Navigant Research Blog

Incentives Are Driving PEV Sales – Right?

Ryan Citron — May 21, 2014

New data from the International Council on Clean Transportation (ICCT) shows that incentives are, for the most part, driving sales of plug-in electric vehicles (PEVs) globally (with the United Kingdom, China, and a few others aside).  For example, while consumer uptake of PEVs has been limited to less than 1% in nearly every major auto market, Norway’s fiscal incentives (equivalent to 55% of the vehicle base price) have resulted in a 6% market share for 2013.  Similarly, large incentives in the Netherlands (5.6% market share) and California (4% market share) have led to strong PEV growth in those markets.

Exceptions to the Rule

However, not all jurisdictions with strong incentives have led to higher market share.  Despite a robust €5,000 ($6,850) incentive per PEV purchased, exemption from the vehicle taxation system, and exemption from London’s CO2-based congestion charge, just 0.2% of vehicle sales can be attributed to PEVs in the United Kingdom.  One possible explanation could be the large influx of French-manufactured PEVs in the country, such as those made by Renault and Citroën, which have traditionally not been highly sought after brands in the United Kingdom.  China’s PEV incentives have similarly not made a significant impact because the middle and upper class who can afford PEVs are looking to buy non-Chinese brands, such as Teslas, which have historically been largely unavailable.

The following graph shows the correlation between fiscal incentives and the market share for plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs).

(Source: ICCT)

While the ICCT data leaves some questions unanswered, it does demonstrate that fiscal incentives can be powerful mechanisms for reducing the effective total cost of ownership and are largely successful at encouraging consumers to buy PEVs.  For example, California’s PEV penetration growth forecast numbers (7.61% market share by 2023) are partially calculated by using a combination of financial and other incentives, such as HOV lane access and exemption from emissions inspections and state sales and use taxes.  For an in-depth analysis of how quantifying U.S. state incentives can identify the best market opportunities in the country, see Navigant Research’s report, Electric Vehicle Geographic Forecasts.

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