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Interaction of Consumer Heterogeneity and Technological Progress in the US Electric Vehicle Market

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  • Ranjit R. Desai

    (National Renewable Energy Laboratory, 15013 Denver West Parkway, Golden, CO 80401, USA
    Ranjit R. Desai is with the National Renewable Energy Laboratory (NREL), Golden, CO, USA. This work was completed before R.R.D. joined NREL and was not funded by NREL or the U.S. Department of Energy.)

  • Eric Hittinger

    (Department of Public Policy, College of Liberal Arts, Rochester Institute of Technology, Rochester, NY 14623, USA)

  • Eric Williams

    (Golisano Institute for Sustainability, Rochester Institute of Technology, Rochester, NY 14623, USA)

Abstract

Electric Technology Vehicles (ETVs: hybrid, electric, and plug-in hybrid) may reach price parity with incumbent internal combustion vehicles (ICEVs) in the near future. Climate policy for transportation will depend on the degree to which consumers prefer ETVs, and price parity is a key factor. In this study, we explore the interaction between future cost reductions and the economically motivated adoption of ETVs. We construct a model of the U.S. personal vehicle market accounting for heterogenous use and vehicle preferences, in which adoption induces cost reductions that increase future market share. Model results indicate that price parity is reached for most consumers in a number of cost scenarios, but not with constant ICEV costs and modest ETV cost declines. A price parity future suggests that government support could be temporary and phased out after a successful market transition. However, if ETVs continue to be more expensive than ICEVs, then lasting government support is needed. Heterogeneity is essential to understanding the market transition: treating consumers as heterogeneous results in an ETV market share 23% higher than assuming average consumers. Future work can clarify ETV support policy by resolving uncertainty in cost trajectories and modeling dynamic and heterogenous consumer markets.

Suggested Citation

  • Ranjit R. Desai & Eric Hittinger & Eric Williams, 2022. "Interaction of Consumer Heterogeneity and Technological Progress in the US Electric Vehicle Market," Energies, MDPI, vol. 15(13), pages 1-25, June.
    • Handle: RePEc:gam:jeners:v:15:y:2022:i:13:p:4722-:d:850258
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