The effectiveness of financial purchase incentives for battery electric vehicles - A review of the evidence

Plug-in electric vehicles (PEVs) are in an early stage of market entry. Nevertheless, there are now more than 2 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$2500 to US$20,000 per vehicle. There are several studies that either directly consider the effectiveness of purchase incentives or at least include analysis of these incentives as 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 means that how effective these incentives are in increasing PEV sales is not well understood. This paper systematically reviews the literature with the aim of understanding purchase incentives effectivity in increasing PEV sales. In doing so this paper builds a deeper understanding of purchase incentives. 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 and PHEV with high electric ranges more than PHEVs with low electric ranges. VAT and purchase tax exemptions for PEVs are most effective. Incentives should not be available on high-end BEVs, education and awareness 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.