Analysis
13 Apr 19

EU – high incentives, high market uptake

As discussed here, EV incentives are crucial to stimulate the EV market. The situation is clear for the US and for China, but let's have a look at how EV incentives determine Europe's EV market.

The more incentives, the more EVs

“The market share of electrically-chargeable vehicles is only substantial in those countries which offer extensive (fiscal and non-fiscal) incentives,” concluded the European Automobile Manufacturers Association (ACEA) when researching the correlation of EV incentives in Europe and its market uptake. Which is remarkable since the incentives vary significantly between the various European countries and hence so does their EV market uptake. 

For instance, the Scandinavian countries are known as EV pioneers where a wide variety of incentives results in a high EV uptake. The EV market leader Norway, for instance, with a market share of nearly 40% (2017) has a wide array of incentives, such as purchase tax exemption for BEVs and FCEVs, and a reduced purchase tax for PHEVs (up to €10.000), and an additional exemption from VAT and import tax for BEVs and FCEVs.  

Poland, on the other hand, closes the row in the cited research, with a market share of almost zero (0.2%), due to its lack of incentives of any kind. The same applies to Lithuania and Estonia, where no incentives result in market shares of 0.2%. For Croatia there are even no data available, while there are no incentives neither. 

In general, the amount of incentives – and their monetary value – differs greatly across Europe, according to ACEA research. Moreover, in many of the new EU member states with a low ECV market share, the incentives merely consist of an exemption from the annual circulation tax. 

Yet, it must be said as well that some countries have a low EV market uptake despite the various EV incentives, such as Greece with a 0.2% market share of ECVs, despite the exemption from registration tax, luxury tax, luxury living tax and annual circulation tax. 

The higher the GDP, the higher share of EVs

Hence, the EV incentives might contribute to the market uptake, yet they cannot be the only explanatory factor. The ACEA has made another comparative analysis, in addition to the one of the EV incentives and concludes that there is a correlation between the GDP and EV market share as well. 

“The market share of ECVs is practically 0% in countries with a GDP below €18,000, including the new EU member states in Central and Eastern Europe but also crisis-torn Greece,” concludes the research. “By contrast, an ECV market share of above 1.8% only occurs in countries with a GDP per capita of more than €35,000.” This division explains why Norway is an EV leading country, while Poland lags behind. “Many people take the Norwegian market as a benchmark. But just like its €67,000 GDP, more than twice the EU average, Norway’s 39.3% ECV share is an exception in Europe.” In fact, half of all 28 EU member states have an ECV market share of 0.75% or lower.

As a result, ACEA observes a clear split between Central-Eastern Europe and Western Europe, and between Northern Europe and Southern Europe. As a result, the Scandinavians, located East and North are leading, while Italy, Greece (South) and Poland, Estonia among others (East) are closing the ranks. 

To incentivise or not?

Although GDP plays a high role and is often an overlooked factor in discussions around the EV uptake, EV incentives do definitely play a significant role as well. 

The European Environment Agency (EEA) sees a significant correlation between the promotion and incentivising of clean vehicles and their purchase. The study towards the different approaches used for taxation and incentives in 7 European countries found that consumers more readily purchase lower emission cars where sufficiently large and targeted taxes and incentives were in place. Here as well the study points to the leading position of Norway thanks to its high number of incentives (the highest in Europe) versus the low uptake in Poland due to its lack of incentives.

And thirdly… 

In addition, while the EEA study found out that most European countries had incentives for EVs, they found that only 11 countries had specific incentives in place to foster more charging facilities (2016). Yet, the lack of sufficient charging infrastructure is often quoted as the main reason to slow the EV uptake. 

Charging infrastructure can be seen as a third determining factor of EV market uptake. The Netherlands for instance, are on the 2nd place of the European EV market. CleanTechnica attributes their high share of EVs – 4.1% - to its strong financial incentives, not only for EVs, but for EV charging as well. “The EV charging policies of the Netherlands make the country best in the world for EV charging.”  

The deployment of EV charging points is part of the third contributing factor to the EV market uptake in Europe: the availability and readiness of the technology. This factor contains both the availability and access to the vehicles, in terms of variety and number of models, and to charging infrastructure. 

Hence, there can definitely be a line between the EV incentives and the EV market uptake, yet other factors such as economic and technological circumstances have to be taken into account as well. 

Read about how EV incentives influence the US and Chinese EV market as well. 

Authored by: Fien Van den steen
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