Electric vehicle deployment & fossil fuel tax revenue in Mexico to 2050

Abstract

We assess the changes in Mexico's privately owned vehicle fleet and tax losses (fuel duty on gasoline) associated to the deployment of electric vehicles (EVs) through a diffusion model. Our projections for 2050 focus on a) electricity use of EVs, b) gasoline use and c) revenue for Mexico's treasury. The model uses population growth and vehicles sales to project two items: a) EV diffusion and b) substitution rates of ICVs with EVs. The equation uses vehicle km travelled and average consumption of fuel to calculate gasoline use of vehicles.The results show that revenues decline by 21.6% per year 2019–2050 owing to technological change in comparison to a gasoline-based scenario. The scenario without EVs points that Mexico's Treasury revenues grow by 100% by 2050 in comparison to revenues collected under the EV diffusion scenario.By 2032 motorization based on EVs will reach 50% of the saturation level producing revenue losses for Mexico's treasury between 70 and 105 billion US$ on a cumulative basis by 2050. Policy implications include: the need to adopt a new tax on electricity, a subsidy policy for EVs and for its infrastructure, a registration tax and an appropriate sales tax as well as strengthening the electric mobility strategy of the country. These taxes help recoup the lost tax revenue of Mexico's treasury.