A common question when talking to individuals interested in purchasing an EV is, “How much is the tax credit?” Of course, what is really being asked is how government subsidies will affect the price. Data suggests that subsidies will be decreasing globally, nationally and regionally over the next three years.
What does this mean? A quick glance at the data surrounding the effect of subsidies on the purchasing of EVs supports the obvious correlation between price, operating cost and range. The amount of subsidies, of course, varies widely around the world.
In short, it means that due to economies of scale and adaptation, EVs will no longer require subsidies to be affordable for the average buyer. At the end of last year (2016), EV sales in China surpassed EV markets in the US and Europe. In order to achieve such a rapid increase in such a short period of time, China has relied on government subsidies, its economy of scale, technology, and will continue to do so until 2020.
Another region that is planning on decreasing subsidies by 2020 is Germany. The same goes for the United States, currently the third largest market in sales volume for EVs. As 2017 begins, subsidies around the globe are starting to decline. The EV market is moving faster than was expected.
It should come as no surprise that this trend in decreasing subsidies is occurring as most companies are due for a fleet makeover by 2020. At this time, we are going to see major players in the automotive industry from across the globe entering the market with large portfolios of EV models. By then, the technologies will have been better proven, and the most successful companies in each region will be able to compete on a global scale.
For example, the Chinese market is inundated by new EV companies, and each one is fighting for a share of the market. We don’t see quite the number of new-comers in the markets in Germany and the US. However, it should be noted that for the most part the quality and safety standards in Germany and the US far surpass those in China.
In recent years, private companies and venture capital investors have invested billions of dollars towards revolutionising the technological infrastructure of tomorrow and in recent months, we have seen a global shift in government subsidies for EVs. Some regions such as Asia and Europe are embracing the renewable sectors more than others. For example, even though we are seeing the US market growing, its growth is not comparable to China and Europe over the past twelve months.
One could argue that subsidies have served their purpose. Arguably, the average consumer hasn’t benefited as much by subsidies as the more wealthy buyer, however at the end of the day we need to come to a compromise because we are all in this sea change together. Yes, subsidies do come from the taxpayers’ pockets, however if we do not invest in the development of technology, we are getting in the way of market evolution.
As more EVs enter the market, with the help of subsidies or without, we are going to see a tremendous drop in prices. Subsidies are not going to solve all the problems, but will bring R&D costs down, making EVs more affordable for everyone.
By Hristo Lazarov Business Development Consultant, Owner and Aspiring Futurist!
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