Costs and Willingness-to-Pay for Electric Vehicles

Abstract

Electric vehicles are hardly competitive against conventional vehicles with combustion engine today. A reason is the high cost which do not seem to match the value consumers attribute to using electric vehicles over conventional ones. In order to target the differences that exist between the costs of the electric cars and the users’ willingness-to-pay (WTP), a parameter-based model has been set up. Using data from Singapore, we calculate the costs of a mid-range electric car and the users’ WTP for it and confirm the assumption that the WTP is significantly lower than the costs. This difference is influenced by various technical, economic and regulatory parameters which can potentially be targeted to raise the WTP and reduce the costs. For the case of Singapore, modifying regulatory parameters like tax reductions for electric vehicles seem most suitable at today’s vehicle costs, as vehicle taxes make up a large percentage of the purchase price. Modifying technical vehicle specifications like the battery capacity or the costs for them within a reasonable range does not yet equalise the costs and WTP.