Rethinking Non-Fiscal Incentives for Electric Vehicle Adoption: Evidence from China’s Post-Subsidy Era

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Abstract:

Purpose
In recent years, electric vehicles (EVs) have gained significant attention as a viable solution to environmental and energy challenges in transportation. In China, the government has actively promoted EV adoption through subsidies, tax credits, and various incentives. However, following revelations of misconduct leading to subsidy abuse by EV manufacturers in 2016, coupled with fiscal pressure, the government adjusted its subsidy policy, reducing subsidy rates and impacting the vitality of the EV market. Consequently, the role of non-fiscal incentives in driving EV adoption has gained prominence. Against this backdrop, the proposal examines how non-fiscal incentives support EV market growth once direct fiscal support diminishes. Drawing on an empirical study set against the backdrop of gradually reduced purchase subsidies, it explores how two particularly salient policy tools—road priority for EVs and the construction of public charging infrastructure—can shape consumer decision-making. The research aims to clarify whether these non-fiscal measures, implemented to mitigate the effects of declining fiscal subsidies, are effective in sustaining market momentum and promoting a transition from policy-driven to product-driven EV development.
Design
This work adopts a mixed-methods approach. First, a quantitative analysis employs a difference-in-difference-in-differences (DDD) model using data from 45 major cities in China that implemented varying combinations of fiscal and non-fiscal policies from 2013 to 2022. This approach isolates the net effect of incentives such as road priority and investments in public charging infrastructure from other potential confounding factors, including local economic conditions and variations in existing vehicle ownership levels. The DDD model compares three types of city groups: those offering both fiscal subsidies and non-fiscal incentives; those implementing only fiscal subsidies; and those implementing neither.
The second part of the research comprises comparative case studies. Two high-restriction cities with similar socio-economic indicators but divergent outcomes in EV uptake were examined through policy documents, local regulations, and complementary sector development. This qualitative phase explores how government interventions, regulatory burdens on conventional vehicles, and local charging infrastructure strategies interact to shape EV sales.
Findings
The study reveals that non-fiscal incentives contribute significantly to EV adoption following the reduction of direct fiscal subsidies. Road priority for EVs proves especially influential in cities imposing tighter regulations on internal combustion engine vehicles (ICEV); where private ICEV ownership faces strict licensing or road-access constraints, consumers see EVs as a practical alternative. Although expanding charging infrastructure correlates with rising EV adoption, road priority emerges as a relatively stronger driver of demand under conditions of high ICEV restrictions.
In a more nuanced analysis, the data show that once public charging coverage in a region reaches a reasonable threshold, its marginal impact on boosting EV uptake can become overshadowed by measures like licence-plate exemption and road-access advantages. A comparison of two high-restriction cities suggests that direct purchase subsidies alone do not account for the substantial differences in EV sales; rather, how stringently local governments regulate ICEVs and how effectively they implement complementary EV support networks appears to be decisive.
Practical and theoretical implications
This study highlights the importance of regulatory mechanisms in sustaining EV market growth when monetary assistance wanes. Road priority programmes can be particularly potent in cities already grappling with congestion and environmental pressures, as they enhance the convenience and attractiveness of EVs relative to ICEVs. At the same time, ensuring an adequate supply of charging facilities remains essential for long-term industry stability. The empirical findings indicate that while continued construction of charging infrastructure is necessary, other measures that alter everyday driving habits or ownership privileges can prove more decisive for accelerating EV adoption in regions with significant constraints on ICEVs.
The insights derived here show that direct subsidies may not be the sole or even the primary lever for cultivating a robust EV market. Government-imposed restrictions on ICEVs, together with public initiatives in complementary sectors such as charging networks, have real effects on consumer choices. As direct subsidies diminish, policymakers can retain control over how quickly the EV market expands by fine-tuning these non-fiscal tools and ensuring broader supportive conditions exist for both manufacturers and consumers. From a theoretical perspective, the research extends understandings of how policy design and timing influence technological transitions, especially where markets remain sensitive to price signals and convenience factors. Beyond China’s context, these results may be relevant to any region seeking to sustain EV growth amid fiscal constraints, highlighting the interplay between regulatory policies, infrastructure availability, and overall consumer acceptance.