When is the electric vehicle market self-sustaining? Evidence from Norway

Koch, Nicolas and Ritter, Nolan and Rohlf, Alexander and Scarazzato, Francesco (2021) When is the electric vehicle market self-sustaining? Evidence from Norway. Department of Economics Working Paper Series, 317. WU Vienna University of Economics and Business, Vienna.


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This paper investigates whether the world’s most mature electric vehicle (EV) market in Norway has overcome critical mass constraints and can achieve sustainable long-term equilibria without subsidies. We estimate a structural model that allows for multiple equilibria emerging from the interdependence between EV demand and charging station supply. We first estimate the resulting indirect network effects using an instrumental variable approach. Then, we simulate long-term market outcomes for each of the 422 Norwegian municipalities. We find that almost 20% of all municipalities faced critical mass constraints in the earliest stage of the market. Half of them are effectively trapped in a zero-adoption equilibrium. However, in the maturing market, all municipalities have passed critical mass. Overall, about 60% of the Norwegian population now lives in municipalities with a high-adoption equilibrium, even if subsidies were removed. This suggests that critical mass constraints do no longer justify the provision of subsidies.

Item Type: Paper
Keywords: electric vehicles, network externalities, critical mass, subsidies
Classification Codes: JEL H23, L62, Q48, Q58, R48
Divisions: Departments > Volkswirtschaft
Depositing User: Claudia Tering-Raunig
Date Deposited: 11 Jan 2022 15:38
Last Modified: 11 Jan 2022 15:38
URI: https://epub.wu.ac.at/id/eprint/8514


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