, being a student, and living in the south of UK. Additionally, purchase cost, performance and range represent the most important vehicle attributes, with high purchase cost and low maximum range being the key adoption barriers.
Chapter 2 studies how vehicle characteristics, safety, and equipment influence conventional and alternative fuel vehicle prices. Furthermore, quality constant price indices are estimated, disentangling the growth of car prices into quality change and other factors. By manually constructing a brand-new dataset for the entire UK market 2008-2019, and applying the adaptive Lasso, weighted least squares, and quantile regressions to a hedonic model, I discover that the main drivers of price include vehicle performance and size/massiveness. The prices of alternative fuel vehicles are also more sensitive to any changes in vehicle characteristics. In addition, quality change is estimated to cause around 65% of the total increase in car prices.
Chapter 3 examines the drivers of automobile demand, while taking into account price endogeneity, consumer heterogeneity, unobserved vehicle characteristics, and realistic substitution patterns. Combining the dataset of Chapter 2 with consumer demographics and applying the discrete-choice random-coefficient model of Berry, Levinsohn, and Pakes (BLP, 1995), we find that the key drivers of demand include fuel consumption, vehicle size, and price. Additionally, a ₤1000 increase in prices is estimated to cause a fall in demand by about 3% - 5%, with 0.15% of consumers leaving the market."