Market share of new EVs in select markets, 2013 and 2014. While the global sales of EVs have about doubled in each of the past two years—from about 45,000 units in 2011 to more than 200,000 in 2013—consumer uptake has been generally limited to less than 1% in nearly every major auto market, with the notable exceptions of Norway, the Netherlands and California. Norway has the highest share of electric automobile sales (BEV and PHEV combined) at about 6% of all passenger cars sold in 2013. The Netherlands has the second-highest market share, with about 5.6%, followed by California (about 4% in 2013). Source: ICCT.

The paper identifies markets with varying market growth in electric vehicles and quantifies the taxation difference between electric vehicles and their conventional, non-electric counterparts. It incorporates fuel and electricity prices to evaluate the equivalent total cost of ownership, and links the level of incentives to the level of electric vehicle market share and sales growth, seeking to draw conclusions about the impact of different incentive programs.

Although numerous policy instruments exist to increase EV sales, the authors focused only on a few for their international comparison: direct subsidies (defined here as a one-time bonus upon purchase of an EV); fiscal incentives (defined here as a reduced purchase and/or annual tax for EVs); and fuel cost savings (incentive due to electricity prices being lower than fuel prices as a result of lower taxation and/or lower energy costs, as well as higher efficiency of EVs)

The study finds clear differences in the taxation benefits provided for electric vehicles and sales of electric vehicles across the major vehicle markets. For example, Norway’s fiscal incentive of about €11,500 (US$16,000) per BEV (equivalent to about 55% of vehicle base price) is associated with a 6% market share for BEV in 2013, and a 90% market share increase from 2012 to 2013.

Evaluation of total cost of ownership for Norway, France, and Germany. Source: ICCT.

Similarly, the report notes, the fiscal incentive in the Netherlands of about €38,000 (US$52,700) for PHEV (equivalent to about 75% of vehicle base price) in 2013 is associated with a 5% market share for PHEV in 2013, and a 1,900% market share increase from 2012 to 2013.

These two examples indicate how national fiscal policy can offer a powerful mechanism to reduce the effective total cost of ownership and entice consumers to purchase electric vehicles, the authors suggest.

At the same time, the results show that a number of factors in addition to fiscal incentives are influencing development of the market for electric vehicles. California, especially, exemplifies a comprehensive electric-drive strategy that goes beyond fiscal incentives.

Based on the data collected and analysis, the team drew two overarching conclusions:

• National fiscal policy is a powerful mechanism to reduce the effective total cost of ownership and entice vehicle consumers to purchase electric vehicles. The analysis suggests that there is indeed some link between the incentives provided and the uptake of EVs in a market.

• More comprehensive study is needed of the impact of the full portfolio of policy actions to accelerate the early electric vehicle market.

The research findings indicate that fiscal incentives matter, but are clearly not the only factor that influences today’s electric vehicle market growth. For example, despite a relatively high level of fiscal incentives, the current market share of EV in the United Kingdom (UK) was found to be low in comparison with other markets. Many confounding factors mean that a clear direct relationship remains elusive between national fiscal incentives and electric vehicles’ early market growth across each of the major vehicle markets … This indicates both the limitation of fiscal policy and also the limited understanding of all the underlying factors and other policies that could help drive and sustain the electric vehicle marketplace.

As a result, a more comprehensive study is needed of the full portfolio of policy actions taken to accelerate the early electric vehicle market—and their impact on the effective total cost of ownership. Such a study would investigate the importance of vehicle manufacturer policy (emission standards, electric vehicle requirements), infrastructure (residential equipment, public charging), electric utility actions (time of use charging), and other local policy (reduced rates for toll roads, preferential parking), along with the consumer fiscal policy evaluated here. A more comprehensive and rigorous assessment would help inform the development of a longer-term policy path that is less dependent upon large initial-year taxation incentives.

—Mock and Yang (2014)

Resources

• Peter Mock and Zifei Yang (2014) “Driving Electrification”