Feasibility of CNG car in Singapore

Abstract

The main focus of this research is to study the adoption of Compressed Natural Gas (CNG) technology in the Singapore passenger car market. We began with a brief introduction to CNG as an alternative energy source for cars, which we consider an innovation to the Singapore market. Subsequently, we introduce the Diffusion of Innovations [Rogers, 2003a] and AIDA models as the underlying frameworks. Subjects are categorized into 4 groups and mean-compared on their willingness to buy CNG cars and conversion kits. This dependent variable is also regressed against the perceived characteristics of CNG technology such as Relative Advantage, Compatibility with existing condition, Observability, Complexity and Trialability. Additionally, we also price the CNG feature as a call option enabling the owner to exploit the price gap advantage of CNG over petrol using a binomial tree model. Finally, we attempt to reconcile this theoretical price with the perceptions of our study subjects.

The results suggest that, in terms of CNG cars adoption, the attitude stage of AIDA has the maximum effect on likeliness of purchase. Furthermore, the perceived Observability of CNG is the most important factor in the decision to adopt CNG. Finally, car owners in Singapore attach a much lower value to the CNG option than its theoretically computed value. Taking into account the slow economy, we perceive a challenging future outlook for CNG cars in Singapore.