Electric Vehicle Incentives and Subsidies: A Global Comparison

✍️ Opinions

Jeenal Jain

Oct 28, 2023 — 3 min read

Rohit Vadera, CEO, PURE EV - Electric Vehicle Incentives and Subsidies: A Global Comparison

This article has been contributed by Rohit Vadera, CEO, PURE EV.

Global electric vehicle (EV) markets today differ widely, shaped by different levels of policy support, corporate activity, consumer preference and awareness, driving patterns, and cultural specificities. The success of EVs is being driven by multiple factors. Sustained policy support is the main pillar. Public spending on subsidies and incentives for EVs nearly doubled in 2021 to nearly USD 30 billion.

A growing number of countries have pledged to phase out internal combustion engines or have significant vehicle electrification targets for the coming decades. The role of policy has been particularly significant in steering corporate strategy towards electrification and enabling consumer uptake.

Global Expansion of Incentives and Subsidies
EV Adaptation and Supply Chains
Incensing Demand for Light-Duty Vehicles
Purchase Incentives
Charging Infrastructure Incentives
Economically Effective Strategies/Subsidies for Consumers

Global Expansion of Incentives and Subsidies

In today’s major EV markets, including China, Europe, and the United States, early adoption was jump-started in many cases by policies to spur demand, such as vehicle purchase incentives. Direct incentives for carmakers were also used in China. Many of these countries and regions are now seeing EV markets maturing, for which sales shares are increasing rapidly. More developed markets, such as China and several European countries, are now progressively decreasing or phasing out incentive schemes for electric cars and shifting focus towards other segments, such as heavy transport and charging.

EV Adaptation and Supply Chains

Some global leaders in major markets have further increased their targets for EV adoption and are working to address other parts of EV supply chains, such as through policy support for vehicle and battery manufacturing and critical mineral supply chains. Many other countries outside the major markets have also started introducing policies to support EV adoption in recent years, for the first time in some cases.

Policies are also shifting towards electric vehicle supply equipment (EVSE), or charging, and currently, almost 80% of global EV sales (LDV and HDV) are covered by EVSE-related policy. Countries are increasingly dedicating funds to EVSE deployment, acknowledging that a lack of charging infrastructure can be a critical barrier to EV adoption.

Incensing Demand for Light-Duty Vehicles

As in recent years, most policies supporting EVs target the electric light-duty vehicle (LDV) segment, for which market maturity is most advanced and vehicle availability is greatest. In 2022, more than 90% of global sales of LDVs were covered by the policy that encourages EV uptake. Typical policies include fuel economy and pollutant standards; zero-emission vehicle mandates; economic and budgetary regulation for fuels and vehicles, such as through fiscal regimes and taxation; purchase incentives and subsidies; and bans on internal combustion engine (ICE)-only vehicles.

Purchase Incentives

Many countries offer direct financial incentives to reduce the upfront cost of purchasing an electric vehicle. These incentives may include tax credits, rebates, grants, or discounts on the purchase price. The amount varies widely and may be influenced by factors such as the EV's battery size, range, or purchase price.

Charging Infrastructure Incentives

Many countries invest in building a robust EV charging infrastructure by offering subsidies or grants to businesses and local governments that install charging stations. This helps alleviate "range anxiety" for potential EV buyers. Examples include, in Norway, the funding of EV charging points every 50km on the major roads. In Germany, some banks offer EV incentives of 10–30% for the installation of wall box chargers.

Economically Effective Strategies/Subsidies for Consumers

Understanding the diverse ways in which households consume energy is another key step in designing effective subsidy policies for a sustainable commute.

The findings could be helpful for implementing energy efficiency subsidy programs that target low-income households. For instance, they might be used to identify appliances low-income households are more likely to purchase as their economic situations improve. Policymakers can then develop subsidies to boost access to more energy-efficient options. Such policies would help these households sustain their economic gains while also supporting energy efficiency goals and cheaper commuting options.

Lucrative incentives and supportive policies are bolstering the growth of EV adoption worldwide. India recently launched FAME II to catapult EV adoption in India. Similarly, Europe and other developed countries have rolled out incentives and subsidies for EV purchases, manufacturing, and charging infrastructure. Subsidies on road tax and loans to purchase an EV are attracting consumers to adopt EVs. Government support through favorable policies supporting EVs has increased demand for EVs.