Driving the Electric Transition: Examining the Interaction of Financial Incentives and Electric Vehicle Prices And its Effect on Electric Vehicle Adoption

Undergraduate Honors Thesis

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Citeable URL: https://scholar.colorado.edu/concern/undergraduate_honors_theses/9g54xk00h

Abstract

Many states implement financial incentives in the form of tax credits and rebates in order to promote public adoption of battery-electric vehicles (BEVs). I use regression on a multi-state panel data set of yearly vehicle registrations, state-level financial incentives, and vehicle MSRP data to ascertain the effect of the interaction between state incentive value and vehicle MSRP on BEV registrations per capita. This analysis is done via a fixed-effects regression specification with the inclusion of an interaction term between incentive value and MSRP. I find that an increase in incentive value of $1000 results in approximately a 3.2% increase in BEV registrations at the sample median MSRP for BEVs, and that a $1000 increase in vehicle MSRP results in approximately an 8.2% decrease in BEV registrations at the sample median incentive value. I also find that the interaction between incentive value and MSRP has a negative relationship with BEV registrations, implying that consumer demand is generally more elastic to changes in MSRP than to changes in incentive value. Finally, I find that consumers of relatively less expensive BEVs are more elastic to changes in incentive values than customers of relatively more expansive BEVs.

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