The role of government in the market for electric vehicles: evidence from China

To promote the development and diffusion of electric vehicles, central and local governments in many countries have
adopted various incentive programs. This study examines
the policy and market drivers behind the rapid development of the electric vehicle market in China, by far the
largest one in the world. The analysis is based on the most
comprehensive data on electric vehicle sales, local and central government incentive programs, and charging stations
in 150 cities from 2015 to 2018. The study addresses the
potential endogeneity of key variables, such as local policies
and charging infrastructure, using the border regression
design and instrumental variable method. The analysis
shows that central and local subsidies accounted for over
half of the electric vehicles sold during the data period.
Investment in charging infrastructure is much more cost-effective than consumer purchase subsidies. In addition, the
policy that merely provided electric vehicles a distinctively
license plate was strikingly effective. These findings demonstrate the varying efficacy across policy instruments and
highlight the critical role of government in promoting
fuel-saving technologies.