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The Impact of Different Incentive Policies on Hybrid Electric Vehicle Demand and Price: An International Comparison

1
School of Civil Engineering, The University of Queensland, St Lucia, QLD Australia 4072, Australia
2
Division of System Analysis and Econometrics, KTH Royal Institute of Technology, Teknikringen 72, 100 44 Stockholm, Sweden
*
Author to whom correspondence should be addressed.
World Electr. Veh. J. 2019, 10(2), 20; https://doi.org/10.3390/wevj10020020
Received: 20 February 2019 / Revised: 18 April 2019 / Accepted: 18 April 2019 / Published: 23 April 2019
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Abstract

Significant efforts to incentivize the uptake of energy efficient vehicles (EEVs) are evident across the globe. Given EEV markets are dynamic, and consumer demand may fluctuate in response to incentives, this may also lead to other market forces influencing prices. An analysis of EEV incentives, therefore, must account for the possible endogeneity between demand and pricing. Here we estimate the effects of different types of incentives on the demand and price premiums of a specific group of EEVs: plug-in and conventional hybrid electric vehicles (HEVs). For the first time we dis-entangle the endogeneity between HEV demand and price, using error components three-stage least squares (EC3SLS) regression, and establish that increased HEV price premiums lead to reduced demand. In turn, we also establish that increased HEV demand leads to lower price premiums. Additionally, we find that one-off subsidies are associated with higher consumer demand, however, unlike other types of incentives, are also associated with higher HEV price premiums. This finding suggests that HEV manufacturers and/or dealers are absorbing a significant monetary benefit from one-off subsidies, raising a question regarding the appropriateness of HEV subsidies, particularly in non-HEV manufacturing nations. We also find that higher fuel prices are associated with higher HEV demand and price premiums. View Full-Text
Keywords: hybrid electric vehicles; plug-in hybrid electric vehicles; energy efficient vehicles; incentives; endogeneity; error component three stage least squares hybrid electric vehicles; plug-in hybrid electric vehicles; energy efficient vehicles; incentives; endogeneity; error component three stage least squares
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Whitehead, J.; Washington, S.P.; Franklin, J.P. The Impact of Different Incentive Policies on Hybrid Electric Vehicle Demand and Price: An International Comparison. World Electr. Veh. J. 2019, 10, 20.

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