Policy incentives and electric vehicle adoption in China: From a perspective of policy mixes

Abstract

China has emerged as a global leader in electric vehicle (EV) sales due to the government’s industrial incentive policies. However, as industrial and incentive policies undergo adjustments and the market scales up, the efficacy of mixed incentive policies in a mature market becomes increasingly relevant compared to individual policies. Drawing on comprehensive year-panel data from 275 Chinese cities during 2016 ∼ 2022, this study estimates the average, complementary, and mixed effects of EV incentive policies. Our estimates indicate a limited incentive effect of purchase subsidy policies, signaling the need for a phased withdrawal of such incentives while exploring cost-effective alternatives. Furthermore, our study highlights the intricate relationship between policy diversity and overall effectiveness, emphasizing the potential crowding-out effects observed when multiple policies are concurrently implemented in cities. The effect of policy mixes is different among cities with different sales level, income level and population density. The effect of policy mixes is better in cities with a higher sales level, an upper middle-income level, and a medium population density. These insights offer a nuanced understanding of the evolving landscape of EV incentives, providing valuable guidance for policymakers navigating the complexities of incentive strategies in a maturing EV market.