The United States and China are the largest electric vehicle (EV) markets. In 2016, China had 336,000 new EV registrations and the United States had 160,000 after a slight drop in 2015. Currently, policy support is playing a major role in developing and deploying EVs in both countries since EVs are still at a disadvantage compared to conventional vehicles. The high upfront price tag of EVs is one factor deterring consumers. In 2016, EVs cost about $15,000 more than conventional vehicles on average and are not expected to match the price of conventional vehicles until 2025. Other disadvantages such as limited access to charging stations, relatively slow charging, and an oft-limited travel range make EVs less attractive to consumers. This article will discuss policy tools used by the United States and China to address the above problems, including providing incentives, installing charging stations, research and development (R&D), and fleet procurement.



Financial incentives, including tax credits and tax exemptions, are a major tool for decreasing the upfront costs of EVs and encouraging the technology's adoption. The U.S. federal government has initiated a tax credit for plug-in electric vehicles (PEVs) purchased after December 31, 2009. The tax credit ranges from $2,500 to $7,500 for each vehicle based on its battery capacity and gross vehicle weight rating (a vehicle's maximum weight, including cargo and passengers). The tax credit is available until a manufacturer sells 200,000 EVs, at which point the credit begins to phase out over time for vehicles sold by that company. The credit halves for the six months following the sale of the 200,000th vehicle, and then halves again for the next six months, and finally disappears entirely. The Obama Administration tried to increase the credit's value to $10,000 and replace it with a point-of-sale rebate, but the proposal was not passed by Congress.

Over half of the states in the United States are using rebates, tax exemptions, and tax credits to motivate EV purchases. For instance, California offers rebates to light-duty zero emission vehicles and plug-in hybrid electric vehicles (PHEVs); low-income families are eligible for an extra $2,000. Washington and New Jersey exempt EVs from motor vehicle sales and use taxes. Louisiana and Maryland provide tax credits of up to $2,500 and $3,000 per vehicle, respectively.

China is taking more aggressive actions to encourage EV purchases. EVs were exempt from purchase taxes from 2014 to 2017 and the government has renewed the exemption through 2020. In addition, the central government has initiated a consumer subsidy program. The subsidy program is renewed every two or three years, decreasing the subsidies and raising the eligibility threshold. In 2010, a subsidy ranging from RMB 4,000 ($635) to RMB 50,000 ($7,941) was available for each PHEV purchased and a subsidy of RMB 60,000 ($9,530) was available for each battery electric vehicle (BEV). The subsidies covered about 40 to 60 percent of the costs of EVs. When the subsidy program expired in 2012, it took the central government six months to renew it. In 2013, the subsidies for each PHEV were adjusted to RMB 35,000 ($5,600) while subsidies for BEV ranged from RMB 35,000 ($5,600) to RMB 60,000 ($9,530) based on a vehicle's driving range. The subsidies decreased by five percent in 2014 and by 10 percent in 2015 based on the 2013 standard. The subsidy program was renewed again in 2016 - up to RMB 55,000 ($8,736) for each BEV and up to RMB 30,000 ($4,765) for each PHEV. It will decrease by 20 percent in 2017 and 2018 based on 2016’s standard, and by 40 percent in 2019 and 2020 based on 2016’s standard. China plans to phase out the subsidy entirely by 2020.

Local governments in China are also supportive of EVs. For example, Beijing and Shenzhen started a matching program to provide the same amount of subsidies as the central government. However, the central government limited local subsidies to 50 percent of the amount subsidized by the central government in 2016 to stop subsidy cheaters. Attracted by the generous subsidies from both the central government and local government, vehicle manufacturers lied about their sales and registered ineligible vehicles in order to get more subsidies. In 2015, five vehicle manufacturers defrauded the central government of RMB one billion ($158 million).

Another important policy in China, the “dual-credit policy,” will take effect in April 2018 and impose compulsory targets for vehicle manufacturers starting from 2019. Under the policy, vehicle manufacturers will be assessed in terms of fuel consumption and EV production in order to qualify for new energy credits. To obtain these new energy credits, manufacturers will need to produce a minimum number of EVs, and the amount of credits they receive will be based on factors such as driving range and EV weight. The policy mandates that 10 percent of a vehicle manufacturer’s total credits must consist of new energy credits in 2019 and 12 percent in 2020. A level of 12 percent in 2020 is equivalent to about four to five percent of actual vehicle sales. Manufacturers failing to meet the requirements will be fined or must buy credits from other manufacturers (only those selling at least 30,000 conventional vehicles annually will be affected).

Apart from financial incentives, incentives such as high occupancy vehicle (HOV) lane exemptions and expedited license plate acquisitions have been offered. More than 10 American states have allowed EVs to use HOV lanes, including California, Colorado, Florida, and New York. Hawaii also exempts PEVs from parking fees. EV drivers in New Jersey enjoy a 10 percent discount on off-peak New Jersey Turnpike and toll road rates. In some provinces and cities in China, EVs are not restricted by traffic control measures (policies to limit the number of cars on the road during a prescribed period), are allowed to use bus lanes, and are offered free parking. In addition, unlike the United States, it is time consuming and expensive to get a license plate in China. But EV drivers in some Chinese provinces and cities can get their license plates without paying the typical fees and more quickly than conventional vehicle drivers. For example, Shanghai has waived EV drivers’ license plate fee, which is about RMB 100 thousand ($15,900). Such incentives are especially attractive to consumers in China.


EV Charging Stations

A limited battery capacity and corresponding travel range remains an obstacle for EVs, necessitating additional charging stations and supporting infrastructure. As of 2017, the United States has installed 47,130 charging outlets while China has 213,903. The U.S. General Services Administration (GSA) has installed EV charging stations for federal employees and other authorized users. In addition, more than 10 states offer rebates and tax credits for installing charging stations. For example, the Los Angeles Department of Water and Power provides up to $4,000 per charger to commercial customers who install charging stations. Arizona residents can receive a tax credit of up to $75 to install a charging station in their own home.

China intends to build 12,000 charging stations by 2020, which can accommodate five million EVs. Local governments could receive RMB 90 million ($14 million) to build charging stations if they meet certain conditions, such as reaching a set amount of EV purchases. In addition, Chinese provinces and cities have made announcements to support installing charging stations via subsidies. The most generous subsidy could reach 30 percent of the total investment.


Research and Development (R&D)

Providing research support is important to bring down costs and improve EV performance. Batteries, which make up the largest cost of BEVs, have been a major focus of R&D efforts. In the United States, the Public Transportation Innovation Program and the Low or No Emission (Low-No) Vehicle Program provide financial support to government, private companies, non-profit organizations, and universities to conduct research on zero-emission public transportation. For example, the Low-No Vehicle Program provided $55 million in R&D funding to cities and public transportation providers in 2017.

In addition, the Advanced Research Project Agency-Energy (ARPA-E), a U.S. Department of Energy agency, has funded many EV projects, including batteries, automotive controls, and efficient EV chargers. For example, Stanford University received an award of about $3 million to support research on Multifunctional Battery Chassis Systems that can reduce the cost and weight of the batteries that power EVs. A power electronics company from Arkansas worked on speeding up the EV charging process through a $4 million grant from ARPA-E.

In 2001, China established a small-scale research and development program aimed at developing new energy technologies. This program has convinced the Chinese government that new energy technologies could yield economic profits and mitigate environmental problems. In 2006, the government appropriated RMB1.16 billion ($184 million) to support R&D via the National High Tech R&D Program (863 Program) administered by the Ministry of Science and Technology (MOST). According to the latest National Key Research and Development Program of China for the country's 13th Five-Year Plan, 20 EV research projects would receive about RMB 700 million ($111 million).


Fleet Procurement

Fleet procurement is another major policy adopted by both countries. The four largest cities on the west coast, Los Angeles, Seattle, San Francisco, and Portland, plan to purchase 24,000 EVs for their municipal fleets, according to their joint Request for Information (RFI). The city of New Bedford, Massachusetts, has procured 23 EVs from Nissan using $7,500 in state incentives and a federal tax credit of $7,500. The U.S. Department of the Navy also proposed a purchase of 400-600 EVs from Ford Motor Company using a federal tax credit.

Government procurement of EVs is playing an even greater role in China. In 2014, China required that the central government, as well as some cities and public organizations, should have at least 30 percent of their vehicle fleet consist of EVs by 2016. In 2016, this goal was increased to at least 50 percent EVs.


Industry Impacts

According to the U.S. Department of Transportation, 9,750 EVs were sold domestically in 2011, with sales jumping to 71,044 in 2015. The U.S. Energy Information Administration concluded that BEV sales made up about one percent of total U.S. vehicles sold in 2017. This number could increase to 12 percent in 2050, partly due to state policies and lower battery costs.

China has witnessed a more significant development of EV sales. In 2011, only 8,159 EVs were sold in China, but that number increased to 331,092 in 2015. The International Energy Agency predicts that China could account for more than 40 percent of global EV sales in 2040.


Author: Jieyi Lu