The effect of transferable tax benefits on consumer intent to purchase an electric vehicle

While the U.S. government has offered tax incentives to purchase electric vehicles (EVs) for many years, a new provision of the law that takes effect on January 1, 2024, will allow consumers to transfer tax credits on the purchase of qualifying EVs to the vehicle dealer at the time of sale, rather than wait to claim these credits on their tax returns filed the following year. We provide experimental evidence on the efficacy of this new tax policy in motivating EV purchases. Our results suggest that implementing a transferable tax credit mechanism increases consumer intent to purchase EVs relative to current law, consistent with the U.S. federal policy goal of shifting demand towards EVs and away from gasoline-powered vehicles. Additionally, intent to purchase increases when consumers learn about the tax policy change from the government rather than from the vehicle dealer, consistent with source credibility effects. Finally, our results suggest that the new policy may be effective at drawing new consumers into the EV market, rather than affecting consumers who were already interested in buying EVs. Our findings have important implications for policymakers as they design and communicate this and other tax incentives intended to motivate demand for sustainable products.