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Free-Ridership in Subsidies for Company- and Private Electric Vehicles

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  • Burra, Lavan T.
  • Sommer, Stephan
  • Vance, Colin

Abstract

Consumer subsidies are commonly employed to incentivize the purchase of battery electric vehicles (BEVs), but free-ridership potentially undermines their effectiveness. The present study investigates BEV subsidies in Germany, distinguishing their effect between company- and private cars. Drawing on a panel of high-resolution car registration data, we use the estimates from a Poisson pseudo-maximum likelihood model to predict BEV registrations in the absence of the subsidy. We calculate aggregate free-rider rates of 19% for private cars and 43% for company cars. We further find that the cost of the subsidy per induced BEV among private consumers is €5,400, while it is €7,215 among companies. Overall, the estimates suggest that the subsidy is considerably less cost effective among company cars, which comprise 55% of new BEV sales.

Suggested Citation

  • Burra, Lavan T. & Sommer, Stephan & Vance, Colin, 2023. "Free-Ridership in Subsidies for Company- and Private Electric Vehicles," Ruhr Economic Papers 1015, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:1015
    DOI: 10.4419/96973181
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    More about this item

    Keywords

    Electric vehicles; consumer subsidy; company cars; free ridership;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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