Optimum Car Life in an Era of Technological Transformation: Public Policy Issues

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Abstract:

This paper explores the distinction between economically optimum car life from the viewpoint of a profit seeking Original Equipment Manufacturer (OEM) and from the viewpoint of social and environmental imperatives. In particular, it is sometimes assumed that environmental viability implies extending the working life of a car (for an application of this premise, see for example Ceschin and Vezzoli 2010). In this paper we explore this proposition, while considering possible public policies – including tax and subsidy policies – that might better reconcile private and social benefits. The context of this paper is one of projected and growing eco-austerity combining with the transformative potentials of non-ICE technologies in an era of technological change.

Taking as given the imperative to accelerate the profitable introduction of sustainable (non-ICE) car technologies, the paper is organized in progressive stages as follows.

(a) Assuming a traditional or conventional organization of the market for used cars, the question of the socially or environmentally optimum car life is isolated from its preferred determination by profit seeking manufacturers: the paper considers the role which tax and subsidy policy might play to better reconcile the two.

(b) Assuming a non-traditional or non-conventional organization of the used car market, the paper then considers how the first set of conclusions might change. In this part of the paper, the design of the used car market, and the organization of after sale services, is brought to the foreground. The implications for auto retail, distribution and services provision are emphasised.

(c) The overall conclusion to emerge is that in a period of technological transformation optimum car life from a social or environmental perspective is more likely to be shorter rather than longer, with a faster rate of turnover of existing vehicle fleets a reasonable goal of policy; and the organization of the used car market emerges as a key feature of the industry, requiring closer study.

The paper as a whole is a further development – with applications – of an exploratory paper presented at the 18th GERPISA Colloquium. It builds on discussions undertaken the following year, in a seminar held at ENS Paris, organised for this purpose. To illustrate its analysis, the policy implications of the paper are contrasted with the policy trajectories currently observed in the particular case of the UK (recently reviewed in papers by Berkeley et al (2012) and Harper and Wells (2012)). Here, as perhaps elsewhere, it can be observed that question of optimum car life, and the organization of the used car market, are subordinated to other concerns. The paper concludes by considering how practical changes to influence public policy might then be effected.

References
Berkely, N., Jarvis, D. and Bailey, J. (2012) ‘Phoenix from the ashes: can low carbon vehicles ensure the long-term of the West Midlands Automotive Cluster’, International Journal of Automotive Technology and Management, vol 12, 2 (forthcoming)

Ceschin, F. and Vezzoli, C. (2010) ‘The role of public policy in stimulating radical environmental impact reduction in the automotive sector: the need to focus on Product-Service System innovation’, International Journal of Automotive Technology and Management, vol 10, no 2/3, pp321-341

Coffey, D. and Thornley, C. (2010) ‘Extended Producer Responsibility in the Auto Industry and Durable Goods Leasing: some economic implications for sector policy’, 18th GERPISA Colloquium, June.

Harper, G. and Wells, P. (2012) ‘Diverse regional sustainability strategies: template for the future or squandered resources?’ International Journal of Automotive Technology and Management, vol 12, no 2 (forthcoming)