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

• Published in: Energy economics 2022-06, Vol.110, p.105991, Article 105991
• Main Authors: Koch, Nicolas, Ritter, Nolan, Rohlf, Alexander, Scarazzato, Francesco
• Format: Article
• Language: English
• Subjects: Critical mass; Electric vehicles; Energy economics; Equilibrium; Interdependence; Markets; Municipalities; Network externalities; Structural models; Subsidies
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2022.105991

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. •We analyze if the most mature electric vehicle market has overcome critical mass.•Our structural model allows for multiple equilibria between supply and demand.•Using multiple IVs, our estimates show indirect network effects.•The critical mass issues found in 2012 have been overcome by 2019.•Critical mass constraints no longer justify the provision of subsidies.