Electric cars

Question 1

Chains of reasoning

1. Falling demand for petrol cars  
2.
3.
4.
5.
6. Lower government revenue

EV x2

Answer 1

1. Falling demand for petrol cars
2. Fuel has VAT and excise duties
3. Electric cars do not rely upon fuel
4. Demand for fuel as a complementary good with a strong XED will fall - less government revenue
5. Road tax may also be impacted as the higher emissions the higher the tax paid - electric cars produce less emissions
6. Tax on sales may falls as electric cars may last longer
7. Lower government revenue

EV - Initial purchase of car still has to occur because of government law 2030 + small second hand market at present
EV - may introduce electric vehicle road pricing which would help to compensate