What Does an Electric Vehicle Replace? Consumer Demand for Gasoline - - PowerPoint PPT Presentation

What Does an Electric Vehicle Replace?

Consumer Demand for Gasoline and Electric Vehicles

Benjamin Leard with Jerry Xing and Shanjun Li

Electric Vehicle Sales

September 2019 electric vehicle (EV) sales: ~33,000 out of 1.5 million light- duty sales (2.2% market share) Why is the market share for EVs so small?

• EVs have limited driving range. Popular EV options have ~250 miles of

range (about ½ of gas options).

• They are expensive.

2018 Ford Focus: $17,950 2018 Ford Focus Electric: $29,120 Range: 500 miles Range: 115 miles

Effectiveness of EV Subsidies

The U.S. has an EV federal income tax credit of $7,500 to stimulate EV adoption and reduce greenhouse gas emissions (GHGs). GHG emissions reductions from EV adoption = The difference between replacement vehicle emissions and EV emissions Subsidy dollars per ton of emissions reductions depends on which types of vehicles EVs are replacing. Tesla Model 3: 150 grams of CO2/mile Ford F150: 423 grams of CO2/mile Toyota Prius: 171 grams of CO2/mile

21 grams of CO2/mile saved 273 grams of CO2/mile saved

Our Approach

We estimate a vehicle choice model using unique household survey data to identify these substitution patterns and to estimate the cost effectiveness of the federal subsidy.

MaritzCX Data

• 200,000 household per year survey of recent new vehicle

buyers, 2012-2014

• Includes “second choice” information on vehicles that

buyers considered in addition to the vehicle they purchased

• Suggests disproportional substitution from EV to hybrid

Results

EVs replace relatively fuel efficient vehicles.

• Replacement vehicles have fuel economy that is 4.2 miles per gallon above

fleet-wide average.

• 12% of replacement vehicles are hybrids (compared to ~3% hybrid market

share). The federal tax credit is regressive and is an expensive way to reduce GHG emissions.

• The credit increases EV sales by 29%.
• Dollars per ton of GHG emissions reductions: $552
• Within the range of recent literature estimates: $340–$650 (Gillingham

and Stock 2018)

• A much cheaper option in the transport sector is raising the federal

gasoline tax ($18–$47 per ton).

Alternative Subsidy Designs

Can alternative subsidy designs be more cost effective?

• The federal subsidy is the same for all buyers.
• California’s Clean Vehicle Rebate Project is a subsidy that varies by

household income.

• We find that varying the federal subsidy by income, where lower income

households are offered a higher subsidy, makes the subsidy progressive and more cost effective.

• Dollars per ton of GHG emissions reductions: $484 (about 10% more

cost effective than uniform subsidy)

• This opens the possibility that further differentiation – such as by vehicle

segment (e.g., sedan vs. SUV) – can improve cost effectiveness.

Evolution of the EV market

The EV market has changed since our sample period. The Chevrolet Bolt and the Tesla Model 3 have entered the affordable car segment where buyers tend to be more price sensitive than buyers in luxury segments. The $7,500 credit generates more sales as buyers become more price sensitive. The new vehicle market still has few EV options in segments with high- emission vehicles (no pickup truck option). Future expansion of the EV market to affordable SUV and pickup truck segments will increase effectiveness of EV subsidies. Sales Increase Cost Per Ton 2014 Benchmark (price elasticity = -2.67) 29% $552 Greater price sensitivity (price elasticity = -4) 42% $418

Thank you!

Extra slides

Vehicle Segment Gasoline Models PHEV Models BEV Models Market Share (Q4 2018) Convertible 47 1 0.5 Coupe 63 3 1.6 Hatchback 44 3 7 3.5 Sedan 116 8 4 22.2 Station Wagon 20 1 1.4 Pickup Truck 22 18.2 SUV 122 5 4 49.5 Van 18 1 3.1 Total 452 17 20 100

Looking Ahead

• Gasoline vehicles are becoming

more fuel efficient as fuel economy standards tighten implies fewer emissions reductions from EV adoption.

• Electricity sector emissions are

declining implies more emissions reductions from EV adoption. How will emissions savings from EVs change in the future?

Source: EPA (2019) Source: EIA (2018)

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Historical and Projected Electric Vehicle Sales

Source: AEO (2019) 1 2 3 2010 2020 2030 2040 2050 New vehicle sales of electric vehicles (Reference case) millions of vehicles total battery electric 300 mile EV hybrid electric 200 mile EV plug-in hybrid 100 mile EV 2018 history projections

Current light-duty Vehicle sales = 17 million Projected sales suggest we have a long time (20 years) before electric vehicles (EVs) get 10% market share.

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Historical and Projected GHG Emissions

35 40 45 50 55 60 65 70 75 1990 2000 2010 2020 2030 2040 2050 transportation commercial residential industrial electric power Carbon dioxide intensity by end-use sector (Reference case) metric tons of carbon dioxide per billion British thermal units 2018 history projections

Source: AEO (2019)

1990 2000 2010 2020 2030 2040 2050 Carbon dioxide intensity by end-use sector (Reference case) metric tons of carbon dioxide per billion British thermal units 2018 history projections The electric power sector is redistributed to each end-use sector