Do plug-in electric vehicle (EV) subsidies raise their sales?
Yes, but their effectiveness depends on the subsidy design.
Plug-in electric vehicles (EVs) are subsidized globally in various forms, including consumer rebates, sales tax exemptions, and tax credits for installing EV charging stations. The literature generally finds evidence that these programs successfully promote EVs. Moreover, their effects can initiate feedback in the future because of the interdependence between EV adoption and charging station investment. For example, in the US, the federal income tax credit of up to $7,500 for EV buyers is estimated to have contributed 40% of EV sales during 2011–13, with feedback loops explaining 40% of that increase. Other studies find similar effects in other countries, including Canada, Norway, and China.
However, the cost-effectiveness of a subsidy (i.e., additional EV sales induced by the subsidy given the dollars spent on the subsidy) depends on who it targets. For instance, dollars spent on consumers who are 'on the fence' and can be nudged into purchasing an EV through the subsidy may be more effective in raising sales than those spent on consumers who would have purchased EVs irrespective of the subsidy. Similarly, a recent study in Norway suggests that dollars spent on charging station subsidies may be more effective in raising sales than those spent on consumer price subsidies.