Vehicle Ownership and Income Growth, Worldwide: 1960-2030

Author(s): Joyce Dargay, Dermot Gately and Martin Sommer

Source: The Energy Journal, Vol. 28, No. 4 (2007), pp. 143-170
Published by: International Association for Energy Economics
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Vehicle Ownership and Income Growth, Worldwide: 1960-2030

JoyceDargay*,DermotGately** and MartinSommer

***

The speed of vehicleownershipexpansionin emergingmarketand

developing countries has important implicationsfortransport and environmental
policies, as well as the global oil market. The literatureremains dividedon
theissueof whether thevehicleownership rateswillevercatchup to thelevels
commonin theadvancedeconomies.Thispaper contributes to thedebateby
building a model that models
explicitly thevehicle saturationlevel as a function
ofobservable country characteristics: and
urbanization populationdensity. Our
modelis estimatedon thebasis ofpooled time-series (1960-2002) and cross-
sectiondatafor45 countries thatinclude75percentoftheworld'spopulation.We
projectthat thetotal vehicle
stock willincreasefromabout800 millionin2002 to
morethantwobillionunitsin2030. Bythistime , 56% oftheworld'svehicleswill
be ownedbynon-OECD countries , comparedwith24% in 2002. In particular ;
China'svehiclestockwillincreasenearlytwenty-fold , to390 millionin2030. This
fastspeedofvehicleownership expansionimpliesrapidgrowth inoil demand.

1. INTRODUCTION

Economicdevelopment has historically been strongly associatedwith

an increasein thedemandfortransportation and particularlyin thenumberof
roadvehicles.Thisrelationship
is also evidentinthedeveloping economiestoday.
verylittleresearchhas been done on thedeterminants
Surprisingly, of vehicle
ownershipin developingcountries.Typically, analysessuch as IEA (2004) or
OPEC (2004) makeassumptions aboutvehiclesaturation rates- maximum levels
of vehicleownership -
(vehiclesper 1000 people) whichare verymuchlower
thanthevehicleownership alreadyexperienced inmostofthewealthier countries.

TheEnergy Vol.28,No.4.Copyright
Journal, ©2007
bytheIAEE.Allrights
reserved.
* forTransport
Institute Studies, of Leeds,LeedsLS2 9JT,England.
University E-mail:
j.m.dargay@its.leeds.ac.uk.
** Corresponding
author.
Dept.ofEconomics,
NewYork 19W.4 St.,NewYork,
University, NY
10012
USA.E-mail:
Dermot.Gately@NYU.edu.
*** International
Monetary Fund,700 19thSt. NW,Washington,DC 20431USA.E-mail:
Theopinions
MSommer@imf.org. inthispaper
expressed arethose
oftheauthors
andshould
notbeattributed
totheInternational
Monetary itsExecutive
Fund, oritsmanagement.
Board,

143

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144/TheEnergyJournal

Because ofthisapproach,theirforecasts offuture vehicleownership in currently

developing countries are much lower than would be expectedbycomparison with
developed countries when these were at comparable income levels.
Thispaperempirically estimates thesaturation ratefordifferent countries,
byformalizing the idea thatvehicle saturation levelsmaybe different acrosscoun-
tries.Givendataavailability, we limitourselvesto theinfluence of demographic
factors,urban and A
population populationdensity. higherproportion of urban
and
population greater population density would the
encourage availability anduse
of publictransit, and could reduce the distances traveled by individuals and for
goodstransportation. Thus countries that are more urbanized and denselypopulated
couldhavea lowerneedforvehicles.In thisstudywe attempt to accountforthese
demographic differences byspecifying a country's saturation levelas a function of
itspopulation density andproportion ofthepopulation livinginurbanareas. There
are,ofcourse,a number ofotherreasonswhysaturation mayvaryamongstcoun-
tries.Forexample,theexistence ofreliablepublictransport alternativesandtheuse
ofrailforgoodstransport mayreducethesaturation demandforroadvehicles.Al-
ternatively,investment in a comprehensive roadnetwork willmostlikelyincrease
thesaturation level.Suchfactors, however, aredifficulttotakeintoaccount,as they
wouldrequirefarmoredatathanareavailableforall buta fewcountries.
This paperexaminesthetrendsin thegrowthof thestockof road ve-
hicles(withat leastfourwheels,includingcars,trucks,and buses) fora large
sampleofcountries since1960andmakesprojections ofitsdevelopment through
2030. It employsan S-shapedfunction - theGompertz function - to estimatethe
relationship betweenvehicleownership and per-capitaincome,or GDP. Pooled
time-series and cross-section data are employedto estimateempirically there-
sponsiveness of vehicleownership to incomegrowthat different incomelevels.
By employing a dynamicmodelspecification, whichtakesintoaccountlags in
adjustment ofthevehiclestocktoincomechanges,theinfluence ofincomeon the
vehiclestockovertimeis examined.The estimatesareused,in conjunction with
forecasts ofincomeandpopulation growth, forprojections offuture growth inthe
vehiclestock.
The studybuildson theearlierworkof DargayandGately(1999), who
estimated vehicledemandin a sampleof 26 countries - 20 OECD countries and
six developingcountries- fortheperiod1960 to 1992, and projectedvehicle
ownership ratesuntil2015.
The current studyextendsthatworkin fourways.Firstly, we relaxthe
1999 paper'sassumption of a commonsaturation level forall countries. In our
previousstudy, theestimated saturation level was constrained to be the same for
all countries(at about850 vehiclesperthousandpeople); differences in vehicle
ownership betweencountries at thesameincomelevelwereaccountedforbyal-
lowing saturation to be reached at different incomelevels.
Secondly, the data set is extended in timeto 2002 and adds 19 coun-
tries(mostlynon-OECDcountries) totheoriginal26; these45 countries comprise
aboutthree-fourths ofworldpopulation. The inclusionof a largenumberofnon-

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 VehicleOwnership
and IncomeGrowth
, Worldwide:
1960-20301 145

OECD countries - morethanone-third ofthecountries, withthree-fourths ofthe

- a
sample'spopulation provides highdegree of variation in both income and
vehicleownership. Thisallowsmorepreciseestimates oftherelationship between
incomeandvehicleownership at variousstagesofeconomicdevelopment. In ad-
dition,the model is usedfor countries not included in the econometric analysisto
obtainprojections forthe"restoftheworld".
The thirdextensionwe maketo ourearlierstudyconcernstheassump-
tionof symmetry in theresponseof vehicleownership to risingand fallingin-
come.Givenhabitpersistence, thelongevity ofthevehiclestockandexpectations
of risingincome,one mightexpectthatreductions in incomewouldnotlead to
changesin vehicleownership of thesamemagnitude as thoseresulting fromin-
creasingincome.Ifthisis thecase,estimates basedon symmetric modelscan be
misleadingifthereis a significant proportion of observations whereincomede-
clines.Thisis thecase in thecurrent study, particularlyfordeveloping countries.
In mostcountries, realpercapitaincomehas fallenoccasionally, andinArgentina
andSouthAfricaithas fallenovera number ofyears.In orderto accountforpos-
sibleasymmetry, thedemandfunction is specified so thattheadjustment tofalling
incomecan be different fromthatto risingincome.Specifically, themodelper-
mitstheshort-run responseto be different forrisingand fallingincomewithout
changing theequilibrium relationship betweenthevehiclestockandincome.The
hypothesis ofasymmetry is thentestedstatistically.
Finally,thefourth extensionis to use theprojections of vehiclegrowth
to investigatetheimplications forfuture transportation oil demand.Thisis based
on a numberof simplifying assumptions and comparisons are madewithother
projections.
Section2 summarizes thedata used fortheanalysis,and exploresthe
historicalpatterns of vehicleownership and incomegrowth.Section3 presents
theGompertz modelusedin theeconometric estimation, andtheeconometric re-
sultsaredescribedin Section4. Section5 summarizes theprojections forvehicle
ownership, baseduponassumedgrowth ratesofper-capita incomein thevarious
countries. Section6 presents theimplications forthegrowth ofhighwayfuelde-
mand.Section7 presents conclusions. Appendix A describes thedatasources.

2. HISTORICAL PATTERNS IN THE GROWTH OF VEHICLE

OWNERSHIP

Table 1 summarizes data1in 1960 and

thevariouscountries'historical
2002,forper-capita
income(GDP, expressedin 1995 PPP-adjusteddollars),ve-

1.AllOECDcountries
areincluded,
excepting andtheSlovak
Portugal Republic. was
Portugal
excluded
because
wecouldnotgetvehicles
datathat
excluded
2-wheeled andtheSlovak
vehicles,
because
Republic comparabledatawereunavailable
fora sufficiently
longperiod.Amongthe
non-OECDcountries
with data,weexcluded
comparable andHongKongbecause
Singapore their
population wastentimes
density than
greater anyoftheother andweexcluded
countries, Colombia
because
ofimplausible
25%annualreductions
invehicle in1994and1997.
registrations

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146/TheEnergyJournal

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 and IncomeGrowth
VehicleOwnership 1960-2030/ 147
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148/TheEnergyJournal

Figure 1. VehicleOwnershipand Per-CapitaIncomeforUSA, Germany,

Japan,and South Korea, withan IllustrativeGompertzFunction,
1960-2002

Figure2. VehicleOwnershipand Per-capitaIncomeforSouth Korea,

Brazil, China, and India, withtheSame IllustrativeGompertz
Function,1960-2002

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 VehicleOwnership
and IncomeGrowth
, Worldwide:
1960-2030/ 149

hide ownership (per 1000 people),and population.Comparisons of thedatafor

1960and2002 aregraphedbelow(in Section5, we presentsimilargraphiccom-
parisonsbetween2002 andtheprojections for2030).
Therelationship betweenthegrowth ofvehicleownership andper-capita
incomeis highlynon-linear. Vehicleownership growsrelatively slowlyatthelow-
estlevelsof per-capita
income, then about twice as fastas income at middle-in-
comelevels(from$3,000to $10,000percapita),and finally, aboutas fastas in-
comeathigherincomelevels,beforereaching itsmaximum level("saturation")at
thehighestlevelsofincome.Thisrelationship is shownin Figure1,usingannual
dataovertheentireperiod1960-2002fortheUSA, Germany, Japanand South
Korea;in the background is an illustrative
Gompertz function that is on average
of oureconometric
representative resultsbelow.Figure2 showssimilardatafor
China,India,Brazil and SouthKorea- withthesame Gompertzfunction, but
usinglogarithmic scales. Figure3 showstheillustrative Gompertzrelationship
betweenvehicleownership andper-capita income,as wellas theincomeelasticity
ofvehicleownership at different levelsofper-capita income.

3. THE MODEL

As illustrated
above,we represent
therelationship betweenvehicleown-
ershipandper-capita incomebyan S-shapedcurve.Thisimpliesthatvehicleown-
ershipincreasesslowlyat thelowestincomelevels,and thenmorerapidlyas in-
comerises,andfinally slowsdownas saturation is approached.
Therearea number
of different
functional formsthatcan describesucha process - forexample,the
logarithmic
logistic, cumulative
logistic, normal, andGompertz functions.
Follow-
ingourearlierstudies,theGompertz modelwas chosenfortheempirical analysis,
becauseitis relatively
easytoestimateandis moreflexible thanthelogisticmodel,
byallowingdifferent
particularly curvatures
at low-andhigh-income levels.2
LettingV* denotethelong-run equilibrium levelof vehicleownership
(vehiclesper1000people),andletting GDP denoteper-capita income(expressed
inreal 1995dollarsevaluatedat PurchasingPowerParities),theGompertz model
can be written as:
'
r = (i)

whereyis thesaturation
level(measuredinvehiclesper1000people)anda andp
arenegativeparametersdefining ofthefunction.
theshape,orcurvature,
The impliedlong-run of thevehicle/population
elasticity ratiowithre-
specttoper-capita
incomeis notconstant,
duetothenatureofthefunctional form,
butinsteadvarieswithincome.The long-run is calculatedas:
incomeelasticity

2.SeeDargay-Gately
(1999)for
a simpler
model, a smaller
using setofcountries.
Earlier
analyses
aresummarized
inMogridge which
(1983), discusses
vehicle
ownership modelled
being byvarious
functions
S-shaped oftime,
rather
thanofper-capita
income,some
with saturation
andsomewithout.
MedlockandSoligo a log-quadratic
(2002)employ ofper-capita
function income.

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150/TheEnergyJournal

$GDPt
'
y^R= ccpGDPte (2)

Thiselasticityis positiveforall incomelevels,becausea andP arenega-

tive.The elasticityincreasesfromzero at GDP=0 to a maximumat GDP=-l/p,
thendeclinesto zero asymptotically as saturation is approached.Thus P deter-
minestheper-capita incomelevelat whichvehicleownership becomessaturated:
thelargerthep in absolutevalue,thelowertheincomelevel at whichvehicle
ownership flattensout.Figure3 depictsan illustrative Gompertz similar
function,
to whatwe have estimatedeconometrically, together withthe impliedincome
forall incomelevels3.
elasticity
ShowninFigure4 arethehistorical ratiosofvehicleownership growth to
per-capitaincomegrowth(whichapproximates theincomeelasticity),compared
tothecountries' averagelevelofper-capita income(forthelargestcountries, with
populationabove 20 millionin 2002). Also graphedis theincomeelasticityof
vehicleownership forourillustrativeGompertz function. One canobservethepat-
ternacrosscountries oftheincomeelasticity increasing atthelowestlevelsofper-
capitaincome,thenpeakingintheper-capita incomerangeof$5,000to $10,000,
followedbya gradualdeclinein theincomeelasticity at higherincomelevels.
We assumethattheGompertzfunction (1) describesthelong-run rela-
tionshipbetweenvehicleownership andper-capita income.In ordertoaccountfor
lags intheadjustment ofvehicleownership to per-capita income,a simplepartial
adjustment mechanism is postulated:

y= o)

whereV is actualvehicleownership and 0 is thespeedof adjustment (0 < 0 <1).

Such lags reflect
theslow adjustment of vehicleownership to increasedincome:
thenecessarybuild-upof savingsto affordownership;thegradualchangesin
housingpatterns and landuse thatare associatedwithincreasedownership; and
theslowdemographic as
changes young adultslearn to drive,replacing their el-
derswhohaveneverdriven.Substituting equation (1) intoequation (3), we have
theequation:

°*PGDPt
+ (1 - 0)V ,
Vt= yde (4)

In DargayandGately(1999), we had assumedthatonlythecoefficients

p. were whileall theotherparameters
country-specific, oftheGompertz function
werethesame forall countries:thesaturation level y,thespeed of adjustment
0, and thecoefficienta. Thus,differences betweencountriesin thatpaperwere
reflected in thecurvatureparameters p. , whichdetermined theincomelevelfor

3. Asdiscussed there
below, canbe differences
across
countries
inthesaturation
levelsofa
country's function
Gompertz anditsincome
elasticity. 3 plots
Figure anillustrative
functionforthe
median saturation
country's level.
Differences
across
countries inFigure
areillustrated 6.

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 VehicleOwnership
and IncomeGrowth
, Worldwide
: 1960-2030/ 151

Figure3. IllustrativeGompertzFunctionand itsImpliedIncomeElasticity

Figure4. HistoricalRatios ofVehicleOwnershipGrowthto Income

Growth,byLevels ofPer-capitaIncome: 1960-2002

each country at whichthecommonlevelof saturation is reached(620 cars and

850 vehiclesper1000people).In thispaperwe relaxthisrestriction ofa common
saturation
level.Instead,we assumethatthemaximumsaturation level will be
thatestimated fortheUSA, denotedyMAX. Othercountries thataremoreurbanized
and moredenselypopulatedthantheUSA willhavelowersaturation levels.The
saturation
levelforcountry i at timet is specifiedas:4

4. Population andurbanization
density arenormalised thedeviations
bytaking fromtheir
means
overallcountries
andyearsinthedatasample.
Sincepopulation andurbanization
density varyover
sotoodoesthesaturation
time, level.

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152/TheEnergyJournal

y„=yMAx+XD„+vv„
where
D it=D it-D„„, if D it>Dn„.
USA,t USA.t
= 0 otherwise (5)
and
U.=U.~
it it U.„A , if £/,
USA.t it> U„,A
,
USA.t
= 0 otherwise

whereX and cpare negative,and D.tdenotespopulationdensityand Ujtdenotes

in country
urbanization i at timet.

Figure5. Countries'PopulationDensityand Urbanization,2002

1000
1
Twn
Kor
Ind Jpn
Pak Ita Deu
100 ^ ChTdn Pt' f"
Population Eav Esp
9y JJysTur
Density Zaf USA
2002
(persq. KM, Bra
logscale)

Can
Aus
1 1 1 1 1
0 20 40 60 80 100
2002
% Urbanized,

Figure5 plotsthe2002 dataon populationdensityandurbanization, for

countries withpopulationgreaterthan 20 million.
The most urbanizedand dense-
lypopulatedcountries areinWestern EuropeandEastAsia: Germany, GreatBrit-
ain,JapanandSouthKorea.Some countries arehighlyurbanizedbutnotdensely
populated,suchas Australiaand Canada. Othersare denselypopulatedbutnot
highlyurbanized, suchas China,India,Pakistan, Thailand,andIndonesia.
The dynamicspecification in equations(3) and (4) assumesthatthere-
sponseto a fallin incomeis equal butoppositetheresponseto an equivalentrise
in income.As mentioned earlier,thereis evidencethatthismaynotbe thecase,
andthatassumingsymmetry maylead to biasedestimatesof incomeelasticities.
Many of thecountriesinthesamplehaveexperienced periodsofnegativechanges
inper-capita income,someforseveralyears,suchas Argentina andSouthAfrica.
Thus it is importantthatwe takesuchasymmetry intoconsideration. To do so,
theadjustment coefficient
relating to periodsoffallingincome,0F , is allowedto
be differentfromthatto risingincome,0^. This is doneby creatingtwodummy
variablesdefinedas:

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 and IncomeGrowth
VehicleOwnership 1960-2030/ 153
, Worldwide:

Rit= 1 ifGDP It- GDPIt-.1> 0 and = 0 otherwise

((L'
K '
Fit= 1 ifGDPit- GDP it-
.1< 0 and = 0 otherwise

andreplacing0 in (4) with:

e= + (7)

Thisspecificationdoes notchangetheequilibrium relationshipbetween

thevehiclestockandincomegiveninequation(1), northelong-run incomeelas-
ticities.Onlytherateofadjustment to equilibriumis differentforrisingandfall-
ingincome,so that the short-run and
elasticities thetime requiredforadjustment
will be different.Since it is likelythatvehicleownershipdoes notdeclineas
quicklywhenincomefallsas itincreaseswhenincomerises,we expect0^ > 0F.
The hypothesis of asymmetry can be testedstatisticallyfromtheestimates of 0^
and0F Iftheyarenotstatistically differentfromeach other,symmetry cannotbe
rejectedandthemodelreverts tothetraditional, symmetric case.
Substituting(5) and (7) into(4), themodelto be estimated econometri-
callyfromthepooleddatasamplebecomes:
- - pGDP.f
n = (Y^+ XD, (pt/„)(0A + 0A)^'
+ W

+ ('-QRRi-QFFJVii_l+ eii

wherethesubscript i representscountry i and £itis therandomerrorterm.The

adjustment parameters,0^ and 0F , and theparameters 9 and X arecon-
a, yMAr
strained tobe thesameforall countries,while(3.is allowedtobe country-specific,
as is eachcountry'ssaturationlevelfromequation(5). The long-run incomeelas-
ticitiesforeachcountry arecalculatedas
p.GDP.
Tif = aP .GDP.tel (9)

whicharethesameas inthesymmetric incomeelastici-

model(2). The short-run
tiesarealso determined
bytheadjustment
parameter,0, andare
p.GDP.,
Tlf = 0(XpGDP.e . (10)

where0 = 0D a forincomeincreasesand0 = 0rr forincomedecreases.

dataacrosscountries
The rationaleforpoolingtime-series is thefollow-
to estimatea separatevehicleownership
ing.Althoughit is possible,in theory,
function foreach country, theshorttimeperiodsand relatively smallrangeof
incomelevelsthatare availableforeach country makesuchan approachunten-
able. Reliableestimation levelrequiresobservations
of thesaturation on vehicle
ownership whicharenearingsaturation.
Analogously, estimationoftheparameter
a, whichdetermines thevalue of theGompertzfunction at thelowestincome

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154 /TheEnergyJournal

levels,necessitatesobservations forlow incomeand ownershiplevels.Thus it

wouldnotbe sensibleto estimatethesaturation level forlow-incomecountries
separately, in
because vehicleownership thesecountriesis farfromsaturation.
Similarly,one couldnotestimatethelowerendofthecurve,i.e. theparameter a,
on thebasisofdataonlyforhigh-income countries withhighvehicle-ownership,
unlesshistoricdatawereavailableformanyyearsin thepast.Forthesereasons,
we use a pooledtime-seriescross-sectionapproach,withall countries beingmod-
eled simultaneously.
We hadconsidered additional
utilizing explanatory variablesinthemod-
el, suchas thecostof vehicleownership, or thepriceof gasoline.5However,the
unavailabilityof data fora sufficientnumberof countriesand yearsprevented
suchan attempt.

4. MODEL ESTIMATION

The modeldescribedinequation(8) was estimated forthepooledcross-

sectiontime-series dataon vehicleownership forthe45 countries. The periodof
estimation is generallyfrom1960 to 2002, butis shorter forsomecountries due
to earlydatabeingunavailable(see Table 1). In all, we have 1838 observations.
In orderto allow largercountries to havemoreinfluence on theestimated coef-
ficients,theobservations wereweightedwithpopulation.As mentioned above,
themaximumsaturation level,yMAX,thespeed-of-adjustment coefficients,0^ and
0F, and the lower-curvature parameter a were constrained to be the same forall
countries.The upper-curvature parameters (3.were estimated separately each
for
country. The model was estimated using iterative leastsquares.
The resultingestimatesare shownin Table 2. A totalof 51 parameters
areestimated, including45 country-specific p..All theestimated coefficientsare
oftheexpectedsigns:0^ , 0F, andyMAX arepositiveanda, X,cpandp. arenegative.
All coefficientsarestatistically
significant,exceptforthep. coefficients forLux-
embourg, Iceland, Ecuador, and Syria. From the Adjusted R2, we see the model
explains the dataverywell;however, thisis to be expected in a model containing
a laggeddependent variable.Fouralternative specificationswerealso estimated,
withsimilareconometric results6.

5.Storchmann (2005)usesfuel thefixed

price, costofvehicle
ownership,andincome distribution
- butnotper-capita
income - toexplainvehicle
ownershipacross
countries.
Hisdatasetincludes
more
countries
(90)butonly a shorttime 1990-1997.
series, Medlock andSoligo(2002),witha smaller
set
ofcountries,utilize
theprice ofhighway fueltomodel thecross-country
fixedeffects
within
a log-
quadratic
approximation ofvehicle ownership.
6.Thealternativespecificationswere:
(1)ReferenceCasebutwithout using Density;
Population
(2) ReferenceCasebutwithout using (3) Reference
Urbanization; Casebutwithout allowingfor
Asymmetric Income Responsiveness;(4) Common Levels:
Saturation Dargay-Gately(1999)with
Symmetric Income Response. Theeconometric results
were similar
across Allthe
allspecifications.
coefficients
havetheexpected signandarestatistically
significant
(except p.for
forcountry-specific
some smaller asinTable2.Detailed
countries), results
areavailable
upon requestfromtheauthors.

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 VehicleOwnership
and IncomeGrowth,
Worldwide:
1960-2030/ 155

The estimated adjustment parameter is largerforrisingincomethanfor

fallingincome, 0.095 versus 0.084. Testing equality0^ = 0Fyieldsan F-statis-
the
ticof4.76 (withprobability value=0.03)so thatsymmetry is rejected.Thisimplies
thatthevehiclestockrespondsless quicklywhenincomefallsthanwhenincome
rises.Withincreasingincome,9.5% of thecompleteadjustment occursin one
year, butwhen income fallsonly 8.4% of thelong-term adjustment occursin one
year.Thus a fallin per-capita income reduces vehicle ownership about 11% lessin
theshortrun(1-year)thanan equivalentrisein incomeincreasesvehicleowner-
ship.The long-run elasticityis thesameforbothincomeincreasesanddecreases.
The vehiclesaturation levelsvaryacrosscountries - froma minimum
of508 forChineseTaipeito a maximum of852 fortheUSA (andforthosecoun-
trieswhichare less urbanizedand less denselypopulated:Finland,Norway,and
SouthAfrica).All theOECD countries havesaturation levelsabove700 exceptfor
themosturbanized anddenselypopulated:Netherlands (613), Belgium(647), and
SouthKorea(646). Similarly, mostof theNon-OECD countries havesaturation
levelsin therangeof 700 to 800 vehiclesper 1000 people.The coefficients for
population density andurbanization arebothnegativeandstatistically significant,
indicatingthatthesaturation leveldeclineswithincreasing population densityand
withincreasing urbanization. The lowestsaturation levelsamongthelargestcoun-
triesareforGermany, GreatBritain, Japan,SouthKoreaandIndia7.Figure6 plots
foreach country (withpopulationgreater than20 millionin 2002) theestimated
saturationleveland theincomelevelat whichit wouldreachvehicleownership
of200 vehiclesper1000people.The lattermeasuresreflects thecountry's curva-
tureparameter p.. Some countries wouldreachvehicleownership of200 quickly,
at relatively
low incomelevels(USA, India,Indonesia,Malaysia),whileothers
wouldreachitmoreslowly,at muchhigherincomelevels(China,France).
Thevalueofa determines themaximum incomeelasticity ofvehicleown-
ership which
rates8, in thiscase is estimated to be 2. 1. The value of p. determines
theincomelevelwherethecommonmaximumelasticity is reached:thesmaller

7. InMedlock-Soligo (2002),there ismuch wider invehicle-ownership

variation
cross-country
saturationlevels
estimated - nearly from
tenfold, lowest tohighest
(China) (USA).Their estimated
ownership-saturationlevels
(forpassenger vehiclesonly) rangefrom600intheUSAandItaly, 400-
500inthemost oftheOECD,150-200 inMexico, Turkey,SouthKoreaandmost ofNon-OECD
Asia,butlessthan 100forChina. Thislarge isduetothefact
variability that
saturationlevelsinthe
Medlock-Soligo model areclosely related
totheestimated fixed - therefore,
effects thecalculated
saturation donottakeintoaccount
levels as much as inourframework.
information
cross-country
Forcomparison, ourestimated ownership-saturationlevels arealmost
estimates allwithin10%ofthe
average saturation
level.Onlythose countries
thataremost urbanized
anddensely populated have
estimatedsaturationlevelsthataresubstantiallylower; thelowest
saturation
level(Twn) is 60%of
thehighest (USA).Attheother extreme, therewasnocross-country invehicle
variation ownership
saturation inDargay-Gately
levels (1999),which assumed a shared
saturation
levelacross countries
that
wasestimated tobe850vehicles (652cars)per1000people.
8. Themaximum is derived
elasticity bysetting thederivative
ofthelong-run with
elasticity
respecttoGDPequaltozero, solving forthevalueofGDPwhere theelasticity
isa maximum and
replacingthisvalueofGDP(=-l/p) intheoriginal formula.
elasticity Thisgives
a maximum elasticity
of-ae1= -0.367a.

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156 /TheEnergyJournal

Figure6. Countries'EstimatedVehicleOwnershipSaturationLevels and

IncomeLevels at whichVehicleOwnership= 200
900
USAMox Zaf
Mar.Mys
Mar
Pol.-EayI. BraCan
Tuf'P Fra
800 Ita ChnArg
idn Aus
vehicle
ownership
saturation PakJpn
p-*Br
level 700 lnd
(vehicles
per1000 Kor
people)600

Twn
500 1 1 1 ^
4 6 8 10 12
income
per-capita 1995
(thousands $ PPP)
atwhich
vehicle =200inlong
ownership run

thep. in absolutevalue,thegreater theper-capita incomeat whichthemaximum

incomeelasticity occurs- forthedifferent countriesrespectively, at incomelevels
between$4,000and $9,600.The vehicleownership levelat whichthemaximum
income-elasticity occursis about90 vehiclesper 1000 people.The valuesof a
andp. also determine theincomelevelat whichvehiclesaturation is reached.The
estimatesimplythat99% of saturation is reached,forthedifferent countries re-
spectively,at a per-capita
incomelevelofbetween$19,000and$46,000.
The graphsin Figure7 illustrate thecross-country differences in satura-
tionlevelsand low-incomecurvature forsix selectedcountries.Countriescan
differin theirsaturation level,or theirlow-incomecurvature (measuredby the
incomelevelat whichvehicleownership of 200 is reached),or both.USA and
Francehave similarsaturation levelsbutdifferent low-incomecurvatures: USA
reaches200 vehicleownership atper-capita incomeof$7,000whileFrancereach-
es itat $9,400.Such differences couldbe theresultof differences in thecostof
and
owning operating or
vehicles, other variablesfor which we do not havedata.
Franceand Netherlands reach200 vehicleownershipat similarincomelevels,
butFrancehas a muchhighersaturation level(823) thandoes Netherlands (613).
Similarly,India and Indonesiahave similar low-income curvatures - reachingve-
hicleownership of200 atabout$6,500- butIndia'ssaturation level(683) is lower
thanIndonesia's(808) becauseIndiais moreurbanizedandhashigherpopulation
density.By contrast, China reachesvehicleownershipof 200 moreslowly(at
about$10,000)thanIndiabutithas a highersaturation level.9
9.AlthoughChina ismore urbanized
than ithasmuch
India, lower aswehave
density
population
measuredit,usinglandarea.Sincemuch ofwestern
Chinaisvirtually itwould
uninhabitable, have
beenpreferabletousehabitablelandarearather
than totallandareawhencalculating
population
butsuchdataareunavailable.
density, Thiswould havetheeffectoflowering
China'sestimated
saturation
leveltosomethingclosertothat
ofIndia ofthis
(683).Theeffect onChina's is
projections
discussed
inthenext section.

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 VehicleOwnership
and IncomeGrowth,
Worldwide:
1960-2030/ 157

Table 2. EstimatedCoefficients ofEquation (8)

coef. P-value
Speedofadjustment0
income increases 0.095 0.0000
income decreases 0.084 0.0000
max.saturationlevel 852 0.0000
population X
density -0.0003880.0000
urbanization
<j) -0.0077650.0001
alphaa -5.897 0.0000
vehicle income
per-capita
1995$ PPP)
ownership(thousands
saturation atwhichvehicle
Country = 200
betacoef. P-value (per1000people) ownership
OECD,North America
Canada -0.15 0.00 845 9.4
UnitedStates -0.20 0.00 852 7.0
Mexico -0.17 0.00 840 7.9
OECD,Europe
Austria -0.15 0.00 831 9.4
Belgium -0.20 0.00 647 8.1
Switzerland -0.11 0.00 803 13.3
CzechRepublic -0.17 0.00 819 8.3
Germany -0.18 0.00 728 8.5
Denmark -0.12 0.00 782 12.0
Spain -0.17 0.00 835 8.1
Finland -0.13 0.00 852 10.6
France -0.15 0.00 823 9.4
GreatBritain -0.17 0.00 707 8.9
Greece -0.15 0.00 836 9.4
Hungary -0.17 0.00 831 8.1
Ireland -0.15 0.01 841 9.4
Iceland -0.17 0.87 779 8.3
Italy -0.18 0.00 800 8.1
Luxembourg -0.16 0.78 706 9.6
Netherlands -0.16 0.00 613 10.1
Norway -0.13 0.00 852 10.6
Poland -0.23 0.00 821 6.2
Sweden -0.13 0.00 825 10.6
Turkey -0.18 0.00 820 7.7
OECD,Pacific
Australia -0.19 0.00 785 7.7
Japan -0.18 0.00 732 8.3
Korea -0.20 0.00 646 8.1
NewZealand -0.19 0.01 812 7.3
Non-OECD, South
America
Argentina -0.13 0.00 800 10.6
Brazil -0.17 0.00 831 8.5
Chile -0.17 0.00 810 8.3
DominicanRep. -0.24 0.02 111 6.2
Ecuador -0.25 0.13 845 5.6
continued

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158/TheEnergyJournal

Table 2. EstimatedCoefficientsofEquation (8) (continued)

vehicle income
per-capita
ownership(thousands1995$ PPP)
saturation atwhich vehicle
Country betacoef. P-value (per1000people) ownership = 200
Non-OECD, Africa
andMiddle East
Egypt -0.22 0.00 824 6.3
Israel -0.13 0.00 630 12.6
Morocco -0.25 0.00 830 5.6
Syria -0.22 0.22 807 6.5
SouthAfrica -0.14 0.00 852 10.1
Non-OECD, Asia
China -0.14 0.00 807 10.1
ChineseTaipei -0.16 0.00 508 11.7
Indonesia -0.23 0.00 808 6.3
India -0.24 0.00 683 6.5
Malaysia -0.23 0.00 827 6.0
Pakistan -0.21 0.01 725 7.3
Thailand -0.22 0.00 812 6.3
R-squared 0.999821
Adjusted
SumofSquaredResiduals
0.038947

Figure7. Long-runGompertzFunctionsforSix SelectedCountries,and

theImpliedIncomeElasticityofVehicleOwnership

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 and IncomeGrowth
VehicleOwnership 1960-2030/ 159
, Worldwide:

5. PROJECTIONS OF VEHICLE OWNERSHIP TO 2030

On thebasisofassumptions concerning future trendsinincome,popula-

tionand urbanization, the model projects vehicle ownership foreach country.10
TheseareshowninTable3.
WithintheOECD countries, projectedgrowthin vehicleownership is
slow,about0.6% annually,
relatively because many of these countries are ap-
proachingsaturation. The onlyexceptionsto slowlygrowingvehicleownership
in theOECD areMexico andTurkey, whosevehicleownership willgrowfaster
thanincome.However,due to populationgrowth, theannual OECD growth rate
fortotalvehiclesis somewhathigher,at 1.4%. For theUSA, we projectonlya
slightincreaseinvehicleownership (from812 to 849 per1000people)buta large
absoluteincreaseinthetotalvehiclestockof80 million,duetopopulation growth
of nearly1% annually.This 80 millionincreasefortheUSA is largerthanthe
projected2030 totalofvehiclesinanyEuropeancountry, andis almostas largeas
thetotalnumber ofvehiclesinJapan.
Forthenon-OECDcountries11, we projectmuchfasterratesof growth:
vehicleownership growthof about3.5% annually, and totalvehiclesgrowthof
6.5% annually - fourtimestheratefortheOECD. The mostrapidgrowth is inthe
non-OECDeconomieswithhighratesof incomegrowth, and per-capitaincome
levels($3,000to $10,000)at whichtheincomeelasticity of vehicleownership is
thehighest.Chinahas byfarthehighestgrowth rateofvehicleownership, 10.6%
annually,followedbyIndia(7%) andIndonesia(6.5%). By 2030,Chinawillhave
269 vehiclesper 1000people- comparableto vehicleownership levelsofJapan
andWestern Europe in theearly 1970's - and it will have more vehiclesthanany
othercountry: 24% morevehiclesthantheUSA. China's vehicleownership is
to
projected growrapidly for two reasons: (1) itsprojected high growth rate for
per-capitaincomeduring2002-2030,4.8% (whichis actuallymuchslowerthan
itsrecentrapidgrowth, and lowerthanthe5.6% growth ratefor2003-2030that
is assumedinDOE's International Energy Outlook 2006), and(2) vehicleowner-
shipgrowing 2.2 times as fastas per-capita income, as itpassesthrough themiddle
levelofper-capita income($3,000to $10,000)withthehighestincome-elasticity
ofvehicleownership. Similarly forIndiaandIndonesia,whoseper-capita income

10.Population is assumed
density togrowat thesamerateas population. for
Projections
areobtained
urbanization byestimatinga modelrelating toper-capita
urbanization income andlagged
urbanization over
forallcountries thesampleperiod forecasts
andcreating onthebasisofthismodel
andtheprojected income
per-capita Themodel
values. usedandtheestimates areavailable
obtained
uponrequest.
11. Forthe"Other"(non-sample)countries weprojected
oftheworld,
intherest vehicle
ownership
fromourestimated Gompertzfunction's tothis"Other"
adapted
parameters, characteristics.
group's
In2002this group income
hadper-capita ofabout$3000andowned 44vehicles per1000people.We
estimatedthegroup'scoefficient thesample
byregressing (3.values
countries' against of
thelevels
income
per-capita atwhich
therespective per1000people;
had44vehicles
countries thisproduceda
valueofp.=-0.21 for"Other"countries.
Using thesample median
countries' value(812),
saturation
weassumed 1.7%annual income
per-capita growthfor"Other"
countries,andprojected vehicle
their
ownership to2030.

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160/TheEnergyJournal

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and IncomeGrowth
, Worldwide:
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162/TheEnergyJournal

is notprojectedto growas fastas China's,butwhosevehicleownership also is

to
projected grownearly twice as fastas per-capitaincome.
The fastergrowth oftotalvehiclesinthenon-OECDcountries willmore
thandoubletheirshareof worldvehicles- from24% in 2002 to 56% by 2030.
Non-OECD countries willacquireoverthree-fourths oftheseadditionalvehicles
- nearly30% will be fromChinaalone. By 2030, therewill be 2.08 billionve-
hicleson theplanet,comparedwith812 millionin 2002; thistotalis 2.5 times
greater thanin 2002.
ShowninFigure8 (forthecountries withpopulation above20 millionin
2002) arethehistoricalgrowth ratesin vehicleownership andper-capita income
(1970-2002),andtheprojectedgrowth ratesfor2002-2030.The historicalresults
for1970-2002showthatvehicleownership in mostcountries grewtwiceas fast
as per-capita income,and in a fewcountries morethantwiceas fast.Such large
income-elasticities forvehicleownership (twoor higher)are consistent withthe
non-linear Gompertz function we haveestimated, forcountries whoseper-capita
incomeis increasing through themiddle-income rangeof$3,000to $10,000.The
projectedresultsto 2030 show thatmostOECD countries'vehicleownership
growthwill deceleratein thefuture, growingat a ratelowerthanper-capitain-
come.However,thenon-OECDcountries whoseper-capita incomeis increasing
through themiddle-income rangewill experiencegrowthin vehicleownership
thatis at leastas rapidas theirgrowth inper-capitaincome.In someofthelargest
countries, vehicleownership willgrowtwiceas rapidlyas per-capita income- in
China,India,Indonesia,andEgypt.
By 2030, thesix countrieswiththelargestnumberof vehicleswill be
China,USA, India,Japan,Brazil,andMexico.Chinais projected tohavenearly20
timesas manyvehiclesin2030 as ithadin2002.Thisgrowth is duebothtoitshigh
rateofincomegrowth andthefactthatitsper-capita incomeduringthisperiodis
associatedwithvehicleownership growing more than twiceas fastas income.
9
Figure puts intohistorical contextthe rapidgrowth thatwe areproject-
ing forChina. In 2002,China's vehicle ownership was 16 per 1000 people,similar

Figure8. GrowthRates forVehicleOwnershipand Per-CapitaIncome

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 VehicleOwnership
and IncomeGrowth, 1960-20301 163
Worldwide:

to thatofIndia,butat a higherper-capita income.Thisrateofvehicleownership

was comparableto theratein 1960 forJapan(as well as forSpain,Mexicoand
Brazilin 1960,andalso forSouthKoreain 1982).We projectthatChina'svehicle
ownership will riseto 269 by 2030, increasing2.2 timesfasterthanits growth
rateforper-capitaincome.This projectionforChina,as its per-capitaincome
increasesfrom$4,300to $16,000,is comparableto the1960-2002experience of
Japan,Spain,MexicoandBrazil, and since 1982for South Korea.Although these
othercountries' per-capitaincomesgrewat different (slowerin
rateshistorically
BrazilandMexico,faster inSpain,Japan,andSouthKorea),theirratiosofgrowth
invehicleownership toper-capitaincomegrowth overthe1960-2002periodwere
at leastas highas the2.2 thatwe projectforChina.12
Figure10 summarizes historicaland projectedregionalvaluesfortotal
vehicles.The worldstockofvehiclesgrewfrom122 millionin 1960to 812 mil-
lionin 2002 (4.6% annually),and is projectedto increasefurther to 2.08 billion
by2030 (3.4% annually).The implications forhighwayfueluse arediscussedin
thefollowing section.

Figure9. Historicaland ProjectedGrowthforChina, India, SouthKorea,

Japanand USA: 1960-2030

12.Asobservedintheprevious China's
section, estimated levelforvehicle
saturation ownership
(807)ishigher
than
that forIndia(683).ThisisbecauseChina's density
population isonlyone-third
ofIndia's,
giventhefactthatwedivide population than
bylandarearather habitable
landarea(90%
ofChina's livesinonly30%ofthelandarea).IfweusedIndia's
population lower level
saturation
forChina, forChinain2030would
ourprojections bevehicle of228rather
ownership than 269
vehicles
per1000people,and331million total
vehicles
rather
than 390million.
Thiswould represent
a reduction
intheannualgrowthrate ofvehicle from
ownership 10.6%to10.0%;theratio
togrowth
inper-capita
incomewould be2.07rather than2.2.

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164/TheEnergyJournal

Figure11 showsthenon-OECD's disproportionately highshareof ad-

ditionalTotalVehiclesrelativeto theirshareof additionalTotalIncomeduring
2002-2030.The non-OECDcountries willproduce62% of theabsoluteincrease
inTotalIncome,butwillconstitute 77% oftheincreaseinTotalVehicles.

5.1 Comparisonto PreviousStudies

Ourvehicleownershipprojections fortheOECD arecomparabletooth-

ersintheliterature,
butaremuchhigherfornon-OECDcountries. Sincecompari-
sonsamongprojectionsarecomplicated
bydifferencesinincomegrowth ratesas-
sumed,we comparetheprojectedratiosof averageannualgrowthrateof vehicle
ownershipto averageannualgrowthrateof per-capitaincomefor2002-2030.

Figure 10. Total Vehicles,1960-2030

Figure 11. RegionalShares oftheAbsoluteIncrease in Incomeand Total

Vehicles,2002-2030

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 and IncomeGrowth
VehicleOwnership 1960-20301 165
, Worldwide:

Table 4. ProjectedRatios ofVehicleOwnershipGrowthto Per-capita

IncomeGrowth,2002-2030
Medlock Button
IEA IEA OPEC SMP & Soligo etal.
D-G-S (2004) (2006) (2004) (2004) (2002): (1993)
Region to2030 to2030 to2030 to2025 to2030 1995-2015 2000-2025
OECD 0.42 0.57 0.39 0.40
Non-OECD 1.61 1.12 0.97 1.13
China 2.20 1.38 1.96 1.28 1.42 2.02
India 1.98 0.39 2.25 1.23 2.89
Indonesia 1.89 2.94
Malaysia 1.16 1.96 0.92
Pakistan 1.48 4.00 0.73
Thailand 1.43 2.63
World 0.94 0.61 0.86 0.57 0.59

Table4 comparesourprojections (D-G-S) withthoseofIEA (2004), IEA (2006),

OPEC (2004),theSustainableMobilityProject(SMP, 2004),Buttonet al. (1993)
andMedlock-Soligo(2002).
The respective ratiosfortheOECD aresimilaracrossthestudies.How-
ever,for theNon-OECD countries,ourprojectedratiosare substantiallyhigher
thanthoseofall theothers13 - exceptMedlock-Soligo(2002), whichis discussed
separatelybelow.Fortheworldas a whole,we projectthatvehicleownership will
grow almost as as
rapidly per-capita income, while IEA OPEC
(2004)14, (2004)
andSMP (2004) projectthatitwillgrowonlyaboutsix-tenths as rapidly.
Lowerprojections of Non-OECD vehicleownership by OPEC (2004)
and SMP (2004) can be explainedby theirassumption of low saturationlevels
and low income-elasticitiesof vehicleownership.For OPEC (2004), thedevel-
opingcountries'vehicleownership saturationlevel was assumedto be 425 ve-
hiclesper 1000 people15- considerably lowerthanour saturation estimatesof
700 to 800 formostcountries. ForSMP (2004), therelativelylow projectionsof

13.Exxon Mobil(2005)projections to2030forOECDEurope andNorthAmerica aresimilar

tothoseinTable4: growth in"lightduty" (carsandlight
vehicles isabout
trucks) halfas rapidas
incomegrowth.However, forAsia-Pacific
(bothOECDandnon-OECD combined)theyproject4.7%
annual
growth in"lightduty" while
vehicles, weproject6.1%annual intotal
growth vehiclesforthose
countries,
using comparable income growth assumptions. oftheunderlying
Details model arenot
Wilson
provided. etal.(2004),usingtheDargay-Gately(1999)model,make for
projections China and
India
thataresimilartoours:(car)ownershipgrowthistwiceasrapid income.
asper-capita
14.ThelatestIEAprojections,IEA(2006),aremuch toours
closer toIEA(2004);details
than of
models
theunderlying arenotprovided.
15.SeeBrennand lowsaturation
(2006).Similarly were
levels assumedbyButton etal.(1993),
forcarownership (300to450carsper1000people). Bycontrast,
Dargay-Gately(1999)estimated
levelsof620cars(and850vehicles)
saturation per1000people. etal. (1993)madecar
Button
ownership for
projections tenlow-income twoofwhich
countries, inoursample:
areincluded Pakistan
andMalaysia.They alsomade for1986-2000,
projections which by50%theratio
underestimated of
carownershipgrowth toper-capita
income that
growth actually from
occurred 1986to2000for these
twocountries.

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166/TheEnergyJournal

Figure 12. ComparisonofIncomeElasticities

non-OECD vehicleownership are due to theirassumption of relativelylow in-

of vehicleownership
come-elasticity (1.3) forlow-to-middle levelsof per-capita
income(through whichmostNon-OECDcountries willbe passinginthenexttwo
decades)- whichis one-third lowerthanourestimated incomeelasticity forthose
incomelevels.SMP (2004) assumessimilarly low income-elasticities vehicle
of
ownership forall incomelevels,whichimpliesmuchlowersaturation levelsthan
we haveestimated.
The highestprojectedratiosforlow-incomeNon-OECD Asian coun-
triesarethoseofMedlock-Soligo(2002). Theyemploya log-quadratic functional
whichhas an income-elasticity
specification, of vehicleownershipthatis very
highat thelowestlevelsof per-capita incomebutwhichdeclinesrapidlyas per-
capitaincomeincreases(Figure12). However,thedata in Figure4 suggestthat
theincome-elasticityof vehicleownership followsa non-monotonic in-
pattern:
creasingoverthelowestincomelevelsthendecreasingas incomelevelsincrease,
butremaining above 1.0 forincomelevelsintherangeof$3,000to $15,000.
To sumupthesecomparisons, theconsiderablylowerprojections ofnon-
OECD vehicleownership in OPEC (2004) and SMP (2004) are due to theiras-
sumption ofsignificantlylowerincome-elasticities andsaturation levelsofvehicle
ownership fortheseregions.Such assumptions raisetheimportant questionof
whydeveloping countries - oncetheyachievelevelsof per-capita incomewithin
therangeof OECD countries overthepastfewdecades- wouldnothavecom-
parablelevelsof vehicleownership. On whatothergoods wouldconsumersin
developing countriesbe spendingtheirincomesinstead?

6. IMPLICATIONS FOR PROJECTIONS OF HIGHWAY FUEL DEMAND

Projectionsof increasingvehicleownershipsuggestthathighwayfuel
However,therateofincreaseinhighwayfuel
use mayalso increasesignificantly.

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 VehicleOwnership
and IncomeGrowth,
Worldwide
: 1960-2030/ 167

Figure 13. Gasoline Usage and VehicleOwnershipforSelectedCountries,

1971-2002

demanddependsuponthechangesovertimein fueluse pervehicleas vehicle

increases.
availability
Figure13 summarizes, forseverallargecountries,the 1971-2002rela-
tionshipbetweengasolineusage16and vehicleownership, bothper-vehicle(left
graph)andtotal(rightgraph).At thelowestlevelsof vehicleownership, fueluse
pervehicleis relativelyhigh;a relativelysmallnumber ofvehicles(mostlybuses
andtrucks)areusedintensively. As vehicleownership grows,morecarsandother
personalvehiclesareavailable;theseadditionalvehiclesareusedless intensively
thanbusesandtrucks, so thatfueluse pervehicledeclines,whiletotaluse grows.
Highway fueluse pervehiclealso changesovertimeforotherreasons
thanvehicleavailability,namelyvehicleusage,and fuelefficiency. Witha given
vehiclestock,fuelpriceandincomecan affectvehicleusage(distancedriven)in
a givenyear.Fuel-efficiency improvements can reducefueluse pervehicle,as it
takesless fueltotravela givendistance.
Basedonjudgment andhistorical OPEC (2004) makesassump-
patterns,
tionsaboutdifferent regions' ratesof declinein highwayfuelpervehicle.Using
thoseprojected ratesofdecline17together with ourprojected
growth ratesfortotal
vehicles,we projectthatworldconsumption of highwayfuelwillgrowby2.5%
annuallyby2030: 0.9% intheOECD and5.2% intherestoftheworld.By com-
parison,OPEC (2004) projects2000-2025annualgrowthin worldhighwayfuel

16.Theratio
ofgasoline tototal
consumption vehicles measure
isanimperfect ofhighway fueluse
because
pervehicle, somevehicles
usediesel
fuel
instead andsome
ofgasoline, gasolineisnotusedby
vehicles.
Weuseonly gasoline because
consumption wehavenodatafordieselfuelconsumptionfor
non-OECD orfor
countries, OECDcountriesbefore
1993.Somerecent inGerman
reductions gasoline
usagereflect todiesel
fuel-switching andinBrazil theuseofethanol.
reflect
17.OPEC(2004)projectsthefollowingannualrates forhighway
ofdecline fuelpervehicle:
OECDNorth America:
-0.5%,OECDEurope: -0.6%,OECDPacific:-0.4%,China:-2.1%,Southeast
Asia:-0.9%,SouthAsia:-2.2%,LatinAmerica:-0.7%,AfricaandMiddle East:-1.4%.Weuse
estimates
ofthese
regions'
highwayfuel
pervehiclefromBrennand(2006)tocalculate
highwayfuel
consumptionin2002.

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168 /TheEnergyJournal

of 1.9%. Ourhigherrateofgrowth inhighwayfuelis due tohigherprojections of

thevehiclestock.If insteadwe wereto assumeslowerprojectedratesof decline
in fuelpervehicle- closerto thoseexperienced in 1990-2000(-0.1% forOECD,
-2% forChinaand SouthAsia,-1% forothernon-OECD)- thenworldhighway
fuelconsumption wouldgrowat 2.8% annually.
If our highprojectedlong-term growthratesof highwayfueldemand
turnouttobe correct, thismaytesttheabilityofproducerstoincreaseproduction.
Givenlimitedincentives fortheOPEC countriesto increaseproduction quickly
(Gately,2004), as well as restrictions
on investment in manycountries, it is not
clearwhether therewill be enoughoil in themarketto matchrisingdemandat
pricestypicaloverthepastseveraldecades.Ifpricesindeedturnouttobe consid-
erablyhigherthanin thepast,highwayfueldemandwillgrowmoreslowlythan
ourprojections, duetoloweruse ofvehicles,higherfuelefficiency,use ofalterna-
tivefuelssuchas bio-dieseland possiblyalso due to reducedvehicleownership
rates.This last effectwouldnotbe capturedby our partialequilibriummodel
of vehicleownership. However,our resultsclearlysupporttheview that,with
current policies,oil demandwill continueto rise significantly
overthecoming
decadesand thereare significant risksthattheoil marketbalanceswill oftenbe
tight;see IMF (2005) fora detaileddiscussion.

7. CONCLUSIONS

We use a comprehensive datasetcovering45 countries over1960-2002

toexplainhistoricalpatternsin vehicle ownership ratesas an S-shaped,Gompertz
functionof per-capitaincome.Our modelspecification exploitsthesimilarity of
response in vehicleownership rates to per-capitaincome across countriesover
time,whileallowingforcross-country variationinthespeedofvehicleownership
growth and in ownership saturation levels.
The relationship betweenvehicleownershipand per-capitaincomeis
highly non-linear.
The income elasticity of vehicleownership startslow butin-
creasesrapidlyovertherangeof $3,000to $10,000,whenvehicleownership in-
creasestwiceas fastas per-capita income.Europeand Japanwereat thisstage
in the 1960's. Manydevelopingcountries, especiallyin Asia, are currentlyex-
periencing similardevelopments and will continueto do so during thenext two
decades.Whenincomelevelsincreasetotherangeof$10,000to$20,000,vehicle
ownership increasesonlyas fastas income.Atveryhighlevelsofincome,vehicle
ownership growth deceleratesandslowlyapproachesthesaturation level.Mostof
theOECD countries areat thisstagenow.
We projectthattheworld'stotalvehiclestockwillbe 2.5 timesgreater
in 2030 thanin 2002, increasing to morethantwobillionvehicles.Non-OECD
countries'shareof totalvehicleswillrisefrom24% to 56%, as theyacquireover
three-fourthsoftheadditional vehicles.China'svehiclestockwillincreasenearly
twenty-fold,to 390 millionby2030 - morevehiclesthantheUSA - eventhough
itsrateofvehicleownership (about270 vehiclesper 1000people)willbe onlyat

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 VehicleOwnership
and IncomeGrowth
, Worldwide:
1960-20301 169

levelsexperiencedbyJapanandWestern Europein themid-1970's, andbySouth

Koreain 2001.As in mostcountries, vehicleownership in China,India,Indonesia
andelsewhere willgrowtwiceas rapidly as itsper-capitaincome,as thesecountries
passthrough middle-income levelsof $3,000 $10,000percapita.By 2030,vehi-
to
cle ownershipinvirtually all theOECD countries willhavereachedsaturation, but
inmostofAsia itwillstillonlybe at 15% to45% ofownership saturationlevels.
Ourresultsalso suggestthatthefuture strong growth inthevehiclestock
in developingcountries will lead to significantincreasesin oil demandfromthe
transportsector.We projectannualworldwide growth inhighwayfueldemandto
be in therangeof up to 2.5-2.8%.Ourworkhas a numberof otherbroadpolicy
implications.Forexample,developingcountries willfacethechallengeofbuild-
ingtheinfrastructure (roads,bridges,fueldelivery, etc.) neededto supportthe
growthin vehicleownership.Moreover,manyof theenvironmental concerns
associatedwiththegreateruse ofvehiclescouldpresumably be strengthened by
our projections,especiallysince futurevehicleownershipgrowthwill mostly
takeplace in developingcountriesthathave so farbeen able to deal withthe
environmental issues less successfully thanadvancedeconomies(WorldBank,
2002). However,whilethehistorical patterns in vehicleownership ratessuggest
thatgrowingwealthis a powerful determinant of vehicledemand,policymakers
maybe able to slowtheexpansionofthevehiclestockthrough taxpolicies,pro-
motionof publictransport, and appropriate urbanplanning- an important area
forfuture research.

ACKNOWLEDGEMENTS

The authorswishto thankKarl Storchmann, two anonymous referees

and theeditorforhelpfulsuggestions.Paul Atang,StephanieDenis,andAngela
Espirituprovidedexcellentresearchassistance.

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APPENDIX A: DATA SOURCES

Thisappendixprovidesfurther detailson thedatasetsusedin theanaly-

sis ofvehicleownership.
Data on vehicles(at leastfourwheels,including cars,trucks,andbuses)
are primarily fromthe UnitedNationsStatisticalYearbook.The data fora few
country-years arefromthenationalstatistical offices.
Historicaldataon Purchasing-Power-Parity (PPP) adjustedgrossdomes-
ticproduct arefromtheOECD's SourceOECDdatabase.Thedataareexpressedin
thousands of 1995PPP-adjusted dollars.Wherenecessary, theserieswerespliced
withreal incomedatafromIMF's WorldEconomicOutlookdatabaseusingthe
assumption thatgrowth in thePPP GDP rateequalsrealincomegrowth.
Data on thereal incomegrowthprojectionsfor2005-09 are fromthe
IMF's WorldEconomicOutlook.For 2010-30,themaindata sourceis theU.S.
Department of Energy(DoE) International EnergyOutlookApril2004. An ad-
justment was madeto theDoE's growthprojection forChinaand India.In both
cases, thelong-term incomegrowthrateswerereducedby 1 percentagepoint
(specificallyforChina,thegrowth rateis 5.0 percentannuallyover2010-14,4.4
percentover2015-2019,and 4.1 percentover2020-2030;forIndia,thegrowth
rateassumption is 4.3 during2010-2014,4.1 percentduring2015-2019,and 3.9
during2020-2030).Thisadjustment was madetoreducethePPP-weighted world
growth rateto itshistorical averageof about3.5 percenta year.This adjustment
maycreatea downward bias in ourvehiclesprojection if,in thefuture,
worldin-
comegrowth willturnoutto be higherthanthehistorical average.
Thedataon urbanization andlandareaarefromtheWorldBank's World
Development Indicatorsdatabase.Urbanization is expressedin percentagepoints
andlandareais expressedinsquarekilometers. The dataon population, including
projections,arefromtheUnitedNationsdatabase(medianscenario).Population
density was calculatedbydividing totalpopulation bylandarea;itis measuredby
personspersquarekilometer.

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