The Effect of Zero-Emission Vehicle Mandates and Changing Consumer Demand on Automaker Strategies and Sales
Decarbonizing transportation, a historically highly carbon-intensive market, poses a significant challenge. There has been extensive policy support for electric vehicles (EVs)—e.g., tax credits, zero-emission vehicle mandates, and fuel-economy standards with generous EV credits—but global sales of EVs have only recently hit substantive levels. In 2021, 8.3% of global new-vehicle sales were electric. Looking forward, projections have them rising fast, mostly based on aggressive government support and phase-out targets and the subsequent responses by automakers to invest heavily in EV technology and sales. For example, General Motors has announced it will sell only electric vehicles by 2035.
At the same time, drivers have become more accustomed to electric cars, and their tastes for electric vs. conventional vehicles have been shifting over time. The first part of this research project aims to quantify that trend. We also aim to explain where EVs are sold; Figure 1 illustrates that EV sales are much higher in certain counties than in others. Understanding the changing tastes for alternative vehicles in various locations is critical for examining the implications of multi-year vehicle policies for consumers, companies, and the environment. However, trends in preferences have not yet been explicitly incorporated into existing benefit-cost analysis.
The second part of this project is asking how zero-emission vehicle (ZEV) policies influence the car market. To answer that question, we need to investigate how consumers prefer vehicles of different characteristics (especially powertrain), how automakers set vehicle prices, and how automakers decide what vehicles to offer. After modeling consumer and producer behavior, we can then answer important questions about the cost and benefits of changing, adding, or removing EV policies, which should be of significant interest to the automotive sector and policymakers alike.
Arthur van Benthem
Associate Professor of Business Economics and Public PolicyArthur van Benthem is an expert in environmental and energy economics, exploring the economic efficiency of energy policy. He is a faculty fellow at the Kleinman Center and an associate professor of Business Economics and Public Policy at Wharton.
