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Consumers willingness to pay for improved safety features in cars



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16 February 1993

CONSUMERS WILLINGNESS TO PAY

• FOR IMPROVED SAFETY FEATURES IN CARS

Overwhelming support has been shown for Federal Government initiatives to improve the protection of car occupants in crashes according to a study released today by Federal Land Transport Minister, Bob Brown.

The study, Willingness to Pay for Safety Features, shows that consumers would be prepared to pay for a range of extra safety features which will protect the driver and passengers in car crashes.

Commissioned to find out how the community felt about increased vehicle safety features related to the new Australian Design Rule (ADR) 69/00, the study found that more than 80 per cent of those surveyed said they would be willing to pay more than the estimated retail price for either of two possible packages of safety features permitted under the new ADR.

`The new design rule does not specify what safety features a car must have, but instead sets performance standards which manufacturers can meet in a variety of ways', Mr Brown said.

'Manufacturers can meet the requirements of the rule by using a combination of improved safety systems, including airbags and other safety technology.

'Air bags are expected to be fitted to the majority of new passenger cars by 1995.'

The survey presented two similar packages of measures differing only by inclusion or exclusion of airbags.

Both packages included the following safety features: padded steering wheel, improvements to seat belt system, improvements to seat design, improved leg protection, and a seat belt warning device. Only one package included a driver's side airbag.

`The survey results show the general public has an understanding of, and a desire for, new occupant protection technologies and is willing to pay for them', Mr Brown said.

`Private buyers with budgets ranging from $12,000 to $35,000, corporate fleet managers and users of rental cars said they were willing to pay for both the package of measures including an air bag and the package without one.

'The fact that fleet managers were willing to pay for measures to protect their employees shows that safety is not only a priority for individuals but is seen to pay off at the corporate level as well.

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`The survey results are a vote of confidence in the Federal Government's occupant protection program and a welcome indication that legislation such as ADR 69/00 fills a need defined by the community itself.

'Equally evident is the message to manufacturers that safety innovations will not be driven by government policy alone. Community demand will also play an important role. It is my hope that the report will increase public awareness of new technologies and increase public support for improved occupant protection in the 90s and beyond', Mr Brown said.

Copies of Willingness to Pay for Safety Features can be obtained by phoning (06) 274 7678

Media inquiries: Veronika Cousens (06) 274 7612 Minister's office: Gary Kent (06) 277 7440

Attachment: Executive Summary

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- 1. Executive Summary

The willingness to pay for vehicle safety measures for private new car buyers was examined in a survey of 515 people who had purchased a new passenger vehicle, costing between $12,000 and $35,000 in the last 2 years. Willingness to pay was determined for a package of safety features excluding an air bag, and a package of the same safety features, but with an air bag. The features contained in the safety packages were those described in the Federal Office of Road Safety report titled, Feasibility of Occupant Protection Measures (CR 100). On average private new car buyers are willing to pay

$486 for the non-air bag package, and $1236 for the air bag package.

Importantly, the willingness to pay for the safety features was well in excess of the best estimated retail price as determined in the Federal Office of Road Safety report; Feasibility of Occupant Protection Measures (CR 100). The best estimated retail price is approximately $270 for the non-air bag package, and approximately $700 for the air bag package. It is estimated that 85% of private new car buyers are willing to pay the best estimated retail price or more for the non-airbag package, and that 82% are willing to pay the best estimated retail price or more for the air bag package.

Demographic factors which appear to be related to willingness to pay include age, sex, and household income.

Other factors related to willingness to pay include size and cost of car. With respect to car size, recent buyers of small and medium size cars appear to be more willing to pay than the buyers of large cars.

With respect to cost of car, buyers of more expensive cars tended to be more willing to pay for the safety packages. However, willingness to pay was still quite high for buyers of cars in the lowest price range (less than $20,000). 82% of buyers of low price range cars were still willing to pay the best estimated retail price or more for the non-air bag

package and 68% were willing to pay the best estimated retail price or more for the air bag package.

The willingness to pay for these safety measures in fleet cars was examined in a series of three sub-studies.

The first sub-study examined people who were the main drivers of fleet cars, and were the main decision maker about the type of car they drive. People typical of this population include some senior executives and small business owners. A sample of 111 people who had made a decision to purchase a new car, registered in a business name

and costing between $12,000 and $35,000 in the last 2 years were surveyed. Main drivers of fleet cars were more willing to pay for the safety features than private buyers. On average, main drivers were willing to pay $506 for the non-air bag package and $1301 for the air bag package. It is estimated that 90% of the main drivers of fleet

cars would be willing to pay the best estimated retail price or more for the non-air bag package, and 81% would be willing to pay the best estimated retail price or more for the air bag package.

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The second sub-study examined the willingness to pay for renters of short term hire

cars. A total sample of 50 car renters were interviewed for sub-study 2. Willingness to pay was based on an increase in the daily rental rate for a car with the safety features. It was found that, on average, car renters were willing to pay an additional $3.42 per day for a car fitted with the non-air bag safety package, and $6.50 per day for a car fitted with the air bag safety package. Industry estimates of the approximate increase in rental cost to cover increases in car purchase price were approximately $1 per day for

the non-air bag package, and approximately $2 per day for the air bag package. It is estimated that over 90% of renters of short-term hire cars are willing to pay for the industry estimated increase in rental fees.

The third sub-study examined the willingness to pay of fleet managers who are responsible for the purchase of cars for their organisation. A sample of thirty fleet managers from both public organisations and private businesses were interviewed. All of the fleet managers were willing to pay the best estimated retail price, or more for the

non-air bag package. On average the managers were willing to pay $523 for the non-air bag package. More than 80% of fleet managers were willing to pay the best estimated price or more for the air bag package. Their average willingness to pay was $1296.

Across all of the surveys, willingness to pay for the air bag and non-air bag packages was found to be high. Despite the small sample sizes in the car renters sub-study and fleet managers sub-study, the data is consistent with the willingness to pay as observed

in the private buyers survey and main drivers of fleet cars sub-study.

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