Direct purchase subsidies and their impact on electric vehicle adoption in European countries

This study examines the causal effect of direct purchase subsidies on electric vehicle market share in 30 European countries from 2014 to 2024. Employing a quasi-experimental difference-in-differences approach, the research reveals a significant heterogeneity in the effectiveness of these public finance instruments. On a Europe-wide average, subsidies act as a positive stimulus, increasing new registrations by 112.5%, with the impact progressively strengthening over a three-year horizon. Aggregately, this support expands both battery electric vehicle and plug-in hybrid electric vehicle sales. Crucially, distinct regional differences exist. Subsidies exhibit no statistically distinguishable average effect in original member states (EU-15), a pattern consistent with the possibility of lower additionality in more mature markets. Conversely, they serve as a primary driving factor in the new member states (EU-13), triggering an average registration increase of 244.1%. Furthermore, analysis by recipient type shows that subsidies expand total registrations by 235.3% for private and 129.4% for corporate buyers. Specifically, the impact on battery electric vehicles peaks in the second year, reaching a 339.3% increase for private and a 235.8% increase for corporate buyers, while private incentives drive a 250.6% surge in plug-in hybrids by the third year. Sub-analyses based on policy design frameworks reveal that the split into capped and uncapped subsidy regimes yields statistically inconclusive results within regional sub-samples. These findings suggest that future policy designs should consider geographical differentiation and the role of recipient eligibility and price ceilings; however, the evidence on cap-related heterogeneity remains statistically inconclusive within regional sub-samples.