I am creating a presentation about main subsidies and taxes for the EV (electric vehicle) market. When I dived deep into this — the question became: why do governments invest in this market? What benefits do they see?

According to Wikipedia, dozens of countries are offering various incentives for buying / investing in electrical vehicles.

Government incentives for plug-in hybrid electric vehicles have been established by several national governments and local authorities around the world as to support the adoption of plug-in electric vehicle.

However, a simple search related to subsidizing efficiency mostly provides articles that argue against EVs (e.g. Forbes 1, Forbes 2 and Manhattan-Institute.org). These articles argue (among others) that:

  • pollution reduction is not significant due to battery fabrication process which requires special metals extraction and great amount of energy
  • high cost of production
  • significant costs for infrastructure

Why are so many countries subsidizing the electrical vehicle industry?

  • 1
    I have rewritten almost the entire post in an effort to make in on-topic. I think most of the comments are obsolete now (sorry for that).
    – Alexei
    May 6, 2019 at 8:54
  • @Alexei, thank you! Now the question is more clear. Maybe, it will lead to ansewers. May 6, 2019 at 13:29

4 Answers 4


There isn't one reason that applies to all the countries that give incentives for buying electric vehicles, rather it appears that there are three buckets for reasoning on this, of which countries have varying levels of each:

  • Politically popular
  • Reduces local smog
  • Gain foothold in the industry

Most of the Western countries you listed fall primarily in the first bucket. While the well-being of our climate was once a bipartisan issue, due to a variety of reasons it has become a left-wing issue, and there are plenty of left-wing parties who find their way to power in European countries that are more than happy to indulge their voters in enacting environmentally-friendly policies, as is the case in France and Denmark, to take two random ones from the wiki list. Your un-cited point "pollution reduction is not significant due to battery fabrication process which requires special metals extraction and great amount of energy" is dubious, but whether or not it is true is moot in this regard as EVs are viewed as more environmentally friendly, which is all you need for politics.

India and China both have famously bad problems with air quality in their large cities, which obviously less internal combustion engines would help with. More importantly to these countries in forming their legislation on this topic though is the propping up of local companies as both try to become dominant in the EV market, as they see EVs as the future and thus the future vehicle market as one they can dominate, seeing as neither built strong conventional car industries when the boom for that occurred. India explicitly states this, China does not but acts accordingly.


While there is some discussion about how environmentally beneficial current electric cars are. There is some quite strong political support for EVs this is a product of the level of awareness of the impact of CO2 vs the impact of other things. Remember there are groups talking about an extinction event in relation to global warming which is in the public mind at least strongly associated with CO2 emissions.

Politicians what to appease environmental groups and those generally concerted about the environment as this is a large number of people including some who are quite active/boisterous but also want to do this without upsetting other groups such those who own/rely on cars. This can be achieved through EVs.

There is also the consideration that CO2 emissions from cars are quite hard to manage as when the car moves or is idling C02 comes out and there isn't much that can be done. Other environmental impacts from factories and disposal facilities can be managed e.g. captured immediately or otherwise stored/disposed of off properly with reduced impact.

When a subsidy is given for a technology it doesn't just support the current iteration of a the technology it will encourage development of other approaches and technologies such as different types of battery. Subsidies can be targeted at specific ideas such as recyclable batteries. Also subsidies can be used to encourage development of a technology in a specific country which will benefit the countries' economy.

High cost of production may currently be a problem as this is a relatively new technology and is thus normal/expected but eventually manufacturing processes will improve and cost come down. A way to encourage this is a subsidy that encourages companies invest in the new technology and overcome those problems. Its worth remembering that answers don't just fall from the sky they require work and if that work is to be done by businesses there has to be a business case for doing it, subsidies help make such a case viable.

Additional environmental benefits include reduced smog which has been associated with lung conditions even in places such as the UK where the smog isn't so apparent.

The use of CO2 producing vehicles is going to have to come to a holt at some point. Whatever the alternative to them is it is likely to require some infrastructure be it production facilities or distribution outlets. Infrastructure tends to be expensive there is little that can be done about that.


According to Forbes, even when an EV car is recharged with fossil fuels, it emits less carbon per mile than internal combustion (IC) vehicles. When an EV vehicle is recharged by fossil fuel power plants, its emissions per mile is the equivalent of an IC car that gets 80 miles per gallon (that is the national average, but it varies by location, based on the environmental efficiency of local power. Equivalent to 35 MPG in Hawaii, equivalent to 191 MPG in New York).

As more power plants convert to clean energy sources, the cleanliness of EV car emissions becomes even better, as the only carbon they emit comes from the emissions of the power plant they are recharged by, and they may one day reach zero carbon emissions.

Jobs in the clean energy sector (solar, wind, alternative vehicles) are growing faster than in the fossil fuel sector and, according to NRDC, already feature five times as many jobs as the fossil fuel electric industry (coal, gas, oil).

Clean energy jobs are safe jobs that replace coal mining jobs that are currently plagued by health hazards like pneumoconioses.

Vehicles that emit carbon dioxide contribute to the effects of climate change, which include longer fire seasons, ocean acidification, desertification, loss of wildlife habitat, rising sea levels, more intense polar vortices caused by slowdown of thermohaline circulation (changes in the jet stream), more intense hurricane seasons, loss of biodiversity, and more. These are all valid reasons economically, politically, and ethically to try to reduce carbon emissions.

Air pollution also creates public health problems 1.

More than 80% of registered American voters support the Green New Deal; which would imply that general support for climate interventions is a popular policy, and therefore politically prudent for politicians to get behind.

Fossil fuels are also nonrenewable and will eventually necessitate replacing. At some point, as supply is dropping and extraction is slowing down, cost is going to go up.

As some drivers transition to EV cars and stop consuming gasoline, this directly causes falling fuel costs for drivers of IC cars, falling fuel costs for transporting consumer products, and therefore lower consumer costs for products and rising profit margins for corporations.

The big talking point regarding dependence on foreign oil conjectures that purchasing fossil fuels from the Middle East helps bankroll human rights violations.


There seems to be an increasing amount of scientific evidence being published that indicates that Climate Change and Global Warming are due to human-related emissions of CO2 and that, unless strong actions are taken to reduce CO2 emissions, there will be very serious negative consequences for humanity, possibly lasting for many generations.

Even if their environmental benefits are debatable, there is a perception that increasing use of electric vehicles will reduce CO2 emissions, and therefore help to address and mitigate the effects of damaging climate change.

Therefore, the perception is that electric vehicles should be part of the solution to combat climate change, which is an issue that the general public is becoming increasingly concerned about, and will likely become an increasingly important issue at the ballot box.

So, it seems to me, the questions you should be asking are: a) is that perception correct or not? And b) if not, how did that perception come about?

(Btw, in my use of the word 'perception', I do not mean to imply the perception is wrong. However, either way, that seems to be the general perception, rightly or wrongly)

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