Effectiveness and efficiency of incentivizing policies for new energy vehicles: From the perspective of powertrain type

With increasing pressure on global resources and environment, governments worldwide, including those in China, the USA, and the EU, have implemented numerous policies to promote the adoption of new energy vehicles (NEVs). However, the effectiveness and efficiency of these policies remain ambiguous; this is particularly the case given the diverse utilities and externalities associated with different vehicle powertrain types. In this context, this paper systematically analyzes China’s NEV incentives from the powertrain type perspective, utilizing structural demand estimation across Chinese municipalities from 2020 to 2023. It also quantifies consumers’ willingness to pay for NEVs and the induced welfare under counterfactual policy schemes. The findings suggest that while the incentives for battery electric vehicles (BEVs), plug-in hybrid (PHEVs), and range extended electric vehicles (REEVs) are all effective, the welfare gains cannot offset the promotion cost, leading to a net social welfare loss. It implies that incentive schemes should be tailored by powertrain type for efficiency: to maximize NEV adoption, uniform policies should be implemented across all NEV types; however, to minimize welfare losses, purchase-phase monetary subsidies and usage-phase incentives should target at BEVs, while only usage-phase incentives should be retained to PHEVs and REEVs.