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

This article explains why: (a) consumers underinvest in new car fuel economy by opting to buy large vehicles; (b) macro shifts in vehicle classes have occurred in the last decades; and how (c) the effects of vehicle fuel economy and shifts in vehicle type influence the growth path of gasoline demand, which is the key to designing effective energy efficiency goals for transport. From 2008, 1.9 EXJ (Exajoules) of energy were consumed in Japan by private vehicles producing 124 MtCO2 emissions. For the period 1980 to 2008, we estimated: (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 found that: (a) in the short term consumers buy fuel economy, that is sales of mini and small cars increase, but this is not sustained in the long term: and (b) consumers increasingly traded in their cars for larger cars. A further finding was that gasoline demand is projected to increase to 2.3 EXJ by 2035, even with a growing number of mini cars. The policy implication is clear: Japan's policy to reduce oil dependency to 80% by 2030 is in peril as long as buyers prefer larger cars and drive ever longer distances.