Estimating the impact of the license plate quota policy for ICEVs on new energy vehicle adoption by using synthetic control method

Abstract

Since 1994, to overcome adoption barriers and promote new energy vehicles (NEVs), eight cities and one province in China have implemented a license plate quota policy for internal combustion engine vehicles (ICEVs). We use a city-level dataset of NEV sales to assess the impact of license plate quota policy for ICEVs on the adoption of NEVs, by using both the synthetic control method (SCM) and difference-in-differences (DID) method for the first time. We find that license plate quota policy can significantly increase the annual sales of NEVs in Tianjin, Hangzhou, Shenzhen, and Haikou by approximately 73.4%, 87.5%, 87%, and 65.5% of total sales of NEVs, which is equivalent to increasing the annual sales of NEVs by 15,557, 22,267, 37,455, and 448 vehicles, respectively. Further, our findings indicate that a license plate quota policy for ICEVs promotes the adoption of NEVs but has certain limitations, for example, license plate quota policy has a short-term inhibitory effect on the regional auto industry. Moreover, due to the restraint on consumers from purchasing ICEVs, consumers have certain negative sentiment toward the policy based on text analysis. Regions where license plate quota policy is adopted generally required well-developed public transportation and adequate charging infrastructures.