Subsidizing Low- and Middle-Income Adoption of Electric Vehicles: Quasi-Experimental Evidence from California

Abstract

Little is known about demand for EVs in the mass market. In this paper, we exploit a natural experiment that provides variation in large EV subsidies targeted at low- and middle-income households in California. Using transaction-level data, we estimate two important policy parameters using triple differences: the subsidy elasticity of demand for EVs and the rate of subsidy pass-through. Estimates show that demand for EVs amongst low- and middle-income households is price-elastic and pass-through is complete. We use these estimates to calculate the expected subsidy bill required for California to reach its goal of 1.5 million EVs by 2025.