Attribute-based Subsidy Can Affect Consumers’ BEV Purchase Decision

We examine the effectiveness of government financial subsidies on battery electric vehicle (BEV) purchasing behavior using a discrete choice model. By optimizing a representative consumer’s decision-making model, we demonstrate that the effectiveness of f inancial subsidies depend on the price elasticity of BEV demand. By analyzing a dataset of individual consumers’ BEV purchase records, we validate our theoretical argument that financial subsidies can encourage consumers to choose eco-friendly BEV models when demand is price elastic. Our findings reveal that South Korean central government subsidies, tailored to the environmental characteristics of EVs, positively influence the sales of eco-friendly BEV models in a price-elastic market. Our results imply that governments should carefully design subsidy policies based on the price elasticity of BEV model demand to maximize their environ mental impact.