Incentive structures for the purchase of electric vehicles in Germany

Abstract

A quasi natural experiment is exploited to examine the relationship between bonus payments or subsidies and the share of electric vehicles in new registrations. The difference-in-differences approach makes a distinction between the instrument's causal effect and the magnitude of the subsidy's influence. Germany, France, Italy, and Austria implemented a direct purchase premium for Battery Electric and Plug-in Hybrid Electric Vehicles in 2016 and repeatedly adjusted the subsidies amount over the years. This setting provides the opportunity to examine an average effect of the premiums on the market share of electric cars in these countries and add this case study to the existing literature. The estimated Average Treatment Effect (ATE) suggests that, on average, the Public Support for Electric Vehicles (PSEV) policies are associated with a 2.04 percentage point increase in the Battery Electric Vehicle Market Share Rate (BEVMSR) across the treated countries. This effect can be interpreted causally due to the robustness checks performed and the validation of the parallel trend assumption. We cannot find statistically significant results for the public support for Plug-in Hybrid Electric Vehicles (PSPHEV). Results from a survey that investigates the German population's acceptance of changes in the design of the environmental bonus complement the difference-in-difference approach of this study with insights on how to make the environmental bonus as efficient as possible in terms of a potential increase in BEVMSR. By removing the premium for hybrid-only vehicles, it was found that the adoption of electric vehicles might be sped up using the stated-choice approach.