Frost & Sullivan: Concerted Government Support Critical for Powering the Electric Vehicle Market

Published: 8 May 2009

By Automotive & Transportation Senior Research Analyst Anjan Hemanth Kumar

Frost & Sullivan estimates that the European market for electric vehicles (EVs) could potentially grow to 480,000 units by 2015. Although vehicle manufacturers, suppliers, utilities and other businesses have jumped onto the EV bandwagon, government support in terms of subsidies and incentives is critical for both the supply and demand side. Some governments have announced different forms of incentives. For instance, the UK government announced a subsidy of up to €5,600 (£ 5,000) for EV buyers - the first scheme that encourages consumers to such high levels. The US government offers a tax credit of up to €5,800 ($7,500) for EV consumers, and the Chinese government has proactively offered subsidies of up to €6,700 for taxi fleets and agencies for the purchase of an electric car.

Government Incentives- Insufficient and Out of Sync

European governments fall short in terms of offering EV-related subsidies to consumers. The German government, for instance, offers no incentives to EV customers except for a car tax exemption for five years. This is insufficient motivation for consumers to consider the purchase of an EV. Countries such as France, Netherlands, Belgium and Austria offer subsidies on green vehicles but these are not clearly defined. In Italy, the tax exemptions and subsidies are limited to specific regions within the country. Some of these policies are old, others lack public awareness and haven't been sufficiently advertised or detailed. Denmark has been proactive in its support of EVs. Denmark is one of the highest auto tax collectors in Europe and, while it doesn't offer direct purchase subsidies, the government does offer consumers the incentive of waiving the 180% tax on vehicle purchase for an EV. The scheme, therefore, substantially decreases purchase costs, reinforcing efforts to boost the uptake rates of EVs.

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