Ecofys bv P.O. Box 8408 NL-3503 RK Utrecht Kanaalweg 16-G NL-3526 KL Utrecht The Netherlands www.ecofys.nl tel +31 (0)30 280 83 00 fax +31 (0)30 280 83 01 e-mail info@ecofys.nl Title of Report: 2 nd hand market of CNG vehicles Alternative Fuel Vehicles the PROCURA project Utrecht, June 2008 PDCSNL061053 Copyright Ecofys 2008 Deliverable n.º D 4.11 Dissemination Level Public Work Package WP 4.1 Authors M. Notenboom Status (F: Final, D: Draft) F 2008.27.06 File Name Project Start Date and Duration PROCURA_Deliverable D4.11 2 nd hand market 01-01-2006, 36 months
Supported by Disclaimer: The sole responsibility for the content of this publication lies with the authors. It does not necessarily reflect the opinion of the European Communities. The European Commission is not responsible for any use that may be made of the information contained therein. This product is a result of the PROCURA project n. EIE/05/102 www.procura-fleets.eu II
Ecofys bv P.O. Box 8408 NL-3503 RK Utrecht Kanaalweg 16-G NL-3526 KL Utrecht The Netherlands www.ecofys.nl tel +31 (0)30 280 83 00 fax +31 (0)30 280 83 01 e-mail info@ecofys.nl INDEX 1 Introduction 4 2 CNG cars in Europe 6 3 European m arket for 2nd hand cars 7 3.1 Offer of second-hand vehicles 7 3.2 Residual value and car prices 7 3.2.1 Prices of second-hand CNG vehicles 9 4 Import/export of CNG vehicles. 10 4.1 Importing vehicles in practice 11 5 Stimulating CNG market through conversion 12 6 Conclusion 14
1 Introduction There are three main barriers for a large scale introduction of natural gas as an alternative fuel in the road transportation sector 1 : Natural Gas availability Infrastructure required, including filling stations. Vehicle availability/ cost. This study focuses on an aspect of the last bullet. The total availability of CNG vehicles is dependant on a strong second hand market of CNG vehicles. This can be founded by the following propositions: A good second-hand market insures a good residual value for CNG-vehicles, which makes it more attractive to buy a new CNG car, thus increasing the total demand for CNG vehicles. By importing a car from another country the total fleet of CNG vehicles increases in the home country. On the consumer side, individuals and small companies often buy used cars instead of new ones, because of the high vehicle costs. Obviously the new price of a car is higher then of a second hand car, but another reason is that the depreciation of a car is the highest in the first three years. Furthermore, according to research by Capgemini and CIRP, consumer attitudes to used vehicles have become more sophisticated as vehicles themselves have improved in quality and reliability. As a result, the importance of the total used car market is growing significantly. In France for instance, the used-to-new vehicle ratio has increased since 1999 from 2.4 to 2.6, showing a steady growth of used vehicle sales by volume 2. In contrast to this, the offer of second-hand CNG cars is very poor in most European member state countries, and is therefore not contributing to the introduction of CNG as a transport fuel. The research question for this study can therefore be formulated as: How can the second-hand CNG-car market in the European member states be stimulated? In order to answer this question, we have investigated the following topics for this report: Total amount of CNG vehicles per member state 1 Market Barriers for Large-Scale Alternative Fuel Vehicles Procurement; Procura D 2.1 2 Used Car Sales Significantly Impact New Vehicle Residual Values, Pricing and Brand Strength ; Cap Gemini & CIRP 2ND HAND MARKET OF CNG VEHICLES JULI 2008 4
Value provision of second-hand CNG vehicles Offer of 2 nd hand CNG vehicles in member states. Conversion of gasoline vehicles to CNG. Import/export of vehicles. 2ND HAND MARKET OF CNG VEHICLES JULI 2008 5
2 CNG cars in Europe To have a better understanding of the potential of the second-hand CNG car market in European member states, the amount of CNG vehicles is given in the table below. The number of vehicles is an indicator for the market of second-hand CNG vehicles. Table 1: Number of CNG vehicles per European country. 3 CNG vehicles Last updated Country Total car/ldv's Bus Truck Other Italy 432.900 430.000 2.100 800 March 2007 Germany 60.000 58.000 1.500 500 June 2007 Bulgaria 25.225 25.000 170 20 35 February 2007 Sweden 11.515 10.420 757 338 December 2006 France 10.150 7.500 2.000 650 March 2007 Switzerland* 4.590 4462 93 35 July 2007 Spain 1.526 122 760 611 33 August 2007 Austria 1.022 1.020 0 2 March 2007 Poland 771 360 41 370 April 2005 Czech Republic 660 440 185 14 21 May 2007 Netherlands 603 485 95 15 8 March 2007 United Kingdom** 448 101 14 333 March 2007 Greece 416 0 416 0 December 2006 Portugal 379 36 314 29 May 2007 Slovakia 337 102 220 15 April 2007 Europe 747.668 574.404 47.655 68.012 57.597 September 2007 Other 6.521.459 6.130.770 115.434 64.334 210.921 May 2007 World 7.269.127 6.705.174 163.089 132.346 268.518 September 2007 * Non EU member state ** United Kingdom: right-hand drive cars In Europe, besides Italy, CNG as a transport fuel is at the moment very minimal. France, Germany, Ireland, Bulgaria and Sweden are the main European CNG markets outside of Italy, though even here rates of penetration into the overall car fleet are minimal and represent only a fraction of the global CNG market (e.g. 1.11% of total car fleet in Italy, 0.12% in Germany). 3 Source: The GVR November 2007 2ND HAND MARKET OF CNG VEHICLES JULI 2008 6
3 European m arket for 2nd hand cars As shown in the previous chapter, the amount of CNG vehicles within the EU is highest in Italy and Germany. In agreement with this, it is likely that the offer of 2 nd hand cars is also the highest in these countries. In this chapter we investigate the offer of 2 nd hand CNG vehicles, the residual value and the prices of 2 nd hand vehicles in and between European member states. 3.1 Offer of second-hand vehicles For the offer of 2 nd hand CNG vehicles we looked for CNG vehicles on car sale websites. In table 1 a quick search for CNG vehicles is presented. Of course these numbers are only indicative and change from day to day, and therefore is only showing the order of magnitude. Table 2: Available cars on the internet Counry Website CNG cars Price range Cars on website # min ( ) max ( ) # Netherlands www.marktplaats.nl 1 29.995 125.825 www.speurders.nl 9 7.950 33.200 164.892 Belgium www.2dehands.be 0 66.505 Germany www.mobile.de 1.354 1.350 48.400 1.024.609 Italy www.autoscout24.it 235 1.000 46.000 N/A www.ebay.it 665 500 55.000 72.184 In Germany the most second hand vehicles were found. The percentage CNG vehicles of the total offer of vehicles is the highest in Italy. 3.2 Residual value and car prices An argument that is often heard is that the residual value is low because of the availability of fuelling stations. Following this reason the purchase of a new CNG vehicle might be less attractive, especially since the prices for new CNG passenger cars are 1,800 to 3,000 euro higher than for the equivalent petrol car (because of the extra components). For CNG busses this varies from 30,000 to 40,000 Euros compared with diesel 4. 4 Market Barriers for Large-Scale Alternative Fuel Vehicles Procurement; Procura D 2.1 2ND HAND MARKET OF CNG VEHICLES JULI 2008 7
In this section the residual value of CNG vehicles is investigated as well as the prices of 2 nd hand CNG vehicles. For this we used data from Autoweek, a Dutch car magazine. The depreciation of a car is dependant on several factors, e.g. make, model, fuel type and country. In the Netherlands the depreciation of a car in its first year lies around 18%. This percentage is slightly higher for diesel vehicles, but that can be addressed to the fact that these vehicles have higher mileages. In table 3 the comparison for depreciation can be found. This comparison is based on new prices and average prices for one and two year old vehicles of the specific model in the Netherlands 5. In this comparison four vehicle models are compared, shown in table 3. Table 3: Comparison of depreciation per fuel type in the Netherlands 5. Make Model CNG Gasoline Diesel Volkswagen Touran 1st year 17% 16% 18% 2nd year 10% 10% 11% Citroen Berlingo 1st year 19% 19% 21% 2nd year 11% 12% 13% Fiat Panda 1st year 15% 18% 20% Opel (Combo) Tour 1st year 23% 23% 24% Average 1st year 19% 19% 21% Average 2nd year 11% 11% 12% As can be seen in the table the depreciation for vehicles is almost the same for CNG vehicles as for gasoline vehicles. Diesel cars depreciate a little faster. 5 Source www.autoweek.nl ; Dutch car magazine, equivalent of autobild etc. 2ND HAND MARKET OF CNG VEHICLES JULI 2008 8
3.2.1 Prices of second-hand CNG vehicles The question rises if the price of a 2 nd hand CNG vehicle differs between member states. Therefore we compared the biggest markets of 2 nd hand CNG vehicles in Europe. Comparison with another country (like the Netherlands) turned out to be difficult because of the limited offer of vehicles (see paragraph 3.1). We choose an Italian car (Fiat) and a German car (Volkswagen) and compared the prices in both countries. We have made the comparison by using popular internet sites in both countries. For comparison we took models in both countries with comparable levels of options, accessories, mileage and similar engine types (performance). Table 4: Comparison of CNG car prices in Italy and Germany Country Make Model Mileage Model year Price fuel Italy Fiat Multipla 60000 2001 7.000 CNG Germany Fiat Multipla 57000 1999 7.900 CNG Italy Fiat Multipla 120000 2001 7.000 CNG Germany Fiat Multipla 119000 2001 5.990 CNG Italy Fiat Multipla 100000 2005 12.500 CNG Germany Fiat Multipla 65000 2004 12.750 CNG Italy Fiat Multipla 78000 2005 12.500 CNG Germany Fiat Multipla 94000 2003 8.790 CNG Italy VW Touran Goal 70000 2006 18.000 CNG Germany VW Touran Goal 77520 2006 17.480 CNG Italy VW Touran Conceptline 21028 2007 19.000 CNG Germany VW Tourran Conceptline 28167 2006 18.950 CNG Germany VW Touran Conceptline 29613 2006 15.490 Diesel Germany VW Touran highline 25990 2006 18.990 Gasoline Germany Fiat Multipla 67967 1999 5.990 Gasoline Germany VW Touran 72000 2006 13.900 Diesel It turned out that there is no big difference in prices between these two countries for a specific car. Remarkable is the price drop of vehicles with the conventional fuels. Compared with the model on natural gas, 2 nd hand prices seem lower for similar vehicles. This indicates a higher depreciation for vehicles with conventional fuel types, which is in line with the depreciation in the Netherlands according to Autoweek. 2ND HAND MARKET OF CNG VEHICLES JULI 2008 9
4 Import/export of CNG vehicles. As seen in the previous chapter, the offer of 2 nd hand vehicles varies per member state. It could therefore be interesting to import a 2 nd hand CNG vehicle from a member state with a bigger 2 nd hand market (like Italy or Germany). There are generally three reasons for importing a car. The first is that it might be that the specific model was never available, or that it is not available at the moment in the home country. Second, the price of a car can be considerably lower in another country (caused by taxes etc.). The third reason may be that the number of a certain vehicle type offered in another country is higher. Of course these reasons are also valid for exporting a car. One would think that with the same currency, all countries within the Euro Zone would have the same or similar prices for standard items as cars. However this is not the case. Although the price gap is narrowing, there are still forces keeping car prices at a huge differential. Taxes for example have a huge influence in creating differences in car prices, since a country's tax often gets figured into the price of the car. For example due to tax measures prices of 2 nd hand cars in the Netherlands are higher than in neighbouring countries like Germany and Belgium. As result of this, together with a change in regulations, the import of vehicle from neighbouring countries has risen by 50% in the Netherlands between 2005 and 2006. In the first quarter of 2007 it has risen even further (28% compared to 2006) 6. To put this in perspective, this is only 1% of the trade of second hand vehicles in the Netherlands (about 800.000 cars annually) The transport sector in Bulgaria could be characterized as growing quite rapidly, where the stock of vehicles is, on average, still relatively old, with a relative large influx of second hand cars, usually from other parts of the EU 7. Exporting to Bulgaria or other East European countries might be attractive for vehicles that can not be sold in the home country, for whatever reason. According to data presented by the Car Importer Association the share of imported cars in Bulgaria increased with 46% for the first two months of 2007 compared to 2006. In total 34 677 cars were imported of which only 8.723 new cars. It is expected that due to emission regulations, measures will be taken to reduce import of polluting 6 www.telegraaf.nl ; website of a popular Dutch newspaper 7 Compressed Natural Gas: a short description of the current market in Bulgaria ; Vladislava Georgieva, 2008 2ND HAND MARKET OF CNG VEHICLES JULI 2008 10
vehicles (up to Euro3 emission standards) in Bulgaria, making it more attractive to import CNG vehicles. 4.1 Importing vehicles in practice Basically there are two ways to buy a car in another country. The first way is through intermediate offices that will take car of the importing process for a fee. The advantage of this is that you do not have to worry about import duty, inspections etc. The other way is to import the vehicle yourself. By importing the vehicle yourself you can save on the fee for the intermediate office, but you have to take care of the following steps: Searching and finding the right vehicle In recent years the internet is becoming a larger platform for trade between seller and buyer. Nowadays, internet has the role to serve as a matchmaker, to put buyers together with sellers. Because of this it is much easier to find specific models across Europe. With the help of large internet sites like Ebay or Autoscout24, it is possible to locate cars that individuals or car dealers sell, that satisfy the need of the buyer. Transport Usually insurance company refuse vehicles with a foreign licence plate. Therefore it is not recommended to drive the foreign vehicle back home. This means that the vehicle has to be transported, which brings extra costs (trailer rental etc.). Importing the vehicle Depending on the home country, there are additional costs for vehicle registration, licence plates, mandatory inspections and additional taxes (e.g. import duty). 2ND HAND MARKET OF CNG VEHICLES JULI 2008 11
5 Stimulating CNG market through conversion Another possibility of stimulating the market of CNG vehicles is through conversion of gasoline fuelled car. For instance, a large part of the CNG vehicles in Bulgaria consist of gasoline vehicles adapted to CNG. The largest part of this is formed by taxis. The average price for adaption of Euro3/Euro4 standard cars is between 1100 1400 Euros. The best example is Argentina, which is the country with the largest CNG fleet in the world, more than 500.000 gasoline vehicles have been converted to CNG. The number of conversions there is stabilized around 5.000 monthly. This represents 70% of the conversions per month world wide. The conversion did not only help to accelerate the introduction of CNG as a transport fuel but also lead to new employment and industry. The conversion of gasoline vehicle also has downsides. A study performed by the University of Texas and the Southwest Research Institute focused on the conversion of gasoline vehicles and the effects on emissions. The investigation involved the conversion of gasoline cars, involving the conversion of light-duty vehicles, up to and heavy light-duty trucks, to bi-fuelled vehicles using commercially available aftermarket CNG and LPG conversion systems. The kits were installed and calibrated according to the manufacturer's guidelines and recommendations. The emissions when operating on the alternative fuel were compared to those when operating on gasoline in order to determine the "success" of the conversion. Most of these conversions performed worse (in terms of emissions) than their gasoline equivalents. In almost all cases, NO x emissions were too high when operating on the alternative fuel. To aid understanding of this problem, detailed measurements of the exhaust oxygen sensor output and air/fuel ratio control output signal from the alternative fuel computer (when available) were recorded and analyzed. It was found that some of the kits operate too lean and/or have control systems that are too slow. Another potential problem is too much timing advance. For some of the vehicle/kit combinations for which the data indicated that adjustments might be beneficial, recalibrations were performed. Many 2ND HAND MARKET OF CNG VEHICLES JULI 2008 12
vehicle/kit combinations showed a benefit from the recalibrations, but some kits did not work on any installations, even after recalibration. 8 8 T he Texas Pr oject Par t 2 - Control System C h ar a c te ristics of A f termarket CNG and LNG Conversio n s for Light-Duty Vehicle s; James C hiu - South w e st Resear c h In s titu t e; Ronald Matth e w s - U niversity of Te x a s ; 1996 2ND HAND MARKET OF CNG VEHICLES JULI 2008 13
6 Conclusion The second-hand car market can play an important role in overcoming the chicken egg situation. A healthy 2 nd handcar market may even be crucial. The research question therefore was: How can the second-hand CNG-car market in the European member states be stimulated? Importing second-hand vehicles is attractive in countries where the offer of secondhand vehicles is low. By importing and exporting vehicles it is possible to purchase a second-hand CNG vehicle. The extra costs of importing a vehicle may be compensated by the lower price of the vehicle in another country. The help of an intermediate office can save the troubles of importing a car individually. Conversion of gasoline vehicles is another way to enlarge the offer of CNG vehicles on the road. However the downside is that these converted vehicles perform less on emissions than factory build vehicles. Furthermore the reliability of the vehicle diminishes, which can negatively influence the attitude against CNG as a transport fuel. From this research it can not be concluded that the residual value of CNG vehicles differs from other cars with more conventional fuels, although this is an often heard argument for not buying a CNG vehicle. An underlying reason for this is that without fuelling stations the usage of CNG vehicles is limited to niche-markets, making it harder to sell a vehicle on the consumer market. For this reason exporting to East European countries might be a solution. Recommendations Create European website for offering vehicles powered by natural gas or alternative fuels, Create a website with information where to find the best (commercial) websites for purchasing vehicles. Provide transparent information of rules for importing and exporting vehicles between EU member states. Provide information about vehicle numbers in other countries and possibilities for importing/exporting during general CNG campaigns. 2ND HAND MARKET OF CNG VEHICLES JULI 2008 14