Toward Sustainability: The Role of Tax Policies in Enhancing the Cost-Competitiveness of Electric Vehicles in Jordan

Abstract

The total cost of ownership (TCO) of electric vehicles (EVs) is significantly influenced by several economic factors which play a critical role in shaping their cost competitiveness, including tax policies. The primary objective of this analysis is to evaluate whether (EVs) can be competitive with internal combustion engine vehicles (ICEVs) for everyday use over a multi-year period. Therefore, the TCO of passenger EVs was compared with that of ICEVs across three categories: affordable, mid-range, and luxury. This allowed us to show how tax laws affect EVs’ TCO and adoption rates. The analysis of the Jordanian regulatory structure showed that specific incentives, like lower sale taxes and customs duty applicable to EVs, successfully offset the higher initial costs of EVs, making them cost-competitive, especially in the affordable and mid-range categories. These results not only demonstrate the effectiveness of such policies in Jordan but also support national sustainability objectives by encouraging eco-friendly modes of transportation. The results provide a valuable framework for other developing countries, particularly in the Middle East, to accelerate EV adoption and transition toward cleaner mobility solutions.

1. Introduction

Over the past decades, electric vehicles have proven to be an efficient solution in sustainable transportation offering potential solutions to mitigate the impacts of climate change [1], reduce greenhouse gas emissions [2], and decrease the energy-dependent nature of the transportation industry [3]. By providing more diverse energy resources, the growing electric vehicle sector helps different countries accomplish its climate change targets [4], manage its energy challenges, and support the transportation sector [5]. According to the International Energy Agency, the number of global sales of electric cars is 14 million, making up 18% of all cars sold in 2023 [6].

Since electric vehicles were first introduced in the market, global sales have grown dramatically [7]. Sales of electric vehicles (EVs) are expected to increase significantly in the future, and by 2035, the global EV market share is anticipated to reach 42.5% [8]. According to [9] the unit sales of the Electric Vehicles market are anticipated to reach 18.84 million vehicles units by 2029. However, despite rapid expansion in United States, Europe and China, their adoption rate in developing markets remains below the level needed.

The adoption of EVs has gained significant attention in recent years, with numerous studies highlighting the barriers and challenges that influence their uptake. Research has identified several key dimensions that hinder widespread EV adoption, including financial, technological, infrastructural, policy, and social barriers. For instance, ref. [10] emphasizes critical obstacles such as battery technology, battery costs, and charging infrastructure, which continue to impede the transition to EVs. In the European context, cost concerns, operational restrictions, lack of trust, and insufficient charging infrastructure were the primary barriers to mass EV adoption [11]. Meanwhile, the Indian market categorizes barriers into sales conversion inability, lack of trust in technology, living with the technology, and desirability [12]. In developing countries, additional challenges have been seen, such as the high upfront cost of EVs, limited availability of public charging stations, lack of diverse EV models, and insufficient consumer awareness [13]. Together, these findings highlight the complexity of EV adoption challenges, which vary across markets and geographical areas and require tailored strategies to properly address them.

Several countries have implemented policies and incentive programs to support the transition to electric vehicles. In 2023, China launched a four-year tax break program of USD 72.3 billion for electric vehicles and other green vehicle [14,15]. Italy, which has the oldest vehicle fleet in Europe, has introduced a major incentive program targeting low-income individuals and encouraging the replacement of old vehicles with electric ones. Spain has also extended its EV support program, offering subsidies for electric vehicle purchases, with additional benefits for those scrapping older cars and for residents in rural areas [16].

The total cost of ownership (TCO) is one of the most important variables impacting the adoption of EVs as a sustainable solution. The TCO for electric vehicles is influenced by a variety of factors, including vehicle purchase cost, fuel cost, and government incentives [17]. When compared to the United States, Europe, and China, Jordan’s infrastructure is less developed and income levels are generally lower [18], which makes understanding these variables more significant for policymakers, stakeholders, and consumers to make informed decisions and accelerate the transition to sustainable mobility.

Despite the growing body of research on EV adoption worldwide, there is a notable lack of country-specific studies that comprehensively analyze the TCO of EVs in developing countries particularly Jordan. The majority of existing research focuses on developed markets, which have quite different infrastructure, policy support, and consumer behavior than those in countries like Jordan. The main contribution of this study is filling the research gap by providing analysis of TCO of EV in Jordan as well as the impact of local policy in adoption EVs. In this paper, the objectives of this research are providing a detailed evaluation of the TCO of EVs in Jordan and compare it with traditional vehicles, and determining the infrastructure, economic, and how tax laws affect EVs’ TCO and adoption rates.

This paper is structured as follows. The next section provides a review of the relevant literature. Subsequently, we present an overview of the current status of electric vehicles in Jordan. This is followed by a detailed explanation of the materials and methods used, the results of the TCO analysis, and a sensitivity analysis. Finally, we conclude the paper with a discussion of the results and limitations.

2. Literature Review

Over the years, numerous studies have investigated the TCO, with a particular focus on EVs. These studies consistently demonstrate that electric vehicles (EVs) have a lower TCO than ICEV and Hybrid Electric Vehicles (HEV), especially in the long run. For example, ref. [19] found that Electric vehicles can be recuperated for their greater initial cost in as little as five years. This is particularly valid for electric cars that have a shorter range. Similarly, ref. [20] identify a significant disparity between the initial purchase price and the TCO across different vehicle drive-trains. They find that battery electric vehicles (BEVs) achieve a competitive TCO compared to internal combustion engine vehicles (ICEVs) and hybrid electric vehicles (HEVs), mainly due to their lower operating costs.

The total cost of ownership and the adoption rate of EVs are heavily influenced by economic variables. Ref. [21] created a technical–economic model that compares the total cost of ownership of diesel and electric vehicles in the same market. Their results demonstrate that economic factors—like government subsidies and depreciation rates—have a greater influence on TCO than do technological factors. Ref. [22] also highlight how important economic considerations are in determining the TCO of EVs, including government incentives and purchasing price. They also emphasize how important it is to improve battery autonomy and lower charging service prices in order to increase EV affordability and adoption. The impact of traveling distance on TCO has been discussed in [23] research. The author’s findings indicate that while EVs have a high chance of becoming the most economical option in the small vehicle class for medium-distance travel and across all vehicle classes for long-distance travel, ICEVs are likely to continue to be the most economical option for short-distance travel.

Due to variations in energy prices, policy and regulation frameworks, and customer behavior, the TCO of EVs and ICEVs varies between different regions. Ref. [24] investigated different vehicle sizes, user types and drive technologies in the German market. The authors reveal that only a few BEVs and HEVs are economical without subsidies when compared with ICEVs in all considered scenarios. Ref. [25] looked on the total cost of ownership for North American electric vehicles. Based on the findings, government subsidies and at-home charging are essential for lowering TCO. Ref. [26] highlighted that the market for electric passenger vehicles in Poland remains underdeveloped, mainly due to the higher purchasing price posing a significant barrier to widespread adoption.

In countries close to the study area, research has examined social and behavioral factors influencing the adoption of electric vehicles, providing valuable insights into regional challenges. A large-scale survey was carried out in the United Arab Emirates (UAE) [27]. The authors showed that raising EV knowledge greatly increased purchase intentions. However, understanding of charging infrastructure remains a significant barrier. The study recommends integrated strategies related to cost, infrastructure, and consumer education, which are relevant to similar developing economies in the UAE, Middle East and beyond. The authors [28] investigated electric vehicle adoption challenges in Oman and found a strong positive correlation between purchase intention and factors such as cost-effectiveness, availability of public charging infrastructure, and awareness of climate change. In contrast, safety concerns were negatively correlated with the intention to adopt EVs.

Total cost of ownership has been the subject of numerous studies over the years. Notably, as the majority of TCO research has concentrated on the US, China and Europe, there are not many studies on the potential TCO of electric vehicles in developing countries, particularly in the Middle East. In this paper, we investigated the total cost of ownership of passengers’ electric vehicles versus conventional vehicles across three market segments: affordable, mid-range, and luxury, while accounting for different mileage scenarios, taking into account all of the key criteria such as initial purchase cost, fuel prices, maintenance costs, and government incentives and taxes from the perspective of private vehicle use. The categorization of electric vehicles into affordable, mid-range, and luxury segments is based on commonly accepted market classifications that reflect price, performance, and technological characteristics. This categorization is consistent with industry standards and enables meaningful comparisons across vehicle types. The practical usefulness of this research may be supported by the fact that Jordan, as an example, may serve as a basis for preliminary investigation in other developing countries.

3. Overview of the Status of Electric Vehicles in Jordan

Jordan has experienced significant population growth in recent decades due to both natural and forced migration, which has increased ambient air pollution, particularly from the transportation, energy, and industrial sectors [29]. The transportation sector, in particular, has emerged as a major contributor to greenhouse gas emissions and deteriorating air quality [30], posing serious public health and environmental challenges [31,32]. This has created an urgent need to transition toward sustainable transportation modes to mitigate these impacts and align with global climate goals [33]. Recognizing this, Jordan promotes electric and hybrid vehicles in an effort to reduce the dependency on fossil fuels and maintain natural resources [34].

Jordan faces significant challenges in decarbonizing its transportation sector and increasing the sustainability, a struggle shared by many developing countries. To address these challenges, Jordan has prioritized the electrification of private vehicles as a key strategy. With the continuous increase in conventional fuels prices in Jordan, consumers are under pressure from the rising vehicles operating costs. In contrast, the relative stability of power prices makes electric vehicles an economically attractive option, offering more predictable operating expenses due to the relative stability of electricity prices [11,35].

The development of the electric vehicle (EV) market in Jordan has gained increasing attention from government, policymakers and consumers in recent years. As part of the Nation Green Growth Plan (NGGP), the government intends to increase consumer awareness. During the January–June period of 2024, EVs accounted for 66.5 percent of all vehicles passed at the Al-Zarqa Free Zone. Additionally, 22,604 EVs were cleared overall, a 63 percent increase from 13,861 during the same period in 2023 [36].

In addition to technological advancements and fluctuations in fuel prices, the growth of EV market share and adoption rate acceleration depend mainly on understanding consumer preferences and ensuring societal acceptance of EVs. According to [37], increased public participation in Jordan not only promotes awareness and understanding of EVs but also raises perceived risks associated with their adoption. Furthermore, greater knowledge of EVs positively and significantly influences their perceived usefulness, ease of use, and overall acceptance.

4. Materials and Methods

Total cost of ownership (TCO) is one of the most significant cost-oriented methodologies extensively used in both research and practice which enables decision makers to combine both value and price when making purchasing decisions [38]. Therefore, in this paper we used TCO, incorporating data on initial purchase costs, maintenance costs, fuel expenses, and government incentives for both EVs and ICEVs, enabling a clear comparison and assisting consumers in making good purchasing decisions. It is worth mentioning that the model does not account for CO₂ emission costs, as Jordan does not impose charges for CO₂ emissions. The following model is used:

$$\mathrm{T}\mathrm{C}\mathrm{O}={\mathrm{I}\mathrm{P}\mathrm{C}}_{\mathrm{i}}+{\sum }_{\mathrm{i}=0}^{\mathrm{N}}({\mathrm{M}\mathrm{C}}_{\mathrm{i}}+{\mathrm{I}\mathrm{C}}_{\mathrm{i}+}{\mathrm{F}\mathrm{C}}_{\mathrm{i}})$$

(1)

IPC_i: initial purchase cost, including registration and taxes/fees in year zero (at the beginning).

MC_i: Maintenance cost in year i.

FC_i: Fuel cost in year i.

IC_i: Insurance fees in year i.

i: Year index, ranging from 0 to N.

4.1. Initial Costs, Taxes and Government Incentives

Customs duties on vehicles in Jordan are determined by factors such as the year of manufacture, engine category, and applicable rates. For conventional vehicles, those manufactures in their first year are subject to a 7% customs duty rate, in addition to a 68% sales tax. Meanwhile, electric vehicles (EVs) benefit from a significantly reduced tax structure, with a 4% tax based on the vehicle’s value and a standard 25% sales tax (https://www.alfarescargo.com/car-customs-in-jordan, accessed on 24 February 2024). This differential taxation exemplifies the government’s strategic use of incentives to encourage the adoption of environmentally friendly vehicles, ensuring that EVs are more economically viable and accessible compared to ICEVs.

For comparison, we divided cars into three categories in this study: luxury, mid-range, and affordable. Both conventional and electric vehicles are included in each category. We choose vehicles with similar specifications in each category and their initial prices are very close. The sale taxes, customs duty, vehicle’s value taxes, vehicles total prices after taxes and fees for each type are broken down in detail in

Table 1. Vehicle types, associated taxes and fees, and total prices including taxes and fees.

	Affordable		Mid-Range		Luxury
	EV	ICEV	EV	ICEV	EV	ICEV
Vehicle Type	Changan V3	Hyundai i10	BYD QIN	KIA Cerato	Tesla Model 3	Mercedes-Benz C Class
Sale taxes	25%	68%	25%	68%	25%	68%
Customs duty	0	7%	0	7%	0	7%
Vehicle’s value taxes	4%	0	4%	0	4%	0
Vehicles prices after taxes and fees	USD 14,947 (https://jordan.hatla2ee.com/en/car/price/changan, accessed on 24 February 2024)	USD 14,799.34 (https://arawheels.com/en-auto-price/76585/hyundai-grand-i10-2024-price-in-Jordan/, accessed on 24 February 2024)	USD 28,047 (https://jo.motory.com/en/new-cars/byd/2024/, accessed on 24 February 2024)	USD 29,540 (https://jordan.hatla2ee.com/en/new-car/kia/cerato, accessed on 24 February 2024)	USD 54,923 (https://jo.motory.com/en/news/new-tesla-model-3-price-in-jordan-15942/, accessed on 24 February 2024)	USD 57,440 (https://www.autogiz.com/jo/car-prices/mercedes-benz-c-class-cabriolet-80.php, accessed on 24 February 2024)

.

The data presented in the table below shows that the total purchase prices of EVs, inclusive of taxes and fees, are consistently lower across all three categories when compared to their conventional internal combustion engine (ICE) counterparts. This price advantage can be attributed to the reduced tax burdens and the substantial financial incentives implemented by the government to promote the adoption of electric vehicles in Jordan.

4.2. Fuel Costs

The fuel cost for charging the electric vehicles and conventional vehicles can be calculated using the following equations, respectively:

$$\mathrm{FC} (\mathrm{EV})={\displaystyle \frac{EV consumption(\frac{\mathrm{k}\mathrm{W}\mathrm{h}}{100 \mathrm{k}\mathrm{m}})\times Annual Milage\left(\frac{\mathrm{k}\mathrm{m}}{\mathrm{y}\mathrm{e}\mathrm{a}\mathrm{r}}\right)\times Cost of Charging(\frac{\mathrm{\$}}{\mathrm{k}\mathrm{W}\mathrm{h}})}{100}}$$

(2)

$$\mathrm{FC} (\mathrm{ICEV})={\displaystyle \frac{ICEV consumption(\frac{Litre}{100 \mathrm{k}\mathrm{m}})\times Annual Milage\left(\frac{\mathrm{k}\mathrm{m}}{\mathrm{y}\mathrm{e}\mathrm{a}\mathrm{r}}\right)\times Cost of Charging(\frac{\mathrm{\$}}{100 \mathrm{k}\mathrm{m}})}{100}}$$

(3)

The residential electricity price in Jordan is USD 0.094 per kWh, while the current gasoline price in Jordan is USD 1.55 per liter (Source: Ministry of Energy and Mineral Resources [39]). The average daily driving distance in the Middle East is 32 km [40], so the annual drive distance is calculated to be 11,520 km and the total number of years of ownership is estimated as five. All the data are presented in

Table 2. Fuel cost and independent variables.

Independent Variable
Electricity cost in household	USD 0.094/kwh
Gasoline cost (as of Jan-2025)	1.55 per litre
Drive distance/Year	11,520 km
Total years of ownership	5

.

It is reported that the efficiency and electricity consumption of EVs are influenced by factors such as vehicle mass, powertrain efficiency, aerodynamic drag, and rolling resistance. Similarly, these factors also affect the fuel consumption of conventional ICEVs [41]. At this stage, the energy consumption values for both electric and conventional vehicles are standardized. Specifically, the consumption rates are established at 13 kWh/100 km for EVs and 7.0 L/100 km for ICEVs [42].

4.3. Maintenance Cost

EVs generally require less frequent maintenance compared to ICEVs due to their regenerative braking systems and simpler mechanical design with fewer moving parts, which might lower the maintenance costs of EVs when compared to the ICEV [25].

Table 3. Maintenance costs for different vehicle types.

	Affordable		Mid-Range		Luxury
	EV	ICEV	EV	ICEV	EV	ICEV
Vehicle Type	Changan	KIA Picanto	BYD QIN	KIA Cerato	Tesla Model 3	Mercedes-Benz C Class
Maintenance cost	136.13 (https://www.yallamotor.com/news/understanding-the-maintenance-costs-of-changan-cars-28286?utm_campaign=nabdapp.com&utm_medium=referral&utm_source=nabdapp.com&ocid=Nabd_App, accessed on 24 February 2024)	USD 413.80 (https://henryman.net/2024/03/24/2024-kia-picanto-review/, accessed on 24 February 2024)	165 (http://mycar.com.au/servicing/byd-car-servicing#:~:text=With%20BYD%20Car%20Servicing%20your,enjoy%20fixed%20price%20car%20servicing, accessed on 24 February 2024)	304 (https://caredge.com/kia/maintenance, accessed on 24 February 2024)	257 (https://caredge.com/tesla/model-3/maintenance, accessed on 24 February 2024)	253 (https://www.edmunds.com/mercedes-benz/c-class/2024/cost-to-own/?style=402029270, accessed on 24 February 2024)

shows the maintenance costs for the different vehicle types. It is important to note that EV batteries may maintain their performance well beyond 20 years [43]; hence, the cost of replacing the batteries is not considered.

4.4. Insurance Cost

Mandatory Third-Party Liability Insurance in Jordan covers legal liabilities for damages caused by vehicle use, enforced by law and regulated through the Jordan Insurance Federation. It features standardized pricing and liability limits, set at USD 129.73 for all types of vehicles [44].

5. Results

The results of the TCO for EVs and ICEVs across three market segments (affordable, mid-range, and luxury) are shown in Figure 1. The results present significant insights into the economic competitiveness of EVs, where government incentives play a critical role. These incentives include lower sale taxes (25% for EVs vs. 68% for ICEVs), exemption from customs duties (0% for EVs vs. 7% for ICEVs), and a 4% vehicle value tax applied exclusively to EVs. These measures effectively offset the higher initial costs of EVs, making their post-tax prices highly competitive, particularly in the affordable and mid-range segments.

5.1. Sensitivity Analysis

A sensitivity analysis is conducted to investigate the potential effects of some parameters on the final outcome, sensitivity analysis. Annual mileage and fuel prices are among the most important variables that have a large impact on the replacement policy

5.2. Annual Mileage

In this section, we compared the total cost of ownership for EVs and ICEVs based on three scenarios, each with different mileage; low mileage—7000 km/annually; medium mileage—11,520 km/annually; and high mileage—17,000 km/annually, respectively. Figure 2 shows distinct trends across the scenarios. The ICEVs (affordable, mid-range, and luxury) show a significant increase in TCO, particularly in Scenario 3 (high mileage—17,000 km/annually, indicating a strong impact from the high mileage. Meanwhile, the EVs (affordable, mid-range, and luxury) remain relatively stable, showing only minor fluctuations. Luxury conventional vehicles exhibit the most drastic increase, suggesting that they are the most sensitive to the high annual mileage.

5.3. Fuel Prices

In this section, we investigated the impact of gasoline and electricity price variations on the total cost of ownership for EVs and ICEVs across three vehicle categories: affordable, mid-range, and luxury. The results indicate that EVs are more resilient to energy price changes, with their TCO remaining relatively stable across different electricity price scenarios. In contrast, the TCO for ICEVs increases significantly with higher fuel prices, particularly in the affordable and mid-range categories. These results demonstrate the economic benefits of EVs, particularly in regions where fuel costs are unstable or high like Jordan and emphasize how they have the ability to accelerate the shift toward environmentally friendly modes of transportation. The results are illustrated in Figure 3.

6. Conclusions

Sustainability has become a central concern for developing countries as they pursue economic growth while taking into account social well-being and environmental considerations. In recent years, electric vehicles (EVs) have emerged as a promising solution for achieving sustainability goals. The primary objective of this analysis is to evaluate whether EVs can be competitive with ICEVs for everyday use over a multi-year period. Through an examination of Jordan’s regulatory structure, we show that specific incentives like lower sales taxes, customs duty exemptions, and a vehicle value tax only applicable to EVs effectively counteract the higher initial costs of EVs, making them competitively priced, especially in the affordable and mid-range segments.

The sensitivity analysis results clearly demonstrate that EVs are more resilient to different annual milage and energy price changes and offer significant cost advantages over ICEVs, particularly in the affordable and mid-range categories. These results are consistent with international initiatives to encourage environmentally friendly transportation modes and lower greenhouse gas emissions.

While the sensitivity analysis showed how the key variables impact the total cost of ownership, practical implementation of EV policies in Jordan may face institutional barriers, such as stakeholders’ conflicts, leading to slow policy coordination and inadequate enforcement strategies. Moreover, long-term sustainability in Jordan depends not only on maintaining financial incentives but also on addressing the infrastructural demands of EV adoption, including public charging stations and battery disposal.

One of the limitations of this study is its consumer-oriented perspective in estimating the TCO of a vehicle. The analysis focuses only on the costs incurred by the vehicle owner, thereby excluding societal costs, such as taxes on greenhouse gas (GHG) emissions and air pollution. In addition, this study focused exclusively on passenger vehicles, excluding light-duty vehicles and trucks. Investigating these vehicle categories could be a valuable direction for future research. Moreover, salvage value was excluded due to the long vehicle usage duration in Jordan and high uncertainty in resale value estimation, particularly in EVs; future research will consider its integration as market data becomes more stable. In addition to marker-related factors, future research could also investigate how price and usage factors affect the purchasing decisions of various driver demographics in Jordan.