Effectiveness of Incentives on the Adoption of Electric Vehicles in the United States

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1 Effectiveness of Incentives on the Adoption of Electric Vehicles in the United States Alan Jenn, PhD Assistant Professional Researcher Institute of Transportation Studies University of California, Davis

2 Plug-in Electric Vehicles (PEVs) Plug-in Hybrid Electric Vehicles (PHEVs) Contains both a battery and engine Battery Electric Vehicles (BEVs) Contains only a battery Toyota Prius Prime Tesla Model 3 Chevrolet Volt Nissan Leaf

3 Current state of PEV incentives

4 Federal incentive for Plug-in Electric Vehicles (PEVs) Plug-In Electric Drive Vehicle Credit (IRC 30D) Provides up to $7500 depending on the size of the battery for purchase of a PEV. Expiring for Tesla and GM soon.

5 Washington incentive is off the hood by exempting sales tax State-level purchase incentives State level rebates can vary in amount and structure Connecticut rebate is based on the battery size of the vehicle California CVRP provides a rebate check after purchase, $1500 for PHEVs, $2500 for BEVs

6 Many local level purchase incentives are offered by nongovernment entities (including electric utilities) Other purchase incentives

7 HOV lane access Many states offer high-occupancy vehicle (carpool) lane access for PEV owners

8 Some utilities across the country offer special electricity rates that vary over the time of day for electric vehicle owners Utility rates for PEVs

9 Relative strength of incentives by state: Some incentives that were not included: emissions exemptions and charging infrastructure incentives

10 Incentive efficacy is one of the most studied topics regarding PEV adoption Studies have both elicited these values directly from PEV owners or measured them by looking at past sales of PEVs Most findings generally attribute around 25%-35% of sales due to existing/past purchase incentives 1. Incentives are effective

11 2. Removal of incentives has led to crashes in the PEV market BEV Market Share (%) 2011 Netherlands PHEV Sales Georgia BEV Market Share 0 Denmark BEV Sales Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q There have been several examples of incentives being removed all of which have led to a plummet in sales of corresponding PEVs This effect is stronger than what we attribute to incentives on PEV adoption: the negative perception of losing the incentive could be strong

12 3. Other countries have been successful Norweigian sales driven by fee exemptions for PEVs which can double the price of conventional gasoline vehicles. Major cities in China have placed restrictions on registering gasoline vehicles but electric vehicles are exempt from these restrictions.

13 4. Knowledge and awareness is low Consistent findings across different studies Even in states with strong PEV markets, such as CA, there have been no improvements in knowledge over the last 5 years Percentage of respondents 100% 80% 60% 40% 20% 78% 96% 87% 87% 81% 64% 37% 31% 28% 24% 22% 17% % 25% 24% 17% 23% 27% 20% 20% 100% 80% 60% 40% 20% 0% Already own a PEV Actively shopped for an electric vehicle Gathered some information, but not really serious yet The idea has occurred, but no real steps taken Have not considered but maybe some day we will Have not and would not consider buying a PEV 0% Toyota Chevrolet Nissan Toyota Chevrolet Nissan Prius*** Volt*** Leaf*** Prius*** Volt*** Leaf*** Have heard of this Have heard of this Tesla Tesla Model S Model Toyota Chevrolet Nissan Tesla Hybrid*** PHEV*** BEV*** Toyota Chevrolet Nissan Tesla HEV*** PHEV*** BEV*** Prius*** Volt Leaf Model S Prius*** Volt Leaf Model Moderately or very familiar Moderately or very familiar

14 5. Incentives are becoming more important As PEVs begin to become more of a mainstream purchasing decision, our analysis finds that the incentives are increasingly becoming a tipping point for purchase decisions Phaseoutofincentives will become increasingly difficult without adversely affecting sales Probability How would consumers change their purchase decision if the federal incentive were removed? Chevrolet Volt Nissan Leaf Model S Prius Plug in Year Change in purchase decision No change Another plug in vehicle A non plug in vehicle Not to buy/lease a vehicle at all Don't know

15 6. New car buyers push the market Just 25% of all households are responsible for all new vehicle purchases Targeting this group can increase efficacy of incentives Used car markets can help to spreadtechnology across the population but this is an area that is currently not well studied 4% of HH purchased 2+ cars = 28+% of new cars 21% of HH bought 1 car = 72% of new car purchases 75% of HH did not purchase new car in the last 3 years

16 7. Feebates: a sustainable funding idea A feebate is the combination of a fee and a rebate, it charges a fee to the dirtiest and least efficient vehicles and provides a rebate for the cleanest and most efficient vehicles Efficient solution that can indefinitely provide sustainable funding for an incentive program Aligns the market with regulatory goals for automakers such as CAFE and ZEV Fee Rebate Paid for by

17 References by subject Purchase Incentive Studies DeShazo, J. R., Tamara L. Sheldon, and Richard T. Carson. "Designing policy incentives for cleaner technologies: Lessons from California's plug-in electric vehicle rebate program." Journal of Environmental Economics and Management 84 (2017): DeShazo, J. R. "Improving incentives for clean vehicle purchases in the United States: challenges and opportunities." Review of Environmental Economics and Policy 10, no. 1 (2016): Tal, Gil, and Michael Nicholas. "Exploring the impact of the federal tax credit on the plug-in vehicle market." Transportation Research Record: Journal of the Transportation Research Board 2572 (2016): Sierzchula, William, Sjoerd Bakker, Kees Maat, and Bert Van Wee. "The influence of financial incentives and other socio-economic factors on electric vehicle adoption." Energy Policy68 (2014): Jenn, Alan, Katalin Springel, and Anand R. Gopal. "Effectiveness of electric vehicle incentives in the United States." Energy Policy 119 (2018): Incentives Over Time Jenn, Alan, Jae Hyun Lee, Scott Hardman, Gil Tal. An in-depth examination of electric vehicle incentives: consumer heterogeneity and changing response over time. In review: Transportation Research Part A: Policy and Practice. International Incentive Studies Bjerkan, Kristin Ystmark, Tom E. Nørbech, and Marianne Elvsaas Nordtømme. "Incentives for promoting battery electric vehicle (BEV) adoption in Norway." Transportation Research Part D: Transport and Environment 43 (2016): Mersky, Avi Chaim, Frances Sprei, Constantine Samaras, and Zhen Sean Qian. "Effectiveness of incentives on electric vehicle adoption in Norway." Transportation Research Part D: Transport and Environment 46 (2016): Aasness, Marie Aarestrup, and James Odeck. "The increase of electric vehicle usage in Norway incentives and adverse effects." European Transport Research Review 7, no. 4 (2015): 34. Knowledge and Awareness Long, Zoe, Jonn Axsen, Christine Kormos, Suzanne Goldberg. Are consumers learning about plug-in electric vehicles? Comparing awareness among Canadian new car buyers in 2013 and Working paper. Kurani, Kenneth, Nicolette Caparello, Jennifer Tyree Hageman. New Car Buyers' Valuation of Zero-Emission Vehicles: California. Institute of Transportation Studies Research Report. UCD-ITS-RR-16-05