An empirical assessment of the impact of subsidies on EV adoption in China: A difference-in-differences approach

Abstract

It is widely recognized that electric vehicles (EVs) will play a crucial role in the electrification of transport, which is necessary for reaching a net-zero emissions economy. This recognition is reflected in the number of initiatives introduced worldwide to promote the EV industry, ranging from purchase subsidies to the provision of charging infrastructure and direct industry assistance. In this context, the Chinese government introduced a comprehensive program of government subsidies to support the sale of EVs. This paper estimates the impacts of these subsidies on EV sales in China using the difference-in-differences (DID) and propensity score matching (PSM) approach. Based on the panel data at city level from 2009 to 2018, we show that subsidies were the major contributor to the increase in EV sales. Our results suggest that the provision of infrastructure such as charging piles is also an important contributing factor. These findings are robust across model specifications and regression approaches. The heterogeneity analysis indicates that the treatment effect is heterogeneous across EV types, city sizes and regions. Our results provide empirical support for the current policy settings designed to promote EV sales in China.