Analysis of local electric vehicle incentives in the Norwegian car market : a multi-homing approach

2016

This paper analyse how the local incentives for electric vehicles affect the number

of people that purchase both conventional and electric vehicles. After the threshold

of 50 000 electric vehicles was reached in April 2015, there has been an ongoing debate

regarding whether the incentives for electric vehicles should be withheld. The

intent of the incentives is to develop a more climate friendly vehicle fleet. Although

the incentives impact on joint purchase is important to understand how efficient the

incentives are in achieving the policy objective, we are not aware of any research

on this area up to this point. Our contribution is a theoretical model that allow

consumers to purchase multiple differentiated product varieties, a behavior defined

as multi-homing. The model predicts that multi-homing softens the competition

between electric and conventional vehicles and partially absorbs the demand shifting

effect of the incentives. Furthermore, we conduct empirical research on the car

market to analyse how the car market historically has reacted to the incentives. Our

findings coincide with the model's predictions at a satisfactory level. We find that

all incentives increase the number of multi-homers. While our estimations shows

that free ferry admission leads to an increased vehicle fleet, the introduction of toll

stations, congestion charge and road toll lead to a reduction in the overall vehicle

stock. The empirical results reveal that the incentives only seem to phase out sales of

conventional cars if they are derivatives of policy instruments with a negative effect

on the demand for conventional vehicles.