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Ho Chi Minh City University of Technology Office for International Study Programs

ECONOMICS PROJECT (IM1013) CC02_HK221

THE MICROECONOMICS ASPECTS OF ELECTRIC VEHICALS

Instructor: Trần Duy Thanh

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1 CONTENTS

<small>1. INTRODUCTION ... 5</small>

<small>1.1INTRODUCTION TO THE PROJECT ... 5</small>

<small>1.2 C ONTENT OF THIS REPORT ... 5</small>

<small>2. INTRODUCTION OF ELECTRIC VEHICLES (EVS) ... 6</small>

<small>2.1DEFINITION AND ATEGORIES OF LECTRIC EHICLES CEV(EVS) ... 6</small>

<small>2.2 E LECTRIC EHICLES VBENEFITS... 7</small>

<small>3. EXPLAIN AND ANALYSIS DETERMINANT OF SUPPLY, DEMAND AND ELASTICITY ... 8</small>

<small>3.1DETERMINANTS OF DEMAND ... 8</small>

<small>3.1.1 Real household incomes ... 8</small>

<small>3.1.2 Petroleum shortage and pollution ... 8</small>

<small>3.1.3 Behavior of customers ... 8</small>

<small>3.2DETERMINANTS OF UPPLYS ... 8</small>

<small>3.2.1 Cost of component ... 8</small>

<small>3.2.2 Number of producers operating in the market ... 9</small>

<small>3.2.3 Effects of changing production technologies / innovation ... 9</small>

<small>3.3 E LASTICITY ... 9</small>

<small>3.3.1 Cross price elasticity ... 9</small>

<small>3.3.1 Income elasticity... 10</small>

<small>3.3.2 Supply elasticity ... 11</small>

<small>4. GOVERNMENT INTERVENTION POLICIES TO ELECTRIC VEHICLES ... 13</small>

<small>4.1. T HE IMPORTANCE OF GOVERNMENT INTERVENTION POLICIES TO LECTRIC EHICLES EV(EVS) ... 13</small>

<small>4.1.1 The benefits of EVs to the environment ... 13</small>

<small>4.1.2 Reasons why government should intervene the EVs market ... 13</small>

<small>4.2. G OVERNMENT INTERVENTION POLICIES TO ELECTRIC VEHICLES ... 13</small>

<small>4.2.1 Vietnam policies to intervene EVs’ market ... 14</small>

<small>4.2.2 Incentive policies on EVs of other countries ... 14</small>

<small>4.2.3 The effective of each policy ... 16</small>

<small>5. THE FACTORS AFFECTING THE ELECTRIC VEHICLES MANUFACTURING ... 18</small>

<small>5.1. T HE COST STRUCTURE OF THE ELECTRIC VEHICLES MANUFACTURING ... 18</small>

<small>5.2. T HE CAPITAL STRUCTURE AFFECTING BUSINESS COSTS ... 18</small>

<small>5.3. T HE ECONOMIES OF SCALE, ECONOMIES OF SCOPE IN THE ELECTRIC VEHICLE INDUSTRY ... 26</small>

<small>5.4. T HE MARKET STRUCTURE OF THE ELECTRIC VEHICLE INDUSTRY ... 27</small>

<small>6. MACROECONOMIC IMPACTS ON EVS’ MARKET ... 29</small>

<small>6.1. MACROECONOMIC INDICATORS THAT AFFECT EVS INDUSTRY ... 29</small>

<small>6.1.1. Aggerate demand and aggerate supply ... 29</small>

<small>6.1.2. Gross domestic product (GDP), GDP deflator and green gross domestic product (Green GDP) ... 29</small>

<small>6.1.3. Gross national product (GNP) ... 29</small>

<small>6.1.4. Nominal gross domestic product (Nominal GDP) and Real gross domestic product (Real GDP) ... 30</small>

<small>6.2. I MPACT OF MACRO VARIABLES ON THE MARKET ... 30</small>

<small>6.2.1. Inflation effect on EV market ... 30</small>

<small>6.2.2. Employment effect on EV market ... 31</small>

<small>6.3. I MPACT OF MACROECONOMIC POLICIES ON EVS’ MARKET ... 31</small>

<small>6.3.1. Fiscal policy and its effect on EV’s market... 31</small>

<small>6.3.2. Monetary policy and its effect on EV’s market ... 34</small>

<small>6.3.3. Supply-side policies and their effect on EV’s market ... 34</small>

<small>7. CONCLUSION ... 35</small>

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3 TABLES

<small>TABLE 1: CONSUMER SUBSIDIES IN CHINA AND US... 15</small>

<small>TABLE 2: COMPARISON EVS MODEL WITH SIMILAR PETROL MODEL ... 15</small>

<small>TABLE 3: ... 22</small>

<small>TABLE 4: ... 25</small>

<small>TABLE 5: ... 26</small>

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4 FIGURES

<small>FIGURE 1: PRICE ELASTICITIES OF DEMAND FOR AUTOMOBILES, BY VEHICLES ENERGY TECHNOLOGY, </small>

<small>NORWAY 2016. ... 9</small>

<small>FIGURE 2: MONTHLY INCOME OF EMPLOYEES IN THE FIRST AND SECOND QUARTERS, PERIOD 2019-2022 ... 10</small>

<small>FIGURE 3: THE ESTIMATE NUMBER OF PLUG-IN ELECTRIC VEHICLES IN USE IN SELECTED COUNTRIES AS OF 2021 ... 11</small>

<small>FIGURE 4: CHINA GDP PER CAPITA ... 11</small>

<small>FIGURE 5: TOP 20 PLUG-IN VEHICLES IN CHINA – APRIL 2022 ... 12</small>

<small>FIGURE 18:US PASSENGER EV SALE FORECAST ... 30</small>

<small>FIGURE 19: DIRECT AUTO MAKING EMPLOYMENT OICA 2018 ... 31</small>

<small>FIGURE 20: GDP, FISCAL INCENTIVES AND SHARE OF EVS IN 2014 ... 32</small>

<small>FIGURE 21: A GLOBAL COMPARISON OF FISCAL INCENTIVE POLICY FOR ELECTRIC VEHICLES ... 33</small>

<small>FIGURE 22: 2012 AND 2013 MARKET SHARE VS PER-VEHICLE INCENTIVE FOR BATTERY-ELECTRIC (BEV) AND PLUG IN HYBRID ELECTRIC PHEV ... 33</small>

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1. INTRODUCTION 1.1 Introduction to the project

The development of technology is applying in social life in some developed and developing countries, so people in whole the world is always find and explore new things and minerals to enhance old devices, equipment, … for serving human’s life. Finding new things to replace old ones was ubiquitous in human’s mind over the world in the past. Therefore, scientists spent a lot of time and budgets on transportations being a way to global evolvement. To put it simply, the development of transportation systems takes place in a socioeconomic context. Regarding microeconomic level, the transportation is linked to producer, consumer, and distribution costs. But overproduction of transportation of big companies and owning cars of customers gives rise to climate changes such as exhaust of natural resources and environmental pollution. Gasoline- an important product for all the increase of economic systems in over the world, is an example for this problem. When gasoline is burned for energy, it releases a large of toxic gas and high amount of carbon dioxide affecting air conditions. By the early 1970s, top automotive manufacturers began to explore alternative energy method because of soaring of gasoline prices. Most scientist thought about products, which is appropriate and necessary for reducing fume released in environment at that time. Electric vehicles (EVs) including electric car, electric, solar-powered aircraft, … are elected to replace some fuel vehicles to alleviate emissions. Besides, National Bureau of Economic Research (NBER) examined the private and public economics of electric vehicles (EVs) and discussed when market forces will produce the optimal path of EV adaption. They assumed that it has many benefits for both personal and public economics when EVs is used in community. Furthermore, EVs is a hot topic researched by many advanced academic, professors to upgrade the quality of services, equipment, … or invent new useful supplies. And, it also has some events, projects for invention and improvement of EVs ending in the future in US. While the enhancement and widespread of electric vehicles in some nation especially wealth countries, the opposite was true for that in Vietnam. It can be seen in a reality life that the most of vehicles used for transportation in Vietnam are gasoline car, motorbike, train, …so people gave many questioning for lack of EVs in Vietnam’s commercials. Why the EVs is not common use like developed countries? What are the challenges for that?

In this report, we will discuss about all the aspect of economics of electric vehicles including determinant of demand, supply, elasticity, government intervention policies, … affecting to the economics in over the world. And we will give challenges for development of EVs and transparent reasons for aforementioned questioning occurred in Vietnam.

1.2 Content of this report This report includes 7 parts: Introduction

Introduction of Electric Vehicles (EVs)

Explain and Analysis Determinant of Supply, Demand and Elasticity Government Intervention Policies to Electric Vehicles

The Factor Affecting the Electric Vehicles Manufacturing Fiscal Policy in Electric Vehicles Market

Conclusion

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2. INTRODUCTION OF ELECTRIC VEHICLES (EVs) Before regarding all the aspect of economics of electric vehicles and issues happened in Vietnam, we have to know some information about electric vehicles including definition, main components, types and benefits of electric vehicles.

2.1 Definition and Categories of Electric Vehicles (EVs)

Electric Vehicles (EVs) are a promising technology for drastically reducing the environment burden of road transport. More than a decade ago and also more recently, they were advocated by various actors as an important element in reducing C0 , emission of <small>2</small>

particularly passenger cars and light commercial vehicles as well as emissions of pollutants and noise.

The main components of electric vehicles are: Traction battery pack

The electric vehicle market is evolving rapidly, with models available in a range of vehicle types. The types of EVs as well as types of charging infrastructure, there are four types of electric vehicles available on the market:

Battery Electric Vehicles (BEVs): Battery electric vehicles run on electricity only and are recharged from an external power source.

Plug-in Hybrid Electric Vehicles (PHEVs): Plug-in hybrid electric vehicles also use batteries to power an electric motor and can be recharged from an external power source, but the incorporate a smaller internal combustion engine that can recharge the battery (or in some models, directly power the wheels) to allow longer driving ranges. Hybrid Electric Vehicles (HEVs): Hybrid electric vehicles are powered by a

combination of an internal combustion engine with electric motors running off a battery pack for greater efficiency. The batteries of an HEV cannot be recharged from an external source.

Fuel Cell Electric Vehicles (FCEVs): Fuel cell electric vehicles use a highly efficient electrochemical process to convert hydrogen into electricity, which powers an electric motor. FCEVs on the market today are not designed for recharging their battery from an external source. Rather, they are fueled with compressed hydrogen gas that is stored in a tank on the vehicle.

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7 2.2 Electric Vehicles Benefits

There are some benefits impacted efficiently on the economic and environment of the world:

Electric and hybrid vehicles can have significant emissions benefits over conventional vehicles

The multiple fuel sources used to generate electricity results in a more secure energy source for the electrified portion of the transportation sector.

Although the purchase prices for electric vehicles can be significant higher, energy cost of that are lower than for similar conventional vehicles.

Electric vehicles can reduce fuel costs dramatically because of the high efficiency of electric-drive components.

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3. EXPLAIN AND ANALYSIS DETERMINANT OF SUPPLY, DEMAND AND ELASTICITY

3.1 Determinants of Demand 3.1.1 Real household incomes

This is the most important consideration when deciding whether or not to purchase an electric vehicle. The price of an electric car in Vietnam starts at 28000 USD or higher, but the Vietnamese GDP per year is only 2785 USD, so they cannot afford to buy and choose other vehicles such as motorcycles. However, in China, the GDP per year is 105000 USD, and the price of an electric car is around 8000 USD, which is a reasonable price for them to pay.

3.1.2 Petroleum shortage and pollution

This is not a limitless resource. Because of the shortage of petroleum in the next 50 years, the price of petroleum will rise, and we will require an alternative. Furthermore, emissions from conventional vehicles will degrade air quality and contribute to global warming. Global heating is supercharging extreme weather at an astonishing speed, and it’s visible in Vietnam and beyond. People across the world are losing their lives and livelihoods due to more deadly and more frequent heatwaves, floods, wildfires and droughts triggered by the climate crisis. Humans are currently dealing with these issues, but in the future, we will need to find an alternative, and electric is a viable option because EV contribute less PM2.5 (particles smaller than 2.5 microns) and PM10 (particles smaller than 10 microns) than diesel or petrol cars.

3.1.3 Behavior of customers

Some countries will have electric vehicle charging stations, but not all. Some countries cannot provide charging stations due to issues such as security, remaining costs, etc., so they will opt for the traditional and simple method of using petroleum. Because changing people's behavior takes time, each country will have a different demand for electric vehicles. Furthermore, each individual's attitude toward environmental protection is influenced by a variety of factors such as income, price, life quality, and so on, and it will be difficult to control this issue until diesel and petrol become scarce and humans are forced to use alternative energy sources.

3.2 Determinants of Supply 3.2.1 Cost of component

Firstly, batteries. An EV uses the same rechargeable lithium-ion batteries that are in your laptop or mobile phone, but they are bigger. The priciest component in each cell is the cathode, one of the two electrodes that store and release a charge. That’s because the materials needed in cathodes to pack in more energy are often expensive: metals like cobalt, nickel, lithium and manganese.

Secondly, software. If an EV's software is not perceived as being advanced, buyers for it become harder to entice. For instance, in China, which boasts the world's largest and most competitive EV market, Volkswagen has had problems selling its new flagship EV ID.4 model, according to a report by Reuters, because its features are not as sophisticated as those offered by other EVs already available in the country, which have self-parking, advanced-voice control and self-driving capabilities. a modern electric vehicle may receive software updates to improve safety and performance, offer new in-car services, or unlock sources of revenue for the manufacturer.

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9 3.2.2 Number of producers operating in the market

As the demand for and interest in EVs grows, an increasing number of manufacturers are beginning to produce and sell electric vehicles. The more producers there are, the more competitive the market becomes. For example, in China, the world's largest EV market, each manufacturer will do everything possible to improve their product in order to compete with the others, so EV quality will improve with high-tech and reasonable prices, attracting people. However, it is difficult for producers to invest in developing countries. Take VN as an example: there are some foreign EV producers, but their prices are too high for Vietnamese consumers; VinFast comes in at a lower and more appropriate price. This will aid Vietnamese approaches and provide a better understanding of EV.

3.2.3 Effects of changing production technologies / innovation

The most important technology for EVs is battery. With the improvement to make the battery larger could lead to smaller, lighter, and more environmentally friendly motors. Cars using these powertrains could also be charged faster and travel further on a single charge. Efforts continue to find an alternative to today’s lithium-ion batteries that is lower cost, faster to charge, longer-lived, and does not depend on scarce minerals. New chemistries such as sodium-ion offer promise of incremental improvement.

EVs manufacturers will need to ensure production keeps up and continues making improvements too. In particular, EVs manufacturing will need to become quicker, more efficient, and suitable for rolling out more car models.

More EVs on the road will also require a better, more extensive charging infrastructure. As a result, manufacturers must increase the power station's capacity so that it takes less time and is more convenient for customers.

3.3 Elasticity

3.3.1 Cross price elasticity

In Vietnam, we can see many diesel cars on the road, despite the fact that the price of EVs is rising due to new innovations. So, there is no doubt that traditional cars and electric vehicles are substitutes. But take Norway as an example:

Figure 1: Price elasticities of demand for automobiles, by vehicles energy technology, Norway 2016.

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The cross-demand elasticities of demand for battery electric cars (BEVs), plug-in hybrid electric cars (PHEVs) and ordinary hybrid electric cars (HEVs) are estimated at 0.36, 0.43 and 0.38, respectively (light blue bars in Fig. E.1).

For diesel driven cars, the direct price elasticity comes out at –1.27. Cross price elasticities of demand for gasoline cars, BEVs, PHES and HEVs are estimated at 0.64, 0.48, 0.71 and 0.32, respectively (red bars in Fig. E.1).

HEVs and BEVs are slightly less price elastic than gasoline cars, exhibiting direct demand elasticities of 0.97 and 0.99. PHEVs, on the other hand, appear to be the most price elastic passenger car segment, with a direct elasticity of –1.72.

So, we can see that because Norwegians were concerned about energy costs, they tended to use clean energy, which is used for EV.

3.3.1 Income elasticity

Customers in low-income countries cannot afford to buy EVs like Vietnam, so they will opt for other vehicles such as motorcycles, and cars will become luxuries. Although income has increased, it is still a small amount when compared to the cost of a car.

Figure 2: Monthly income of employees in the first and second quarters, period 2019-2022

However, let us see how China fared. As income and EV’s quantity demand rise, EV becomes more popular among Chinese.

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11 as of 2021

Figure 4: China GDP per capita 3.3.2 Supply elasticity

The average price for an EV in China before subsidies and incentives is below $30,000 and the graph below shows that the supply of EV in China is very large. As a result, supply is elastic.

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However, not all countries have the same impressive quantity as China. For example, in developing countries where prices are too high, but income is too low, producers are unable to increase EV’s quantity.

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4. GOVERNMENT INTERVENTION POLICIES TO ELECTRIC VEHICLES

4.1. The importance of government intervention policies to Electric Vehicles (EVs) 4.1.1 The benefits of EVs to the environment

EVs together with a clean electricity network have a large potential to reduce environment pollution. Firstly, they reduce the usage of fossil fuel energy, hence lower pollution and greenhouse gas emission. Unlike the internal combustion engine vehicles (ICEVs), EVs when operate in fully electric mode only use electricity to power the motor so that they consume no petroleum and produce no tailpipe emission. Electricity which can be generated from power plants is stored in rechargeable batteries. Fossil fuels or renewable energy sources generate the stored electricity.

Although electricity may come from fossil fuel power plants, which cause air pollution, they have much better fuel efficiency (the efficiency of converting energy sources to usable energy) compared to internal combustion engines (ICEs). Therefore, EVs pose a way to reduce energy usage and emission through increasing the fuel efficiency from switching ICEs to large power plants. While ICEs just have an efficiency of about 30%-40%, efficiency could be over 50% for coal plant, or even 90% for hydrogen plant.

4.1.2 Reasons why government should intervene the EVs market

A fully electrified transportation reduces the greenhouse gas emission, hence reduces air pollution. However, the transition from ICEVs to EVs is difficult because of various economic and technological problems including the likely high upfront purchase cost of EVs compared to ICEVs due to the high cost of lithium-ion batteries, the limited range of driving, the installation of charging infrastructure, etc. These challenges are the barrier for the consumption of EVs. Along with these reasons, there are some market failures lead to inefficient consumption of EVs including consumer misperception about product attributes (quality or fuel-cost savings), inadequate taxes on environmental externalities (air pollution, greenhouse gas emission) from gasoline vehicle usage. Therefore, government should implement various policies to promote the usage of EVs. These policies can be subsidies for consumer to lower the upfront purchase cost, subsidies for firms to build charging station to reduce the infrastructure cost, subsidies for electricity used for charging to reduce maintenance cost. Besides those financial policies, there are some non-financial policies such as parking privilege, road privilege or even providing a distinct green license plate for EVs vehicle.

4.2. Government intervention policies to electric vehicles

In order to support the development and the spread of EVs, many countries in the world promulgated incentive programs. Different countries had different policies to target the problems. In this report, we focus mainly on the government’s policy and market drivers behind EVs’ market in Vietnam, China, the USA and Norway.

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14 4.2.1 Vietnam policies to intervene EVs’ market

The market for EVs in Vietnam is quite small compared to other countries in the region and the world. Almost half of Vietnamese population has a motorbike, although car ownership only has a ratio at about 46 per 1,000 people. In the domestic market, there are not many manufacturers seriously investing in EVs: only Vinfast seriously invests in development and research of EVs. In the past, Vietnam had no specific and clear policies to encourage EVs among people, although some private’s companies have stepped up and invested in this sector to promote this industry. The governments in the past had proposed tax incentives for vehicles powered by environmentally friendly energy source such as electricity, hybrid source (gasoline and electricity), biofuel, compressed natural gas, but this simply not enough to promote the use of EVs.

Recently, the situation changed when the government issued a Decree about tax incentives on battery electric vehicle (BEVs). According to the policy, consumers of BEVs are not charged registration fee for 3 years starting from March 1, 2022. After 3 years, which is from 2022 to 2025, the registration fee will be only equal to 50 percent of that for petrol and diesel fueled cars with same number of seats over the next 2 years.

Besides reducing the registration fee for BEVs, the National Assembly of Vietnam promulgated law to lower the excise tax (a legislated tax on specific goods or services) for BEVs in an attempt incentivize greater investment and consumption of BEVs. The excise tax for each kind of BEVs will be different from each other by their number of seats. In particular, from March 1, 2022, the excise taxes for BEVs with nine seats or fewer, from 10 to 15 seats, from 16 to 23 seats are 3 percent, 2 percent, 1 percent respectively (in the past it was 15 percent, 10 percent, 5 percent respectively) before climbing up to 11 percent, 7 percent, 4 percent respectively on March 1, 2027.

EVs manufacturers in Vietnam is still in the development period so that they obviously cannot compete with other big automakers in the world. Understanding this situation, a number of tax reduction preferences for assembling components and producing EVs was promulgated by the government to encourage the domestic manufacture of EVs. In order to protect domestic automakers such as Vinfast, the Ministry of Finance refused the request for EVs import tax reduction from some companies. Therefore, the import tax for EVs in Vietnam still remains high: about 56 to 74 percent of the value of EVs imported from Europe.

These tax incentives not only serve to help the domestic market catch up with the general trend of the auto industry but also encourage the domestic manufacturers to produce “made in Vietnam” EVs

4.2.2 Incentive policies on EVs of other countries

The auto industry has long been considered as a strategic industry, since it not only affects the GDP but also the employment and other industries (such as iron, steel, etc). This is the reason why many developed and developing countries implemented policies to promote this industry. Nowadays, the world faces with the increasing pressure on energy and environment so that many governments make strategic plans to prioritize the development of the EVs industry. There are three big markets for EVs in the world: China, United States and Europe (in the order of decreasing market size). Therefore, we choose three countries to identify the government policies behind their enormous EVs’ market: China, United States and Norway (representing for the Europe).

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15 4.2.2.1 Financial incentives.

Subsidizing for consumers who buy EVs is the most popular policy among countries to boost the adoption of EVs. Different countries have different subsidizing policies. From 2010, US federal government provides a federal income tax credit to new EV buyers based on each vehicle’s battery capacity and the gross vehicle weight rating, with the amount ranging from $2,500 to $7,500, with a phase-out target of 200,000 EVs sold. The Chinese government also subsidizes for EVs based on their driving range.

Table 1: Consumer Subsidies in China and US

Another financial subsidizing is that government can invest in charging infrastructure. This also help boost the EVs demand. Both China, US and Norway do this way.

Besides subsidizing for EVs, other countries such as Norway have ways to make EVs is cheaper than ICEVs. In Norway, there are tax reductions on e-vehicles so, for consumers buying electric cars is more convenient than buying fossil fuel equivalents. The tax reductions in Norway include: no purchase/import tax on EVs, no annual road tax (1996-2021), exemption from 25% VAT on purchase, no CO2 tax, no NOx tax, etc. Therefore, even if e-cars are more expensive than fossil fuel types, they become cheaper once taxes are deducted. The following example compares an EV model with a similar petrol model to illustrate how the Norwegian tax system makes EVs competitive in the market.

Table 2: Comparison EVs model with similar petrol model

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The progressive tax system makes most EV models cheaper to buy compared to a similar petrol model, even if the import price for EVs is much higher. This is the main reason why the Norwegian EV market is so successful compared to any other country.

4.2.2.2 Non-financial incentives.

As effective as financial incentives, non-financial incentives play an important role in boosting the EVs adoption. Chinese, United States and Norway have some kinds of non-financial encouragement on EVs such as: parking privileges, vehicle registration privileges and road privileges.

In China, there is a special major non-financial policy program called green-plate policy. This policy allows EVs owners to have green license plate which is distinguishable from the one that ICEVs owners have. In addition to displaying the conspicuous adoption of energy-efficient vehicles, the green plate also helps make EVs easily recognizable for relevant road traffic and parking infrastructure privileges.

4.2.3 The effective of each policy

Consumer subsidies have a great impact on EVs sales. Economic experts in three countries: China, United States and Norway do the research of the effect of consumer subsidies on the demand. They all conclude that these policies play an important role in promoting EVs sales. Li et al. (2020) study that the total subsidy amounts to ¥44,400 (or about $7,000) per EV, or nearly 26% of MSRP on average and as high as 73% from 2011 to 2019 explained for nearly 55% of the EV sales in China. Li et al. (2017) estimates the federal tax credit of $2,500 to $7,500 per EV contributed to about 40% of EV sales during 2011 to 2013 in the US. Springel (2019) finds that the subsidies on consumer purchases and charging stations explained about 37% of EV sales during 2011 to 2015 in Norway.

Green plate policy allows EVs to have a special license plate in green color, distinctive from the license plates for gasoline vehicles. Although these policies have a low-program cost, evidence shows that it has great impact on EVs sales. Li et al. (2020) study that the green plate policy is equivalent to about ¥20,000 subsidies in promoting EV sales. The reason for this effect is that consumers demonstrate their environmental preferences through buying green products (Kahn, 2007; Kahn and Vaughn, 2009) or choose to buy green products in order to seek status. Sexton and Sexton (2014) define conspicuous conservation as a phenomenon where individuals seek status conferred upon demonstration of austerity that minimizes the environmental impact of consumption.

Economists in the world found an interesting phenomenon that subsidizing in charging infrastructure is much more effective than subsidizing consumer purchases. Li et al. (2020) estimated that invest in charging infrastructure is nearly four times as effective as lowering EVs purchase cost. Both Li et al. (2017) and Springel (2019) show that subsidizing charging stations is more than twice as effective as subsidizing consumer purchases on a per dollar basis in the US and Norway, respectively.

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