Synoptic Revision - Micro & Macro Factors Influencing E-Vehicle Sales

In this short revision video, we explore some of the micro and macro factors affecting sales of e-vehicles in the EU and the UK.

Registrations of petrol and diesel cars in the EU went down by 9 and 8.5 percent in 2021 according to data by the European Automobile Manufacturers' Association. Whereas the share of cars with alternative power trains made up more of a third of newly-registered automobiles in the EU.

Microeconomic influences on the future growth of sales of e-vehicles in the EU or a country of your choice.

• Real price levels – competition between suppliers might drive down prices and make e-vehicles more affordable. And prices might fall because of economies of scale
  

• The costs of inputs used in production – for example, world prices for lithium used in lithium-ion batteries. And, technologies available to car producers.

• Government intervention can affect consumer demand – for example, a direct subsidy paid to consumers might lead to an outward shift of demand.

Macroeconomic influences on the future growth of sales of e-vehicles in the EU or a country of your choice.

• Interest rates – many new vehicles are bought on credit, if central banks are raising interest rates, this might limit the growth of demand as loans cost more to repay

• Taxation – demand for e-vehicles is likely to be highly income elastic and therefore affected by changes in direct taxation which influences real disposable incomes.

• Trade policy – whilst many e-vehicles are manufactured in the EU, others are not. A fall in import tariffs due to a trade agreement would lower prices & expand demand

Evaluation: Are micro or macro factors more important?

• In the short run, macro factors might be more significant – for example, the cost of living crisis, falling real disposable incomes.
• But in the long run - micro factors might dominate – for example, economies of scale in production and also in expanding the charging infrastructure.
• Rising demand – assumes producers have capacity to meet this – depends on price elasticity of supply.