Diffusion of Satellite-supported Telematics in European Passenger Cars

1
Diffusion of Satellite-supported Telematics in
European Passenger Cars

• ISF 2005, San Antonio,12th 15th June
• Birgit Loecker Michael A. Hauser
• ARC Seibersdorf research GmbH Vienna University
  of Economics and
  Business Administration
• Mail birgit.loecker_at_arcs.ac.at Mail
  michael.hauser_at_wu-wien.ac.at

2
Agenda

• Motivation and Scope of the Study
• Data
• Modelling Durables
• Models Bass and Gompertz
• Models Specification
• Results of the Bass Model Estimation
• Results of the Gompertz Estimation
• Comparison of Bass Gompertz Results
• Summary Discussion

3
Motivation

• Capacity problems on European road transport
  (EU15)
• infrastructure and potentials for improvement by
  
• Rapid development of modern information and
  communication technologies combined use with
  satellite navigation systems
• Telematic systems and services offer market
  opportunities to the industrial
• actors
• Higher transport
• safety
• Better transport
• information,
• management
• control.

4
Scope of the Study

• Modelling and forecasting the diffusion of
  satellite-supported telematic systems implemented
  in new luxury and middle class passenger cars by
  5 European (EU 15) car manufacturers
• Application of different types of diffusion
  models for consumer durables, comparison of the
  models
• Bass model
• Gompertz model.

5
Data (1)

• Cumulative sales data of satellite-supported
  telematic devices of 5 European car makers
  (anonymous) since market introduction
• Market share of 20.7 in the overall market
  (2002,EU15)
• Evidence of three groups of car makers with
  different diffusion behaviour
• Pioneers M4 and M5
• Follower M3
• Laggards M1 and M2.

6
Data (2)

• Market potential 2002 total stock of new
  registered cars
• Individual market shares of each car maker in
  this stock (average from 1995 2002)
• Portion of luxury and middle class cars of each
  car maker is chosen
• Growth of the market potential of 2 p.a.,
  (transformation of the data to 2002 levels by
  adequate discounting).

7
Modelling Durables

• Notation
• st sales (units) in period t (observed)
• St cumulative sales (units) up to period t,
  St ?tj0 sj
• nt adopters in period t, new purchasers
  (unobserved)
• Nt cumulative adopters, Nt ?tj0 nj
• rt replacement demand, recurrent purchasers
  (units)
• Npotential adopters, potential stock of cars
  to be equipped (units)
• Replacement Demand (cp. Islam/Mead(2002) EJOR)
• Passenger cars and telematic systems are durable
  goods with the same scrappage incidence rt d
  Nt-1 , t1,2,
• Assumption constant scrappage rate implying av.
  life time of 10
• Current sales are composed of the demand of new
  adopters and replacement demand st nt rt
• Adopter series (N0 0) nt st - rt and Nt
  Nt-1 nt , t1,2,

8
Models Bass and Gompertz

• Bass Model Estimation
• Pooled estimation in discrete time and fixed
  effect form
• nit Nit - Ni(t-1) p q (Nt-1 / N)
  (Ni Ni(t-1)) et
• i .number of the car maker, i1,..,5
• imitators use information from the whole market
  (innovative)
• nit /Ni p (NiNi(t-1))/Ni q (N(t-1)
  /N) (Ni Ni(t-1))/Ni ?it
• Gompertz Model Estimation
• Linearisation of data by using a different time
  axis
• F(t) exp(-exp(-ab tc)) a,b,c gt 0
  generalised Gompertz function
• Pooled estimation in levels partially linearised
  and with fixed effects -ln(-ln (Nit / Ni))
  a b tc et for i1,,5,
• Iterative procedure for (c) by minimising sum of
  squared residuals

9
Models Specification

• The model estimation addresses the problem of
• Small sample size ? pooled estimation (Islam et
  al.(2002) IJF)
• Individual potentials are taken into account by
  modelling relative values for the Bass model and
  the rate of market penetration for the Gompertz
  function.
• Identification of different groups of car makers
• Estimation of all car makers in one pool
• Different diffusion behaviour of three groups
  (Chow test)
• Pioneers (M4 and M5),
• Follower (M3),
• Laggards (M1 and M2).

10
Results of the Bass Model Estimation (1)

• Laggards (M1, M2)
• nit/Ni0.0008(NiNi(t-1))/Ni0.0274(N(t-1)
  /N)(NiNi(t-1))/Ni ?it
• p-values for the innovator and imitator
  parameters are 0.0003 and 0.0261 respectively r2
  is 0.834, and DW statistic is 1.51 18 obs.
• Follower (M3)
• nit/Ni0.0025(NiNi(t-1))/Ni0.1088(N(t-1)
  /N)(NiNi(t-1))/Ni ?it
• p-values for the innovator and imitator
  parameters are 0.0133 and 0.0738 respectively r2
  is 0.922, DW 1.41 9 obs.
• Pioneers (M4, M5)
• nit/Ni 0.0014(NiNi(t-1))/Ni0.2822(N(t-1
  )/N)(NiNi(t-1))/Ni ?it
• p-values for the innovator and imitator
  parameters are 0.0153 and 0.0000 respectively r2
  is 0.872, DW 1.21 18 obs.

11
Results of the Bass Model Estimation (2)

• Long run level of cumulative adopters is
  normalised by the indiv. market potential of each
  car maker to 1
• Different shapes due to pioneer, follower and
  laggard behaviour
• Half of the long run level is obtained for the
  pioneer group in 2020, for the follower in 2028
  and in 2052 for the laggards.

Path of total adopters normalised Pioneers,
Follower, Laggards
12
Results of the Bass Model Estimation (3)

• Pioneers show an overshooting behaviour from
  2022 onwards, annual sales are above the long run
  level, reaching their peak in 2027 with 112 of
  the long run level, and decreasing slowly
  afterwards.
• Reason for the overshooting behaviour seems to
  origin in the slope of new adopters and the
  development of the replacement demand.

Total Sales (st) of Pioneers Sales to New
Adopters (nt) Replacement Demand (rt)
13
Results of the Bass Model Estimation (4)
Total Sales (st) of Laggards Sales to New
Adopters (nt) Replacement Demand (rt)
Total Sales (st) of Follower Sales to New
Adopters (nt) Replacement Demand (rt)
14
Results of the Gompertz Estimation (1)

• Laggards (M1, M2)
• -ln(-ln (Nit / Ni)) - 2.282 0.231 t0.58
  ?it
• p-values for the parameters are 0.0000 and 0.0000
  respectively, r2 is 0.985, DW 1.33, 18
  observations.
• Follower (M3)
• -ln(-ln (Nit / Ni)) - 2.108 0.204 t0.73
  ?it
• p-values for the parameters are 0.0000 and 0.0000
  respectively, r2 is 0.989, DW 1.68, 9
  observations.
• Pioneers (M4, M5)
• -ln(-ln (Nit / Ni)) - 2.070 0.130 t0.92
  ?it
• p-values for the parameters are 0.0000 and 0.0000
  respectively, r2 is 0.985, DW 1.03, 18
  observations.

15
Results of the Gompertz Estimation (2)

• Long run level of cum. adopters is normalised by
  the individual market potential of each car maker
  to 1
• Different shapes due to pioneer, follower and
  laggard behaviour
• Half of the long run level is obtained for the
  pioneer group in 2019, for the follower in 2025
  and in 2061 for the laggards.

Path of total adopters normalised Pioneers,
Follower, Laggards
16
Results of the Gompertz Estimation (3)

• Contrary to Bass model, no overshooting is
  observed in the total sales with respect to the
  long run level.
• The number of new adopters obtains its peak in
  2015 6 years before the pioneers in the Bass
  model (shape is clearly skewed to the right)
• Market saturation by 2080 - 30 years after the
  Bass model result.

Total Sales (st) of Pioneers Sales to New
Adopters (nt) Replacement Demand (rt)
17
Results of the Gompertz Estimation (4)
Total Sales (st) of Follower Sales to New
Adopters (nt) Replacement Demand (rt)
Total Sales (st) of Laggards Sales to New
Adopters (nt) Replacement Demand (rt)
18
Comparison of Bass Gompertz Results

• Pioneers (M4, M5)
• Cumulative adopters
• Half of the potentials are reached at the same
  (approx.) time in both models
• Then the Bass model shows a faster increase in
  cumulative adopters than the Gompertz model,
• Total Sales
• Increases are higher in the Gompertz than in the
  Bass model and within 4 years total sales of the
  Bass model catch up with that of the Gompertz
  model which takes 9 years for the same increase
  
• Follower (M3) and Laggards (M1 and M2)
• Differences are even more pronounced.

19
Summary Discussion

• Modelling of the diffusion of satellite-supported
  telematic systems implemented in European
  passenger cars outlines future market development
  in the long run
• Several comprehensive (ceteris paribus)
  sensitivity analyses with respect to
• Overall saturation level,
• Possible compounding to take into account a
  growing saturation level (0 2 p.a.),
• Scrappage rate (av. life time 10 to 15 years),
• Share of newly sold cars equipped with telematic
  systems of a single car maker.
• Results for both models are robust for all but
  the market share choices
• In case of overshooting behaviour, the Bass model
  is more realistic in the absence of overshooting
  behaviour, the Gompertz function seems to model
  the diffusion more adequately.