How long can subsidies promote EV adoption?

The growing popularity of electric vehicles (EVs) raises questions about the use of government subsidies. This has reduced consumer initial purchase costs in recent years. Additional laws such as tax incentives and regional regulations have also been introduced by local governments, but at best they are mottled.

While early adopters led early growth, subsidies and legislation now offer the greatest incentives for drivers to take advantage of EVs. A 2021 McKinsey study found that EV adoption depends primarily on the breadth and generosity of the measures the government is trying to provide, from country to country. For example, China was one of the most generous countries in the early 2010s when EVs first appeared on the mass market. According to the survey, more than 50% of respondents were willing to adopt EV as a direct result of the measures introduced by the Chinese government. Initially, these included a government subsidy for 50% of the EV label price. Subsidies have been significantly reduced over the past few years, but research points to government support as the main reason China’s early lead in EVs. How long can subsidies promote EV adoption?

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