COVID-19 shock, fiscal subsidies, and consumption resilience of new energy vehicles: evidence from Shanghai, China

Abstract

New energy vehicles are regarded as an important measure for improving air quality, reducing oil dependence, fostering emerging industries, and promoting high-quality development. Since 2009, the Chinese government has been committed to promoting new energy vehicles through various policy measures, such as fiscal subsidies. Meanwhile, the outbreak of the COVID-19 pandemic at the end of 2019 has brought great impact on the economy and society. Thus, it is a topic of research to determine if the fiscal subsidy policy can assist new energy vehicles to resist the pandemic’s impact and build consumption resilience. Current researches lack enough attention to the role of fiscal subsidy policy in enhancing consumption resilience under the pandemic impact. By utilizing monthly sales data of new energy vehicles in Shanghai from January 2018 to February 2021, this study employs regression discontinuity (RD) analysis and the combination of the RD with the differences-in-differences (DID) model, to comprehensively evaluate the impact of the COVID-19 pandemic on new energy vehicle consumption and the effectiveness of fiscal subsidy policies in enhancing consumption resilience. The findings reveal that the COVID-19 pandemic shock, with a bandwidth of 3 months, led to a 23% decrease in new energy vehicles sales. In comparison with unsubsidized vehicles, sales of subsidized new energy vehicles significantly increased by 15–80% during the pandemic shock, indicating that fiscal subsidies are crucial in enhancing the consumption resilience of new energy vehicles. Compared with other country-specific new energy vehicles, the subsidy effect of domestic new energy vehicles is relatively inadequate during the pandemic shock. The retreat from subsidy policies has contributed to a decline in the consumption of new energy vehicles in response to the pandemic shock. It is necessary to further improve the consumption resilience of domestic new energy vehicles and pure electric vehicles.