Boom and bust of flex-fuel vehicles in Sweden

Until 2008 the introduction of flex-fuel vehicles in the Swedish new vehicle market seemed to be a success. Each year sale shares increased, reaching in 2008 almost 25 % of the market. But since then the sales have dropped to 5 % of new sold cars in 2011. This paper explores and explains both the rise and fall of this new technology. Flex-fuel vehicles have been highly subsidized both from a vehicle and fuel perspective. Incentives for consumers have been offered at national level as well as municipal. At the same time the focus of the media has shifted questioning the benefits of ethanol as an alternative fuel. The analysis is based on two sets of sales statistics: monthly sales of vehicles in Sweden divided per fuel type and type of consumer, i.e., private person or company for the years 2002-2011; yearly sales per municipalities divided per fuel type and purchaser type between 2006 and 2011. Economic factors, such as income and fuel prices; infrastructure, such as number of fuel stations; incentives; and media, such as share of negative articles covering ethanol, are used as dependent variables. Findings show that changes in the rebate structure, E85 losing its economic advantage and the removal of the exemption of the congestion charging have been the most significant factors for the decline. This has been paralleled with an increasing negative media coverage and the availability of a substitute, i.e., conventional vehicles that get labelled green by the official definition (less than 120 g CO2/km).Policymakers in many countries are facing the challenge of phasing out fossil fuels from the vehicle fleet. Insights from this papers show that a successful development at first may easily be overturned the economic as well as the environmental picture is altered. The availability of highly efficient and thus more environmentally friendly conventional vehicles, may also hamper the alternatives’ sales