GOVERNMENT INTERVENTION POLICIES TO ELECTRIC VEHICLES .... In this report, we will discuss about all the aspect of economics of electric vehicles including determinant of demand, supply,
INTRODUCTION
I NTRODUCTION TO THE PROJECT
The development of technology is applying in social life in some developed and developing countries, so people in whole the world is always find and explore new things and minerals to enhance old devices, equipment, … for serving human’s life Finding new things to replace old ones was ubiquitous in human’s mind over the world in the past Therefore, scientists spent a lot of time and budgets on transportations being a way to global evolvement
To put it simply, the development of transportation systems takes place in a socioeconomic context Regarding microeconomic level, the transportation is linked to producer, consumer, and distribution costs But overproduction of transportation of big companies and owning cars of customers gives rise to climate changes such as exhaust of natural resources and environmental pollution Gasoline- an important product for all the increase of economic systems in over the world, is an example for this problem When gasoline is burned for energy, it releases a large of toxic gas and high amount of carbon dioxide affecting air conditions By the early 1970s, top automotive manufacturers began to explore alternative energy method because of soaring of gasoline prices Most scientist thought about products, which is appropriate and necessary for reducing fume released in environment at that time Electric vehicles (EVs) including electric car, electric, solar-powered aircraft, … are elected to replace some fuel vehicles to alleviate emissions Besides, National Bureau of Economic Research (NBER) examined the private and public economics of electric vehicles (EVs) and discussed when market forces will produce the optimal path of EV adaption They assumed that it has many benefits for both personal and public economics when EVs is used in community Furthermore, EVs is a hot topic researched by many advanced academic, professors to upgrade the quality of services, equipment, … or invent new useful supplies And, it also has some events, projects for invention and improvement of EVs ending in the future in US While the enhancement and widespread of electric vehicles in some nation especially wealth countries, the opposite was true for that in Vietnam It can be seen in a reality life that the most of vehicles used for transportation in Vietnam are gasoline car, motorbike, train, …so people gave many questioning for lack of EVs in Vietnam’s commercials Why the EVs is not common use like developed countries? What are the challenges for that?
In this report, we will discuss about all the aspect of economics of electric vehicles including determinant of demand, supply, elasticity, government intervention policies, … affecting to the economics in over the world And we will give challenges for development of EVs and transparent reasons for aforementioned questioning occurred in Vietnam.
C ONTENT OF THIS REPORT
Introduction of Electric Vehicles (EVs)
Explain and Analysis Determinant of Supply, Demand and Elasticity
Government Intervention Policies to Electric Vehicles
The Factor Affecting the Electric Vehicles Manufacturing
Fiscal Policy in Electric Vehicles Market
INTRODUCTION OF ELECTRIC VEHICLES (EVS)
EXPLAIN AND ANALYSIS DETERMINANT OF SUPPLY, DEMAND AND ELASTICITY
D ETERMINANTS OF UPPLY S
3 EXPLAIN AND ANALYSIS DETERMINANT OF SUPPLY,
DEMAND AND ELASTICITY 3.1 Determinants of Demand
This is the most important consideration when deciding whether or not to purchase an electric vehicle The price of an electric car in Vietnam starts at 28000 USD or higher, but the Vietnamese GDP per year is only 2785 USD, so they cannot afford to buy and choose other vehicles such as motorcycles However, in China, the GDP per year is 105000 USD, and the price of an electric car is around 8000 USD, which is a reasonable price for them to pay
This is not a limitless resource Because of the shortage of petroleum in the next 50 years, the price of petroleum will rise, and we will require an alternative Furthermore, emissions from conventional vehicles will degrade air quality and contribute to global warming Global heating is supercharging extreme weather at an astonishing speed, and it’s visible in Vietnam and beyond People across the world are losing their lives and livelihoods due to more deadly and more frequent heatwaves, floods, wildfires and droughts triggered by the climate crisis Humans are currently dealing with these issues, but in the future, we will need to find an alternative, and electric is a viable option because EV contribute less PM2.5 (particles smaller than 2.5 microns) and PM10 (particles smaller than 10 microns) than diesel or petrol cars
Some countries will have electric vehicle charging stations, but not all Some countries cannot provide charging stations due to issues such as security, remaining costs, etc., so they will opt for the traditional and simple method of using petroleum Because changing people's behavior takes time, each country will have a different demand for electric vehicles Furthermore, each individual's attitude toward environmental protection is influenced by a variety of factors such as income, price, life quality, and so on, and it will be difficult to control this issue until diesel and petrol become scarce and humans are forced to use alternative energy sources
Firstly, batteries An EV uses the same rechargeable lithium-ion batteries that are in your laptop or mobile phone, but they are bigger The priciest component in each cell is the cathode, one of the two electrodes that store and release a charge That’s because the materials needed in cathodes to pack in more energy are often expensive: metals like cobalt, nickel, lithium and manganese
Secondly, software If an EV's software is not perceived as being advanced, buyers for it become harder to entice For instance, in China, which boasts the world's largest and most competitive EV market, Volkswagen has had problems selling its new flagship EV ID.4 model, according to a report by Reuters, because its features are not as sophisticated as those offered by other EVs already available in the country, which have self-parking, advanced-voice control and self-driving capabilities a modern electric vehicle may receive software updates to improve safety and performance, offer new in-car services, or unlock sources of revenue for the manufacturer
3.2.2 Number of producers operating in the market
As the demand for and interest in EVs grows, an increasing number of manufacturers are beginning to produce and sell electric vehicles The more producers there are, the more competitive the market becomes For example, in China, the world's largest EV market, each manufacturer will do everything possible to improve their product in order to compete with the others, so EV quality will improve with high-tech and reasonable prices, attracting people However, it is difficult for producers to invest in developing countries Take VN as an example: there are some foreign EV producers, but their prices are too high for Vietnamese consumers; VinFast comes in at a lower and more appropriate price This will aid Vietnamese approaches and provide a better understanding of EV
3.2.3 Effects of changing production technologies / innovation
The most important technology for EVs is battery With the improvement to make the battery larger could lead to smaller, lighter, and more environmentally friendly motors Cars using these powertrains could also be charged faster and travel further on a single charge Efforts continue to find an alternative to today’s lithium-ion batteries that is lower cost, faster to charge, longer-lived, and does not depend on scarce minerals New chemistries such as sodium-ion offer promise of incremental improvement
EVs manufacturers will need to ensure production keeps up and continues making improvements too In particular, EVs manufacturing will need to become quicker, more efficient, and suitable for rolling out more car models
More EVs on the road will also require a better, more extensive charging infrastructure
As a result, manufacturers must increase the power station's capacity so that it takes less time and is more convenient for customers.
E LASTICITY
In Vietnam, we can see many diesel cars on the road, despite the fact that the price of EVs is rising due to new innovations So, there is no doubt that traditional cars and electric vehicles are substitutes But take Norway as an example:
Figure 1: Price elasticities of demand for automobiles, by vehicles energy technology,
The cross-demand elasticities of demand for battery electric cars (BEVs), plug-in hybrid electric cars (PHEVs) and ordinary hybrid electric cars (HEVs) are estimated at 0.36, 0.43 and 0.38, respectively (light blue bars in Fig E.1)
For diesel driven cars, the direct price elasticity comes out at –1.27 Cross price elasticities of demand for gasoline cars, BEVs, PHES and HEVs are estimated at 0.64, 0.48, 0.71 and 0.32, respectively (red bars in Fig E.1)
HEVs and BEVs are slightly less price elastic than gasoline cars, exhibiting direct demand elasticities of 0.97 and 0.99 PHEVs, on the other hand, appear to be the most price elastic passenger car segment, with a direct elasticity of –1.72
So, we can see that because Norwegians were concerned about energy costs, they tended to use clean energy, which is used for EV
Customers in low-income countries cannot afford to buy EVs like Vietnam, so they will opt for other vehicles such as motorcycles, and cars will become luxuries Although income has increased, it is still a small amount when compared to the cost of a car
Figure 2: Monthly income of employees in the first and second quarters, period 2019-
2022 However, let us see how China fared As income and EV’s quantity demand rise, EV becomes more popular among Chinese
Figure 3: The estimate number of plug-in electric vehicles in use in selected countries as of 2021
Figure 4: China GDP per capita
The average price for an EV in China before subsidies and incentives is below $30,000 and the graph below shows that the supply of EV in China is very large As a result, supply is elastic
Figure 5: Top 20 Plug-in Vehicles in China – April 2022
However, not all countries have the same impressive quantity as China For example, in developing countries where prices are too high, but income is too low, producers are unable to increase EV’s quantity
GOVERNMENT INTERVENTION POLICIES TO ELECTRIC VEHICLES
G OVERNMENT INTERVENTION POLICIES TO ELECTRIC VEHICLES
In order to support the development and the spread of EVs, many countries in the world promulgated incentive programs Different countries had different policies to target the problems In this report, we focus mainly on the government’s policy and market drivers behind EVs’ market in Vietnam, China, the USA and Norway
4.2.1 Vietnam policies to intervene EVs’ market
The market for EVs in Vietnam is quite small compared to other countries in the region and the world Almost half of Vietnamese population has a motorbike, although car ownership only has a ratio at about 46 per 1,000 people In the domestic market, there are not many manufacturers seriously investing in EVs: only Vinfast seriously invests in development and research of EVs In the past, Vietnam had no specific and clear policies to encourage EVs among people, although some private’s companies have stepped up and invested in this sector to promote this industry The governments in the past had proposed tax incentives for vehicles powered by environmentally friendly energy source such as electricity, hybrid source (gasoline and electricity), biofuel, compressed natural gas, but this simply not enough to promote the use of EVs
Recently, the situation changed when the government issued a Decree about tax incentives on battery electric vehicle (BEVs) According to the policy, consumers of BEVs are not charged registration fee for 3 years starting from March 1, 2022 After 3 years, which is from 2022 to 2025, the registration fee will be only equal to 50 percent of that for petrol and diesel fueled cars with same number of seats over the next 2 years
Besides reducing the registration fee for BEVs, the National Assembly of Vietnam promulgated law to lower the excise tax (a legislated tax on specific goods or services) for BEVs in an attempt incentivize greater investment and consumption of BEVs The excise tax for each kind of BEVs will be different from each other by their number of seats In particular, from March 1, 2022, the excise taxes for BEVs with nine seats or fewer, from 10 to 15 seats, from 16 to 23 seats are 3 percent, 2 percent, 1 percent respectively (in the past it was 15 percent,
10 percent, 5 percent respectively) before climbing up to 11 percent, 7 percent, 4 percent respectively on March 1, 2027
EVs manufacturers in Vietnam is still in the development period so that they obviously cannot compete with other big automakers in the world Understanding this situation, a number of tax reduction preferences for assembling components and producing EVs was promulgated by the government to encourage the domestic manufacture of EVs In order to protect domestic automakers such as Vinfast, the Ministry of Finance refused the request for EVs import tax reduction from some companies Therefore, the import tax for EVs in Vietnam still remains high: about 56 to 74 percent of the value of EVs imported from Europe
These tax incentives not only serve to help the domestic market catch up with the general trend of the auto industry but also encourage the domestic manufacturers to produce
4.2.2 Incentive policies on EVs of other countries
The auto industry has long been considered as a strategic industry, since it not only affects the GDP but also the employment and other industries (such as iron, steel, etc) This is the reason why many developed and developing countries implemented policies to promote this industry Nowadays, the world faces with the increasing pressure on energy and environment so that many governments make strategic plans to prioritize the development of the EVs industry There are three big markets for EVs in the world: China, United States and Europe (in the order of decreasing market size) Therefore, we choose three countries to identify the government policies behind their enormous EVs’ market: China, United States and Norway (representing for the Europe)
Subsidizing for consumers who buy EVs is the most popular policy among countries to boost the adoption of EVs Different countries have different subsidizing policies From 2010,
US federal government provides a federal income tax credit to new EV buyers based on each vehicle’s battery capacity and the gross vehicle weight rating, with the amount ranging from
$2,500 to $7,500, with a phase-out target of 200,000 EVs sold The Chinese government also subsidizes for EVs based on their driving range
Table 1: Consumer Subsidies in China and US
Another financial subsidizing is that government can invest in charging infrastructure This also help boost the EVs demand Both China, US and Norway do this way
Besides subsidizing for EVs, other countries such as Norway have ways to make EVs is cheaper than ICEVs In Norway, there are tax reductions on e-vehicles so, for consumers buying electric cars is more convenient than buying fossil fuel equivalents The tax reductions in Norway include: no purchase/import tax on EVs, no annual road tax (1996-2021), exemption from 25% VAT on purchase, no CO2 tax, no NOx tax, etc Therefore, even if e-cars are more expensive than fossil fuel types, they become cheaper once taxes are deducted The following example compares an EV model with a similar petrol model to illustrate how the Norwegian tax system makes EVs competitive in the market
Table 2: Comparison EVs model with similar petrol model
The progressive tax system makes most EV models cheaper to buy compared to a similar petrol model, even if the import price for EVs is much higher This is the main reason why the Norwegian EV market is so successful compared to any other country
As effective as financial incentives, non-financial incentives play an important role in boosting the EVs adoption Chinese, United States and Norway have some kinds of non- financial encouragement on EVs such as: parking privileges, vehicle registration privileges and road privileges
In China, there is a special major non-financial policy program called green-plate policy This policy allows EVs owners to have green license plate which is distinguishable from the one that ICEVs owners have In addition to displaying the conspicuous adoption of energy-efficient vehicles, the green plate also helps make EVs easily recognizable for relevant road traffic and parking infrastructure privileges
4.2.3 The effective of each policy
Consumer subsidies have a great impact on EVs sales Economic experts in three countries: China, United States and Norway do the research of the effect of consumer subsidies on the demand They all conclude that these policies play an important role in promoting EVs sales Li et al (2020) study that the total subsidy amounts to ¥44,400 (or about $7,000) per EV, or nearly 26% of MSRP on average and as high as 73% from 2011 to 2019 explained for nearly 55% of the EV sales in China Li et al (2017) estimates the federal tax credit of $2,500 to
$7,500 per EV contributed to about 40% of EV sales during 2011 to 2013 in the US Springel
(2019) finds that the subsidies on consumer purchases and charging stations explained about 37% of EV sales during 2011 to 2015 in Norway
Green plate policy allows EVs to have a special license plate in green color, distinctive from the license plates for gasoline vehicles Although these policies have a low-program cost, evidence shows that it has great impact on EVs sales Li et al (2020) study that the green plate policy is equivalent to about ¥20,000 subsidies in promoting EV sales The reason for this effect is that consumers demonstrate their environmental preferences through buying green products (Kahn, 2007; Kahn and Vaughn, 2009) or choose to buy green products in order to seek status Sexton and Sexton (2014) define conspicuous conservation as a phenomenon where individuals seek status conferred upon demonstration of austerity that minimizes the environmental impact of consumption
Economists in the world found an interesting phenomenon that subsidizing in charging infrastructure is much more effective than subsidizing consumer purchases Li et al (2020) estimated that invest in charging infrastructure is nearly four times as effective as lowering EVs purchase cost Both Li et al (2017) and Springel (2019) show that subsidizing charging stations is more than twice as effective as subsidizing consumer purchases on a per dollar basis in the US and Norway, respectively
From 2010 to 2013, the net working capital of Tesla is not stable and there is a significant fluctuation during 2012 to 2013 This fluctuation happened to both current assets and current liabilities
Among current assets items, the level of inventory increased as well as cash and cash equivalent At the end of 2011, the amount of inventory was $50.082 million, which increased to $268.504 million in 2012, and reached as high as $342.355 million at the year end of 2013
As for cash and cash equivalent, it increased significantly from $201.890 million in 2012 to
For current liabilities items, there are also significant increases in accounts payables, accrued liabilities, deferred revenue, and customer deposits
The main reason for these changes is the enlarged investment in 2012 and the dramatic sales increase in 2013 To match the prediction of sales increase in 2013, it is reasonable to see the rise in inventory from 2012, which also explains the increase of accounts payable and accrued liabilities And due to Tesla’s policy that customers have to pay full amount of the car when ordering, Tesla’s cash and cash equivalent, together with the deferred revenue and customer deposits, increased a lot
Operating Cycle and Cash Cycle
THE FACTORS AFFECTING THE ELECTRIC VEHICLES MANUFACTURING
T HE ECONOMIES OF SCALE , ECONOMIES OF SCOPE IN THE ELECTRIC VEHICLE INDUSTRY
The key factors influence the success in the electric vehicle industry: charging infrastructure, technical progress, political measures, overall operating costs traffic behaviour, resource availability, value-added system
Example for the economies of scale and economies of scope in Tesla industries:
Elon Musk’s best-known company Tesla grows its electric vehicle business through using economies of scale in one of its important components: lithium-ion batteries Over the past few years, as Tesla acts to produce more and more batteries, they do so with significantly cheaper manufacturing costs while also working to increase the battery performance (lifetime, efficiency, energy/power density etc.) In wanting to produce advanced battery powered vehicles to disrupt the gasoline-dominated automotive industry, the basic requirement is to lower the overall cost so that it is comparable to traditional vehicles Typically, batteries represent ~1/3 of the total cost for electric vehicles As a high-tech industry, Lithium battery factories have high fixed costs that are constant regardless of the production level and variable costs that change based on production levels (producing more units acts to increase the variable costs) However, the average cost does decline in the case of batteries when more and more are being manufactured When the long-term marginal cost ends up below the average cost of all previous units, that is the impact of economies of scale
Tesla also demonstrates an excellent example of economies of scope As mentioned earlier, Tesla started as an electric vehicle manufacture (or OEM), then expanded its business scope to becoming a world leader in producing advanced lithium-batteries, which not only guarantees the company’s core technical IP but also acted to lower the total cost of their vehicles given the cost savings on their battery production Beyond that, Tesla noted the range- anxiety concerns held by electric vehicle owners when first designing their vehicles and worked in parallel to develop charging station networks around its user’s locations to meet their different needs and scenarios For instance, having fast-charging stations on highways while having slow-charging stations near shopping malls Other examples from Tesla to expand their economies of scope include setting up their vehicle dealerships as their direct sales channel to increase its customer stickiness, equipping Tesla cars with advanced hardware capable of providing Autopilot features and software updates designed to improve functionality over time, and building a factory in Shanghai, China to target the local market as well as lower their overall production costs due to China’s cheaper labor and materials With all these, Tesla positioned itself better off than its competitors.
T HE MARKET STRUCTURE OF THE ELECTRIC VEHICLE INDUSTRY
The market of electric cars is specified as an oligopoly market as there are only a certain number of players that controls the market Parmar et al (2017) stated that Tesla motors positioned itself in the market as the features that they offer is not available entirely in any of the large luxury automobile companies, however a few numbers of the famous automobile companies entered the market recently The electric vehicles industry (EV) competition is intensive, and increasing regulatory standards, pressure manufactures to reduce vehicle emissions
According to Parmar, Tesla’s has the superior hand as it products revolve around its core competency of creating entirely electric cars Tesla through the strong brand awareness already created through traditional markets As they have a greater number of dealerships through the US However, Tesla’s have greater profits to invest in marketing and advertising campaigns According to Statista, Tesla’s Model 3 has an EV market share about of 60% as Model 3 is the most produced and sold electric car model in the US with similarly priced BMW, Benz and Audi fossil-fuel rivals As the market of EV is oligopoly, which means that the
28 company has the total ability to satisfy the market needs, therefore this supplier sets the price of its product and has the upper hand over the market and the barriers
Empirical data and market analysis about Tesla’s oligopoly
Over the course of 2016, Tesla’s share in the U.S automotive market rose to 2% However, Tesla’s Model 3 has a market share of about 60% Currently, Tesla is the market leader in battery-electric car sales for the United States The global market for electric vehicles is estimated to increase to over 567 billion U.S dollars by 2025; Meanwhile Tesla Model “S” has a market share of about 18% as of December 31, 2016
Tesla currently produces more batteries in terms of kWh than all other car manufacturers combined With the increased production of the Gig-factory, the cost of Tesla battery cells will decrease significantly, the battery cell was reduced from 200$ per kWh to 100$ Tesla's Giga-factory would reduce the production costs by 30 % because of its dependence on the solar panels Moreover, Tesla has the knowhow of producing the entire electric component for their vehicles Selling patented electric powertrain components to other automakers, including Daimler and Toyota Panasonic’s battery cell production lines in Tesla’s Giga factory in Sparks, Nevada, produce 2170 cells exclusively
Preference for new technologies: Vehicle technology is taking a whole new turn and there are a host of new technologies like hybrid vehicles, green cars, electric cars, battery operated cars and self-driven autonomous cars Tesla has researched and launched many products in this emerging technology With the trend towards environment friendly vehicles and regulations to limit emissions Tesla has improved future opportunities in the battery electric vehicle (BEV) market The price of the car is not a dominant factor, as we can see in figure 2, furthermore, the increasing preference for renewable energy led to rising the popularity of low-carbon lifestyles and increasing preference for renewable energy Moreover, Price of running cost: Price of oil and gasoline are skyrocketing, making the EV highly demanded However, it is unsatisfying when you buy an expensive electric car, and it expires after three years of use
The resident in the European countries can accept this concept but for others it may be inconvenient
MACROECONOMIC IMPACTS ON EVS’ MARKET
M ACROECONOMIC INDICATORS THAT AFFECT EV S INDUSTRY
6.1.1 Aggerate demand and aggerate supply
Aggregate demand is a measurement of the total amount of demand for all finished goods and services produced in an economy Aggregate demand is expressed as the total amount of money exchanged for those goods and services at a specific price level and point in time As a result, it is the total of four components: consumer spending, private investment, government spending, and net exports Furthermore, a variety of factors influence aggregate demand, including interest rates, income and wealth, inflation expectations, and currency exchange rates
Aggregate supply is the total supply of goods and services produced within an economy at a given overall price in a given period A shift in aggregate supply can be attributed to many variables, including changes in the size and quality of labor, technological innovations, an increase in wages, an increase in production costs, changes in producer taxes, and subsidies and changes in inflation Some of these factors lead to positive changes in aggregate supply while others cause aggregate supply to decline
6.1.2 Gross domestic product (GDP), GDP deflator and green gross domestic product (Green GDP)
GDP is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health
GDP deflator measures the changes in prices for all the goods and services produced in an economy It shows how much a change in GDP relies on changes in the price level by tracking the prices paid by businesses, the government, and consumers
Green GDP is an index of economic growth with the environmental consequences of that growth factored into a country's conventional GDP Green GDP monetizes the loss of biodiversity, and accounts for costs caused by climate change
The standard GDP measurement has limitations on account of being indicators of economic growth and desirable standards of living The standard GDP measures only the total economic output and does not have any means to identify wealthy and assets that arise because of the economic output So, a need for a comprehensive macroeconomic indicator is in tandem with the need for sustainable development GDP is falsely believed to be an indicator of social well-being and thus it’s used heavily in the analysis of political and economic policy The Green GDP will be a suitable alternative in this regard
GNP is the approximation of the total value of all goods and services produced by a country’s citizens and citizen-owned businesses Besides, GNP is the sum of total personal consumption expenditures, gross private domestic investment, total government expenditures, net exports, total income earned by citizens from overseas investments, subtract domestic income earned by foreign residents
6.1.4 Nominal gross domestic product (Nominal GDP) and Real gross domestic product (Real GDP)
Nominal GDP assesses economic production in an economy but includes the current prices of goods and services in its calculation
Real gross domestic product (real GDP) is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year (expressed in base- year prices) and is often referred to as constant-price GDP, inflation-corrected GDP, or constant dollar GDP
Nominal GDP measures the economic production at current market prices, whereas real GDP measures the economic production factoring in any prices changes in the market (deflation or inflation).
I MPACT OF MACRO VARIABLES ON THE MARKET
6.2.1 Inflation effect on EV market
In America, the federal government has used EV tax credits as a tool to promote the adoption of electric vehicles and lower the U.S automotive industry’s reliance on fossil fuels Electric vehicles are currently far pricier than their gasoline counterparts due to the expensive batteries needed to power the vehicles
Under the Inflation Reduction Act — which received Senate approval on Sunday and is expected to clear the House this week — a tax credit worth up to $7,500 for buyers of new all-electric cars and hybrid plug-ins would be extended through 2032 The bill would also create a separate tax credit worth a maximum $4,000 for used versions of these vehicles Automakers have relied on the credits to assist in lowering the prices on the vehicles for consumers, as costs of lithium and cobalt needed for the batteries have soared
Figure 18:US passenger EV sale forecast
6.2.2 Employment effect on EV market
Figure 19: Direct auto making Employment OICA 2018
To safeguard a position as an EV maker you must have your own EV battery supply chain That requires access to the raw materials and the know-how used in electric motor car batteries In turn, that means setting up long-term raw materials supply from stable producers and building your own battery manufacturing base, which mean create job
The jobs in EV component manufacture would rise, however that all the jobs in existing ICE engines and ICE-specific components would disappear, because EV batteries need many more people to manufacture them than IC engines With present technology more than double the number of jobs is created Electrification will reduce staff levels – especially in service and parts – but this process is likely to be gradual Even if 40% of cars sold by 2040 are EV’s, that suggests 60% will be ICE vehicles.
I MPACT OF MACROECONOMIC POLICIES ON EV S ’ MARKET
Normally, government use three main types of macroeconomic policies: fiscal policy, monetary policy and supply-side policies Other government policies including industrial, competition and environmental policies Price controls, exercised by government, also affect private sector producers In EVs’ industry, government mainly used fiscal policy because of its great effect on boosting EVs’ sales in the short term
6.3.1 Fiscal policy and its effect on EV’s market
Fiscal policy is when our government uses its spending and taxing powers to have an impact on the economy The combination and interaction of government expenditures and revenue collection is a delicate balance The direct and indirect effects of fiscal policy can influence personal spending, capital expenditure, exchange rates, deficit levels, and even interest rates, which are usually associated with monetary policy In EV market, fiscal incentives (defined here as a reduced purchase and/or annual tax for EVs) are implement by:
Provided support for EV charging infrastructure through measures such as direct investment to install publicly accessible chargers or incentives for EV owners to install charging points at home In some places building codes may require new construction or substantial remodels to include charging points, for example in apartment blocks and retail establishments
Differentiated taxation of vehicles and fuels, based on their environmental performance, and by reinforcing regulatory measures that will enable the EV industry to thrive
Fiscal incentives policy, if sufficiently high to offset cost differences between EV and conventional cars, are the most important reason to buy an EV Figure 1 shows the average national fiscal incentives provided for the vehicles, along with the share of EVs in total new car registrations in 2014, as well as the 2014 GDP/capita The EV market shares vary greatly and do not seem to correlate strongly with GDP/capita levels, motivating the investigation of the differences in EV sales across countries and their relation to fiscal incentives and other costs associated with EV ownership The effect of fiscal incentives can depend on demand elasticities
Figure 20: GDP, fiscal incentives and share of EVs in 2014
Figure 21: A global comparison of fiscal incentive policy for electric vehicles
Figure 22: 2012 and 2013 market share vs per-vehicle incentive for battery- electric (BEV) and plug in hybrid electric PHEV
Market shares of electric vehicles vary significantly across the world As can be seen from Figure 2, Norway has the highest share of electric automobile sales (BEV and PHEV combined), with about 6% of all passenger cars sold in 2013 The Netherlands has the second- highest market share, with about 5.6% The structures of the two markets are entirely different, though: While in Norway nearly all EVs sold are BEVs, in the Netherlands PHEVs clearly account for the majority of the market The dynamics of the two markets are likewise significantly different: The market share of EVs in Norway doubled from 2012 to 2013, while in the Netherlands it quintupled between 2012 and 2013 The number of BEVs sold in the Netherlands remained about constant in this time frame, while the PHEV sales numbers exploded
The research findings indicate that fiscal incentives policy matter, but are clearly not the only factor that influences today’s electric vehicle market growth For example, despite a relatively high level of fiscal incentives, the current market share of EV in the United Kingdom (UK) was found to be low in comparison with other markets Many confounding factors mean that a clear direct relationship remains elusive between national fiscal incentives and electric vehicles’ early market growth across each of the major vehicle markets—as seen in the spread of the data and the lack of an obvious trend line in figure above This indicates both the limitation of fiscal policy and also the limited understanding of all the underlying factors and other policies that could help drive and sustain the electric vehicle marketplace
As a result, national fiscal policy is a powerful mechanism to reduce the effective total cost of ownership and entice vehicle consumers to purchase electric vehicles
6.3.2 Monetary policy and its effect on EV’s market
Monetary policy includes changes in the money supply, the rate of interest and the exchange rate, although some economists treat changes in the exchange rate as a separate policy The main monetary policy measure, currently used in most countries, is changes in the rate of interest
A rise in the rate of interest helps implement a deflationary monetary policy It will be likely to reduce aggregate demand by lowering consumption and investment Households will spend less due to availability of less discretionary income, expensive borrowing and greater incentive to save
Firms will invest less as they will expect consumption to be lower Also the opportunity cost of investment will have risen and borrowing will have become expensive A higher interest rate may also reduce aggregate demand by lowering net exports
Changes in the money supply, as with changes in interest rates, are implemented by Central Banks on behalf of governments If the money supply is increased by the Bank printing more money, buying back government bonds or encouraging commercial banks to lend more, the aggregate demand increases On the other hand, a decrease in the money supply reduces aggregate demand
Thus, increasing the interest rate lowers the sales of EVs because the cost of borrowing to buy a new car is high
6.3.3 Supply-side policies and their effect on EV’s market
Supply-side policies are policies designed to increase aggregate supply and hence increase productive potential Such policies seek to increase the quantity and quality of resources and raise the efficiency of markets These include improving education and training, cutting direct taxes and benefits, reforming trade unions and privatization Improving education and training is designed to raise labor productivity
The intention behind cutting direct taxes and benefits is to make work more attractive, relative to living on benefits If successful, this will make the unemployed search for work more actively and will raise the labor force by encouraging more people (including for instance married women and the disabled) to seek employment Reforming trade unions may make labor more productive, and privatization may increase productive capacity, if private sector firms invest more and work more efficiently than state owned enterprises
CONCLUSION
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7 Electric Vehicles Benefits and Considerations https://afdc.energy.gov/fuels/electricity_benefits.html#:~:text=Electric%20and%20hy brid%20vehicles%20can,type%20of%20hybrid%20power%20system
8 The demand for new automobiles in Norway – a BIG model analysis Lasse Fridstrứm, Vegard ỉstli https://www.toi.no/getfile.php/1349130-
9 BYD achieves record month in Covid-disrupted market https://cleantechnica.com/2022/05/26/china-electric-car-market-29-market-share-in- april/
10 China GDP per capita https://tradingeconomics.com/china/gdp-per- capita#:~:text=GDP%20per%20Capita%20in%20China%20is%20expected%20to%2 0reach%2011800.00,according%20to%20our%20econometric%20models
11 Estimated number of plug-in electric vehicles in use in selected countries as of 2021 https://www.statista.com/statistics/244292/number-of-electric-vehicles-by-country/
12 Thông cáo báo chí tình hình lao động việc làm quý II và 6 tháng đầu năm 2022 https://www.gso.gov.vn/du-lieu-va-so-lieu-thong-ke/2022/07/thong-cao-bao-chi-tinh- hinh-lao-dong-viec-lam-quy-ii-va-6-thang-dau-nam-2022/
13 Chinese EV Sales In July: After The Subsidy Storm https://cleantechnica.com/2019/08/18/chinese-ev-sales-in-july-after-the-subsidy- storm/
14 WSJ: Electric Vehicles Are More Software Than Hardware https://cleantechnica.com/2021/02/16/wsj-electric-vehicles-are-more-software-than- hardware/
15 Why are electric cars expensive? The cost of making and buying an EV explained? https://cleantechnica.com/2021/02/16/wsj-electric-vehicles-are-more-software-than- hardware/
16 Electric vehicles and air pollution: the claims and the facts https://epha.org/electric- vehicles-and-air-pollution-the-claims-and-the-facts/
17 Markets in Action: Supply and Demand for Electric Vehicles https://www.tutor2u.net/economics/reference/markets-in-action-supply-and-demand- for-electric-vehicles
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27 The impact of Electric Vehicles on Jobs in Auto makers and retailers - Motor monitor
28 How Huge Inflationary Pressures Are Affecting Electric Vehicle Prices - Tijo Tenson (March 2022)