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Financial Purchase Incentives for Battery Electric Vehicles – A Review of the Evidence


Research Report

Sustainable Transportation Energy Pathways (STEPS), Plug-In Hybrid & Electric Vehicle Research Center

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Suggested Citation:
Hardman, Scott, Amrit Chandan, Gil Tal, Thomas S. Turrentine (2017) Financial Purchase Incentives for Battery Electric Vehicles – A Review of the Evidence. Institute of Transportation Studies, University of California, Davis, Research Report UCD-ITS-RR-17-24

Plug-in electric vehicles (PEVs) are in an early stage of market entry. Nevertheless, there are now more than 1 million PEVs in use globally. PEVs result in lower energy consumption, greenhouse gas emissions and urban air pollution compared to internal combustion engine vehicles (ICEVs). For these reasons policy makers are eager to see PEVs purchased by consumers in larger numbers. Many policy makers have introduced financial purchase incentives to nurture the growth of PEV markets. These incentives range in value from around US$2,500 to US$20,000 per vehicle. Whether these incentives are effective in increasing PEV sales is not well understood at present. There are several studies that either directly consider the effectiveness of purchase incentives or at least include analysis of these incentives are part of a larger study. The results of these studies have not been assimilated in one place to gain an understanding of whether purchase incentives are effective in promoting PEV sales. This paper systematically reviews the literature with the aim of understanding whether purchase incentives are effective tools to increase PEV sales. In doing so this paper builds a deeper understanding of purchase incentives than has been possible before. This in-depth understanding allows recommendations to be made on how to design purchase incentives so that they are most effective in promoting PEV market growth. Incentives should be applied when someone is buying a PEV, not afterwards, incentives should promote BEVs more than PHEVs, VAT and purchase tax exemptions for PEVs are most effective, incentives should not be available on high-end BEVs (e.g., Tesla Model S), education and awards campaigns should promote incentives to consumers. Finally, the premature removal of incentives could negatively affect PEVs therefore incentives should be designed with longevity in mind.

Keywords: electric vehicles, policy, purchase incentives, literature review

Presented at EVS30 Symposium, Stuttgart, Germany, October 9-11, 2017