Cross-price elasticities of demand on electric vehicles, by prices and taxes of gasoline vehicles

Abstract

The purpose of the thesis is to estimate the cross-price elasticities of demand on electric vehicles by gasoline vehicle taxes and gasoline prices in six different countries with electric vehicle markets. This is to examine whether a government’s incentives have any effect on the demand for electric vehicles, and if so by how much. The countries chosen are Sweden, Norway, Germany, USA, China and Japan where each country's demand and price changes during the time period 2016 - 2020 is studied. The investigation derives a logarithmic linear function that is applied in order to estimate the relevant elasticities from a panel data regression. The used data is on demand and prices of electric vehicles, prices of gasoline vehicles, prices of gasoline, taxes on gasoline vehicles and finally the GDP per capita in each of the countries. The demand of electric vehicles is the dependent variable which is divided into two datas; new registered electric vehicles per 100 000 capita and the market share of new registered electric vehicles compared to the total number of new registered light vehicles. The result shows that the demand of electric vehicles during the time period is mainly dependent on the gasoline vehicle prices and GDP per capita, whilst the other variables were examined to be non-significant. One explanation for the high insignificance in the study could be due to too few observations in the data set.