ICCT study finds state EV incentives playing a significant role in driving sales
31 October 2014
A study by a team from the International Council on Clean Transportation (ICCT) shows that state electric vehicle incentives are playing a significant early role in reducing the effective cost of ownership and driving electric vehicle sales.
As described in their white paper, “Evaluation of state-level US electric vehicle incentives”, the researchers found that some of the states with the largest electric vehicle incentives—i.e., California, Georgia, Hawaii, Oregon, and Washington—have electric vehicle sales shares that are approximately 2–4 times the national average. A statistical regression revealed that the total monetary benefit to consumers from state incentives significantly positively correlates with BEV sales when all 50 states and the District of Columbia are included.
These findings suggest that future state efforts to incentivize BEV sales through incentives that substantially drive down the total cost of owning and operating electric vehicles are likely to be effective.—Jin et al.
Other major findings of their study included:
Some types of incentives appear to be more effective in driving electric vehicle sales than others. A stepwise regression analysis shows that the most effective incentives are subsidies; carpool lane access; and emissions testing exemptions initiatives. In addition, a basic benefit-to-cost analysis that compares incentives’ benefits to consumers to state spending shows that public charger availability is an especially cost-effective incentive for BEV owners, and carpool lane access is cost effective for electric vehicle owners.
Further research is needed to more deeply analyze the impact of other factors on electric vehicle sales. Many factors remain outside the scope of this state-level assessment, the researchers said. Examples of electric vehicle promotion actions not included in the study were those related to R&D programs; fleet-specific policy; vehicle regulations; low-carbon fuel policy; zero emission vehicle requirements; as well as incentives offered by cities, utilities, workplaces, automakers, and insurance companies.
Tracking how the level of automaker marketing activity or the limited geographic electric vehicle roll-out strategies play a role in connecting policy actions to market uptake of the new technology is also a key unexplored question. The current study does not include how technology costs could decline with battery innovation, greater mass-market economies of scale, or other technical factors. Further study on these factors may help explain how some cities and states are more or less effective at accelerating electric vehicle adoption in the future.
The study compared the total monetary benefit available to consumers through US state incentives to electric vehicle sales in those states in 2013. To compare quantitatively the total benefit for electric vehicle consumers offered by different states, the study introduced a methodology to monetize the major direct and indirect incentives.
This new study builds on a previous ICCT study that suggested fiscal incentives could potentially be driving electric vehicle sales on a national level when comparing countries around the globe but did not include the value of sub-national level and indirect incentives to consumers. (Earlier post.)
The ICCT team first monetized the direct incentives by evaluating the effective benefit available to consumers—e.g., if a state covers 50% of the cost of a home charger installation, the effective benefit is equal to half the cost of a typical home charger. Second, the monetized indirect incentives based on the type of benefit provided to consumers—assumed to be time savings for HOV lane access and emissions testing exemptions and avoidance of rental car cost for public charger availability. They calculated benefits over the duration of ownership of the vehicle, assumed to be six years based on the average length of time a new vehicle is retained by the purchaser.
Purchase subsidies, home Level 2 charger subsidies and one-time registration fee reductions were all assumed to be upfront benefits, with the value of the benefit realized at the time of purchase. Benefits from annual registration fees, annual license fees, annual or biennial emission test fees, free parking, HOV lane access, and the value of public charger availability were summed over a period of six years, assuming a discount rate of 5% per year for future-year benefits.
They did not discount the value of free electricity at public Level 2 chargers as they assumed that electricity prices increase over time at a rate comparable to the discount rate (actual electricity rate increases have been 1.4% to 3.1% per year in recent years.
The sales dataset was purchased from IHS, and included electric vehicle regulations by make and model in each state in 2013. The ICCT authors assumed new vehicle registrations as being approximately equivalent to, and synonymous with, vehicle sales over 2013.
Comparing California and states with little EV incentives or sales also helps illustrate the effect of total electric vehicle incentives on sales. California offers an assortment of different benefit types, ranking #3 in the total incentive benefit offered to consumers for BEVs and #4 for PHEVs, and it has the highest electric vehicle sales and sales share overall. Subsidies and HOV lane access, two major incentives offered in California, have a higher benefit-cost ratio than some other incentives. In addition, California’s Zero Emission Vehicle (ZEV) program requires that an increasing share of auto sales be electric vehicles in that state and this, as well as similar programs in other ZEV-adopting states, is not included in this analysis. The ZEV program clearly contributes to automakers’ deployment and marketing efforts. On the other hand, Mississippi, Oklahoma, North Dakota, and Wyoming are examples of states offering nearly no benefits to electric vehicle owners, and have nearly no EV sales. Whereas California has over 2.4% combined PHEV and BEV sales share, these four low-EV-incentive states each have less than 0.08% combined PHEV and BEV sales share.
Overall, the total monetary benefit to consumers of state incentives is significantly correlated with BEV sales in 2013. In other words, these incentives are effective at driving BEV sales. While the federal tax credit of $7,500 per vehicle may be thought to be the major factor in consumer decision making in the U.S., our analysis shows that adding up the value of all state incentives together can nearly approach this value for the states that are offering the highest incentives for electric vehicles. Based on this analysis, these suites of state-level incentives are impacting BEV sales. These results suggest that state electric vehicle incentives are playing a significant early role in reducing the effective cost of ownership and driving electric vehicle sales.
…we emphasize that caution should be taken in interpreting these results of the effectiveness of different incentives before additional research is conducted. This analysis only considered the benefits to consumers we were able to approximately monetize. The total benefit to society of promoting electric vehicles is much higher, as electric vehicles reduce negative externalities that are associated with conventional vehicles’ impacts on local air pollution, contribution to climate change, and consumption of petroleum.—Jin et al.
Lingzhi Jin, Stephanie Searle, and Nic Lutsey (2014) “Evaluation of state-level U.S. electric vehicle incentives”
The so called Federal Credit of $7,500 is not a credit unless you make enough money to offset $7,500 of paid taxes; it is biased against lower-income middle-class Americans. It should be a credit period; not dependent on taxes due or paid. Did the Republicans have to do with this?
Posted by: Lad | 31 October 2014 at 03:56 PM
They needed a study to figure out that incentives have an impact? I hope the states and feds did at least a preliminary study to figure out the sweet point of incentives before handing them out.
Posted by: TM | 31 October 2014 at 04:18 PM
The Republicans always bargain for concessions if they can not kill it outright. The Democrats have been pushing for an upfront rebate so you walk out of the showroom paying less money, the Republicans have blocked that for years.
Posted by: SJC | 31 October 2014 at 05:00 PM
There may be a better way to do it.
Since the asverage gas guzzler emits between 5 and 10 tons of GHG a year VS zero to one ton for equivalent electrified vehicles, why not:
1. Charge a GHG fee @ $100/ton of GHG emitted a year for all vehicles. This could become a monthly registration fee.
2. Credit EV owners with negative fees for GHG not emitted i.e $100 x 7.5 Tons/year = $750 a year. Could become a monthly or yearly pay out. It would be more than enough to pay for the electricity used and most of he insurance cost.
EV users would get a minimum of $7,500 over 10 years or $15,000 over 20 years. PHEV users would get a bit (25% to 50%) less. Sellers could accept these pay back as car payments.
ICEV users would pay an average of $7,500 over 10 years and $15,000 over 20 years. HEV users would pay half as much.
The programme would be budget neutral over 20 years but could be highly profitable during the first 10 years due to the large ICEV fleet.
Posted by: HarveyD | 01 November 2014 at 08:21 AM
From a practical standpoint, most consumers don't want to pay too much for a car. It really is that simple.
I'd love a Volt or Tesla. When the Volt first came out, I drove it, loved it, and looked into purchase. Financing $50,000 for what is in essence, a compact car, made zero sense. Even with the incentive. I'd still be subject to a massive car payment. $1041 per month, zero down, 0% interest rate, 48 months. NO THANK YOU> I'll purchase 3ea. Toyota Yaris, or 2ea. Toyota Prius.
Posted by: cujet | 01 November 2014 at 09:20 AM
That is exactly why a smart malus-bonus program is required to level the playing field.
Posted by: HarveyD | 01 November 2014 at 02:54 PM
This bias/unfairness discussed above is a shameless extension of the old, Republican idea that any tax rebates should go only to those who pay taxes.
There are many such outdated philosophies that cry for federally funded behavioral modification.
To name a few:
• Scholarships are awarded to the best students (a carryover from those dark days when high grades were awarded to the best students).
• Highest pay and promotions are awarded to the best workers (only bigots would say “to the hardest workers”).
• The best housing is awarded to those with access to the the most money.
Now the Canadians are claiming that rebates cost between 4 and 60 times as much as alternate methods of carbon reduction. This study was from the academics at the University of British Columbia. One can only wonder how much more biased it would be, were it written by other than government employees.
And since their inception in 1999, hybrid vehicles (and EVs) have saved almost one week’s worth of auto fuel usage.
See: http://4dlab.info/electric-vehicles/electric-vehicles-fuel-savings-from-hybrid-electric-vehicles.pdf 
Then there is the oft overlooked benefit to battery technology:
Over the last 15 years, since hybrid cars first hit the market, advances in battery technology have been truly noticeable.
Posted by: ToppaTom | 01 November 2014 at 04:20 PM
A recent (1929/1930) man made event drastically changed the behavior of about 80% of people living in industrialized countries. It could happen again.
The arrival of the $275 Ford-T, farm tractors, farm machinery, trucks, buses, airplanes, the IBM PC, Apple high performance mobile phones and many other technologies changed behavior in most countries in less one generation or in less than 3 decades.
The arrival of practical, affordable, extended range, autonomous drive BEVs and FCEVs will also provoke a similar change in human behavior and environment.
The arrival of much lower cost distributed REs with energy storage will also become another behavior changer.
Technologies and general evolution will not stop to please right wing politicians.
Posted by: HarveyD | 02 November 2014 at 08:23 AM
As to predicting what will arrive to provoke a change in human behavior, even Dr. Seuss knew the foolishness of this when he said;
“Fantasy is a necessary ingredient in living, it's a way of looking at life through the wrong end of a telescope, and that enables you to laugh at life's realities.”
As for blaming a specific group for our presently fouled up government and its inability to force people to use presently non-viable alternatives to burning all the world’s oil, Robert Heinlein said;
“Political tags - such as royalist, communist, democrat, populist, fascist, liberal, conservative, and so forth - are never basic criteria. The human race divides politically into those who want people to be controlled and those who have no such desire.”
Posted by: ToppaTom | 03 November 2014 at 12:19 AM
Cujet, times have changed. A new 2014 Volt can be had for as little as $179 month, with the down payment covered by the rebate check (not year end tax credit) in some states.
Nine EVs or PHEVS are available for $199/month or less. Nine! Considering gas savings, these are practically free cars.
Electric Car Insider has full write-ups of the details on all these cars in our print EV Buyers Guide magazine. It's available on the newsstand or at a discount on our Kickstarter page.
Search kickstarter.com for electric car insider.
Posted by: electric-car-insider.com | 03 November 2014 at 08:05 AM
The net amount owing on a Volt after the incentives has to be somewhere in the mid twenties so payments of $180 per month would take close to 12 years just to cover the principal without considering the interest. So you are either stuck with the car or for a decade and a half or you face a huge buyout. Better to buy a used volt whose price reflects the incentive.
This lease scheme sounds like another quality product from the folks who brought you sub-prime mortgages.
Posted by: Calgarygary | 03 November 2014 at 10:54 AM
electric-car-insider; times have changed.
A gallon of gas costs less than $2.70.
And the Volt and the Tesla are the sad results of government incentives.
Sales of EVs (electric and hybrid cars) have stalled, capturing just 3.6% of the market (per Edmunds.com) after 15 years.
This is in spite of unwavering (albeit involuntary) financial support, by me, through rebates, credits and incentives.
At enormous cost to the taxpayers, EVs have had little effect.
They have slightly reduced the improvements auto makers must make in ICE efficiency to meet CAFÉ, thus perpetuating the dominance of the ICE.
I am in favor of advanced automotive technology, especially EVs, but I object to the costly ideological government meddling that is screwing things up.
Let science, engineering and the market place continue to make the US the world’s leader.
Posted by: ToppaTom | 04 November 2014 at 03:49 AM
There is a world of difference between engineering-science and market place.
The first two try to make better things while the third group want to capture more market share with lower Dollar Stores, Walmart, Target, McDonald, Burger King style prices.
Some ultra light weight re-enforced plastic future electrified vehicles may fall in the third group by 2040 or so.
Posted by: HarveyD | 04 November 2014 at 09:33 AM
"Earlier this week Representative Dave Camp (R-MI), Chairman of the House Committee on Ways and Means, released the Tax Reform Act of 2014. This proposal would make sweeping changes to a very long and complex U.S. tax code. Included in the proposal was a provision to repeal the tax credit for new qualified plug-in electric drive motor vehicles, known as Internal Revenue Code Section 30D or IRC 30D. Or as most of us know it “the $7,500 EV credit.”
It seems to be fine to spend $300 million on an F35 fighter but not $3 million for cleaner air and less imported oil.
Posted by: SJC | 04 November 2014 at 10:54 AM
When you say; "[Science and engineering] try to make better things while the third group want to capture more market share with lower Dollar Stores, Wal-Mart, Target, McDonald, Burger King style prices." I assume you meant to say you are NOT actually in favor of "better things" at lower prices, but were unable to express yourself.
I work in the aerospace industry, but agree that defense spending may be too big. But one of or THE prime roles of government is to provide for the common defense.
And spending the taxpayer's money for the F35 accomplishes this well.
It also ensures our rights to Life, Liberty and the pursuit of Happiness.
Money for Hybrids “gives” (rather than allows the pursuit of) happiness to the fiscally challenged and provides negligible reduction in global pollution.
Oh; and fracking is what provides “less imported oil”
Posted by: ToppaTom | 04 November 2014 at 09:46 PM
Too many posters ccnfuse quality goods, food and services (for people who can afford them) with cheap stuff from chain stores and low cost junk food from you know where (for the other 90+% who can no longer afford better quality).
A recent extreme are $300+ million F-35 small planes to try to win current and future oil and religious wars.
Another foolishness are thousands of $1+ million super Jeeps given away as USA's troops pull out and found in the hands of djihadists a few months latter.
USA may be better off pulling out from costly endless oil and religious wars and spending the equivalent resources at home on H2 and electrified vehicles, e-charging and H2 national networks and clean REs and NGPPs to replace the 400+ older CPPs.
Posted by: HarveyD | 07 November 2014 at 09:04 AM
A few posters confuse high prices with value. They typically buy coffee at Starbucks instead of McDonald’s.
Don’t be jealous of those who buy a BMW or MB instead of a Ford or Toyota; they pursue status, not value.
If you simplistically think you get what you pay for, Elon will sell you a Tesla for over 100 grand and you can buy gas for ~$4/g (Av-gas) at the airport.
Don’t let those soulless oil companies and our free enterprise system seduce you into cheap gas.
Posted by: ToppaTom | 10 November 2014 at 05:38 PM
It's hard to tell what effect ToppaTom is aiming for, but his comments have convinced me for one that Fox News is a socialist propaganda channel. Great job, Tom!
On the i3 being fugly compared to the Volt, so were Picasso's nudes compared to Raphael's, and the 1957 Holden FE compared to the Holden FJ, at least for those who'd never seen an FE-type grille before 1957.
Posted by: Celeste Deligne | 15 February 2015 at 08:43 PM