Conference Agenda

This paper examines how consumers respond to purchase-stage tax changes in the electric vehicle (EV) market, using the 2021 Danish registration tax reform as a quasi-natural experiment. The reform simultaneously introduced tax reductions for some EVs and tax increases for others within a single tax system, creating a unique setting to study asymmetric demand responses to price changes of opposite directions. Using model-level monthly sales data from Denmark and neighboring Nordic countries, we implement a difference-in-differences design to identify the causal effects of the reform on EV adoption. We find that the reform significantly increased overall EV sales in Denmark relative to comparable markets, with demand responses primarily concentrated among lower-priced EVs, while higher-priced models exhibit little measurable response. Further analysis reveals asymmetry: EVs experiencing tax reductions display clear sales increases, whereas EVs facing tax increases do not exhibit symmetric demand contractions. We also document substantial heterogeneity across EV segments, which is consistent with the interaction between price thresholds and battery-capacity-based deductions embedded in the tax schedule. From a policy perspective, the results suggest that differentiated EV purchase taxes can promote adoption among price-sensitive consumers while preserving fiscal sustainability.