Does air pollution stimulate electric vehicle sales? Empirical evidence from twenty major cities in China

Abstract

Introduction of electric vehicles (EVs) is regarded as an effective measure to mitigate air pollution. Although intensive efforts have been invested on examining the factors affect the adoption of EVs, the potential impact of air pollution on EV sales is severely underexamined. In this study, we pioneer to examine the relation of air pollution (measured in terms of the concentrations of PM2.5) to the sales of EVs. Our empirical analysis is based on a unique panel data comprises of the monthly sales volumes of EVs and the monthly average PM2.5 concentration levels from 20 major cities in China. The data spans from 1st May 2014 to 30th April 2018. Additionally, we employ the urban population, industrial output and disposable income per capita as controls. The results show that the PM2.5 concentrations are significantly positively correlated to the sales volumes of EVs as well as those of battery electric vehicles (BEVs), while no significant relationship between the PM2.5 concentrations and the hybrid electric vehicles (HEVs) sales is observed. The significant and positive effect of the PM2.5 concentrations on the EVs sales persists, in EVs with different brand popularities and in cities of different average income levels. Amongst the selected controls, only disposable income is significantly and positively related to the sales volumes of EVs, while the others only impart insignificant effects on the EV sales. Further, we confirm the robustness of the results by using the different sectors of the panel data. Our findings contribute to the growing body of EV adoption literature, and policy implications are provided.