What Does an Electric Vehicle Replace?Consumer Demand for Gasoline and Electric Vehicles
Benjamin Leardwith Jerry Xing and Shanjun Li
Electric Vehicle Sales
September 2019 electric vehicle (EV) sales: ~33,000 out of 1.5 million light-duty sales (2.2% market share)
Why is the market share for EVs so small?
• EVs have limited driving range. Popular EV options have ~250 miles of range (about ½ of gas options).
• They are expensive.
2018 Ford Focus: $17,950 2018 Ford Focus Electric: $29,120
Range: 500 miles Range: 115 miles
Effectiveness of EV Subsidies
The U.S. has an EV federal income tax credit of $7,500 to stimulate EV adoption and reduce greenhouse gas emissions (GHGs).
GHG emissions reductions from EV adoption = The difference between replacement vehicle emissions and EV emissions
Subsidy dollars per ton of emissions reductions depends on which types of vehicles EVs are replacing.
Tesla Model 3: 150 grams of CO2/mile
Ford F150: 423 grams of CO2/mile
Toyota Prius: 171 grams of CO2/mile
21 grams of CO2/mile
saved
273 grams of CO2/mile
saved
Our Approach
We estimate a vehicle choice model using unique household survey data to identify these substitution patterns and to estimate the cost effectiveness of the federal subsidy.
MaritzCX Data• 200,000 household per year survey of recent new vehicle
buyers, 2012-2014• Includes “second choice” information on vehicles that
buyers considered in addition to the vehicle they purchased
• Suggests disproportional substitution from EV to hybrid
Results
EVs replace relatively fuel efficient vehicles. • Replacement vehicles have fuel economy that is 4.2 miles per gallon above
fleet-wide average.• 12% of replacement vehicles are hybrids (compared to ~3% hybrid market
share).
The federal tax credit is regressive and is an expensive way to reduce GHG emissions.• The credit increases EV sales by 29%.• Dollars per ton of GHG emissions reductions: $552
• Within the range of recent literature estimates: $340–$650 (Gillingham and Stock 2018)
• A much cheaper option in the transport sector is raising the federal gasoline tax ($18–$47 per ton).
Alternative Subsidy Designs
Can alternative subsidy designs be more cost effective?• The federal subsidy is the same for all buyers.• California’s Clean Vehicle Rebate Project is a subsidy that varies by
household income.• We find that varying the federal subsidy by income, where lower income
households are offered a higher subsidy, makes the subsidy progressive and more cost effective.
• Dollars per ton of GHG emissions reductions: $484 (about 10% more cost effective than uniform subsidy)
• This opens the possibility that further differentiation – such as by vehicle segment (e.g., sedan vs. SUV) – can improve cost effectiveness.
Evolution of the EV market
The EV market has changed since our sample period.
The Chevrolet Bolt and the Tesla Model 3 have entered the affordable car segment where buyers tend to be more price sensitive than buyers in luxury segments.
The $7,500 credit generates more sales as buyers become more price sensitive.
The new vehicle market still has few EV options in segments with high-emission vehicles (no pickup truck option).
Future expansion of the EV market to affordable SUV and pickup truck segments will increase effectiveness of EV subsidies.
Sales Increase Cost Per Ton2014 Benchmark(price elasticity = -2.67)
29% $552
Greater price sensitivity (price elasticity = -4)
42% $418
Thank you!
Extra slides
Vehicle Segment
Gasoline Models
PHEVModels
BEV Models
Market Share (Q4 2018)
Convertible 47 0 1 0.5Coupe 63 0 3 1.6
Hatchback 44 3 7 3.5Sedan 116 8 4 22.2
Station Wagon 20 0 1 1.4Pickup Truck 22 0 0 18.2
SUV 122 5 4 49.5Van 18 1 0 3.1
Total 452 17 20 100
Looking Ahead
• Gasoline vehicles are becoming more fuel efficient as fuel economy standards tighten implies fewer emissions reductions from EV adoption.
• Electricity sector emissions are declining implies more emissions reductions from EV adoption.
How will emissions savings from EVs change in the future?
Source: EPA (2019)
Source: EIA (2018)
12
Historical and Projected Electric Vehicle Sales
Source: AEO (2019)
0
1
2
3
2010 2020 2030 2040 2050
New vehicle sales of electric vehicles(Reference case)millions of vehicles
total batteryelectric
300 mile EVhybrid electric200 mile EV
plug-in hybrid100 mile EV
2018history projections
Current light-dutyVehicle sales = 17 million
Projected sales suggest we have a long time (20years) before electric vehicles(EVs) get 10% market share.
13
Historical and Projected GHG Emissions
35
40
45
50
55
60
65
70
75
1990 2000 2010 2020 2030 2040 2050
transportation
commercialresidential
industrial
electric power
Carbon dioxide intensity by end-use sector(Reference case)metric tons of carbon dioxide per billion British thermal units 2018
history projections
Source: AEO (2019)
1990 2000 2010 2020 2030 2040 2050
Carbon dioxide intensity by end-use sector (Reference case)metric tons of carbon dioxide per billion British thermal units 2018
history projections
The electric power sector is redistributed to each end-use sector