Does high gasoline price spur electric vehicle adoption? Evidence from Chinese cities

Promoting the adoption of electric vehicles (EVs) is crucial for curbing carbon emissions in the transportation sector and combating climate change. Higher gasoline prices could accelerate the transition to EVs by raising the operating costs of vehicles powered by internal combustion engines (ICEVs). This study examines the impact of gasoline prices on EV adoption by analyzing monthly sales data at the product level from 36 major cities in China over the period of 2017 to 2022. Our analysis reveals that a 1 Chinese Yuan (CNY)/L increase in gasoline prices is associated with a 4.67 % surge in EV sales, indicating that consumers opt for EVs in response to the higher operating costs of ICEVs. Furthermore, we find that the effect is more pronounced for EVs with lower purchase costs, lower electricity consumption, and those within the Mini/Small vehicle segment. Using our results, we simulate the effects of a 1 CNY/L increase in gasoline price and show that it would reduce 1.97 million tons/year of carbon emissions from the vehicle fleet sold annually. This research underscores the efficacy of gasoline taxes as a policy instrument to mitigate carbon emissions by accelerating EV adoption.