In this research paper (a riview of literature), I illustrated the effect of government subsidies and tax incentives to accelerate the overall sales and production of Electric vehicle (EVs) in Bangladesh. I would like to thank my professor Gamal Atallah, who is an Associate Professor at the Economics department of University of Ottawa, for guiding me throughout the semester to complete this paper.

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The implementation of government subsidies and tax
incentives to enhance the sale of Electric vehicles in
Bangladesh
Submitted by:
Name: Fardeen
Ahmed. Student ID:
300337302
Submitted to:
Professor: Gamal Atallah
Associate Professor
Economics,
Faculty of Social Sciences.
University of Ottawa.
Course information:
ECO 6142 – A
(Industrial
organization 2)
Term: Spring/Summer 2023

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Table of contents:
1) Abstract..........................................................................................03
2) Introduction… ................................................................................03
3) Policies taken by Bangladesh government....................................... 05
4) Current Situation of Electric Vehicle in Bangladesh ........................ 06
5) Policies taken by government from other countries .......................... 09
6) Review of Other research papers:.....................................................14
7) Research gaps and shortcomings ...................................................... 15
8) Effect of tax incentive and subsidy on innovation performance ........16
9) Disadvantages and challenges in Bangladesh’s EV adoption .............18
10) Disadvantages and challenges .......................................................... 19
11) Conclusion and work for future..........................................................21
12) References… ....................................................................................23

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Abstract:
The adoption of electric vehicles (EVs) is increasingly recognized as a pivotal step towards
sustainable transportation systems worldwide. In Bangladesh, the government has recognized
the potential of EVs to mitigate environmental challenges, reduce dependence on fossil fuels,
and foster economic growth in the automotive sector. To promote the widespread use of EVs,
the government has implemented a range of subsidies and tax incentives. This paper examines
the various government measures, including financial incentives, reduced import duties, and
exemptions on EV-related equipment, aimed at boosting the sales and adoption of electric
vehicles in Bangladesh. The study analyzes the impact of these subsidies on the EV market,
the associated challenges, and the effectiveness of such measures in achieving the desired
goals. Additionally, it explores the future prospects and policy recommendations to further
enhance the use of electric vehicles as a sustainable and viable means of transportation in the
country. The findings of this research shed light on the significance of government support in
accelerating the transition towards green mobility and provide insights into designing more
effective strategies to promote EVs in other developing nations facing similar challenges.
Introduction:
The Fossil fuel reserves around the globe are estimated to last for only another 35 years;
and will be depleted by the year 2045 (Shafiee & Topal, 2009). Various countries in the world
and their governments are looking for more sustainable and environment friendly way of
transportation to combat against the global problems (negative externalities) like greenhouse
gas (GHG) emissions, air & sound pollution, and fossil fuel dependence.
The (IPCC, 2012) highlighted that the increasing levels of greenhouse gases (GHGs)
leading to climate change present a significant danger to both the physical and economic well-
being of people worldwide. Moreover, it could have detrimental effects on ecosystems,
potentially putting 20-30% of plant and animal species at a high risk of extinction. The primary
GHGs, such as CO2 and N2O, are largely produced from burning fossil fuels during activities
like electricity generation and internal combustion engine operation.
In 2010, the transportation sector was responsible for emitting 6.7 Gt of CO2, accounting
for 22% of the global total (IEA, 2012a). Additionally, the global fuel demand for transportation

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is projected to increase by approximately 40% by 2035 (IEA, 2012b). The IPCC emphasized
the urgency of reducing GHG emissions, particularly in the energy and transportation sectors,
to prevent a temperature rise of 2.4-6.4 degrees Celsius by 2090 compared to temperatures
from 1990 (IPCC, 2012). The transportation sector is a significant driver of human-induced
climate change on a global scale, contributing approximately 23% of energy-related
greenhouse gas (GHG) emissions worldwide (IEA, 2012)
This figure remains consistent within the European Union (EU) as well. In the EU, the
transportation sector holds the second-largest share of emissions, amounting to nearly a quarter
of the total emissions, following the energy industries. Analyzing the modal breakdown of
transport-related GHG emissions, it becomes evident that road transport is the leading
contributor, accounting for 73% of these emissions in 2014 (EC, 2016a). According to Drew
T. Shindell, professor of climate sciences at Duke University revealed the health costs: one
gallon of gasoline purchased from the gas station causes up to $3.80 in health and
environmental costs. (Shindell, 2015). The United States Environmental protection agency also
claimed that the transportation sector alone is responsible for almost 29% of world’s total
energy related CO2 emissions which is getting worse by day. One of the best possible way to
reduce these negative externalities is to introduce Electric vehicles in the transportation sector
(Perujo & Ciuffo, 2010). Due to the increase in the number of restrictive CO2 emission
regulations (Fontaras & Dilara, 2012) coupled with rising fuel prices (Macharis, Hoeck, Pekin,
& Lier, 2010) have made a substantial change in the way that some characteristics of the
automobiles are perceived. Consumers are going for more fuel efficient, lower emission, and
smaller engines (Fontaras and Samaras, 2010; Thiel et al., 2014). Electric vehicles have already
experienced an exponential growth and worldwide interest as an alternative solution to reduce
pollution and dependence on fossil fuels. (Ma, 2012)
Electric vehicles, including battery electric vehicles (BEVs), hybrid electric vehicles
(HEVs), and plug-in hybrid electric vehicles (PHEVs), are considered essential substitutes for
internal combustion engine vehicles (ICEVs) in the transportation sector. Their adoption is seen
as crucial for enhancing energy efficiency, curbing local air pollution, and reducing carbon
dioxide (CO2) emissions. (Weeda, 2012)
Numerous governments have set interim targets for electric vehicle market shares within
the relatively near-term period of 2020 to 2025. The aim is to stimulate the vehicle market and

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facilitate a gradual transition to an economy that aligns with climate stabilization efforts. (Yang,
2014)
Electric vehicles (Ev) contain batteries as an efficient replacement of diesel or gasoline
tanks and electric motors instead of internal combustion engines, that is why electric vehicles
don’t produce extra heat and harmful emissions from exhaust. (EPA; United States
Environmental Protection Agency, 2023) (Holdway, Williams, Inderwildi, & King, 2010). In a
recent study done by ‘David Reichmuth’ proves that electric and hybrid vehicles have lower
emission compared to gasoline powered vehicles. About 94% people in the US live where
electric vehicles generate very low emission than using a 50-mpg gasoline car. (Reichmuth,
2020)
Nowadays, electricity produced through renewable sources like hydropower, solar and wind
energy has become more efficient. (Office of Energy Efficiency & Renewable Energy, n.d.).
Numerous countries around world are also using nuclear energy because it is the second largest
source of low carbon electricity just after hydropower. (Natural history museum., n.d.). Due to
this the demand of electric vehicles has experienced a dramatic growth over the past years.
According to the international energy agency (International Energy Agency, 2023) the sales
of electric vehicles were 6.85 million in 2020, 10 million in 2022 and it might increase to 30
million by 2025 and 45 million by 2030. In 2023 they are expecting 14 million sales and
predicting that one in every five cars will be electric by the end of the year. If this trend
continues it will also reduce the demand for approximately 5 million barrels of oil a day by the
end of 2030.
Policies taken by Bangladesh government:
According to the Nationally Determined Contributions published in 2021 where it is clearly
stipulated that Bangladesh is targeting to reduce 3.39 million tonnes of carbon dioxide
emissions from road transports by the end of 2030. (Ministry of Environment, Forest and
Climate change Bangladesh., 2021). To fulfill the climate change mitigation goal Bangladesh
government is strongly supporting the development for the adoption of electric vehicle (EVs)
in the transportation sector. The target is to attain at least 30% Electric vehicle penetration by
2030. (Bangladesh Road Transport authority., 2023).

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In 2021 Bangladesh Government published a new policy for automobile industry where it
is clearly mentioned that the aim is to replace passenger and commercial vehicles like bus,
truck, auto rickshaw and sedan cars with Evs. Bangladesh govt also promises to provide special
incentive programs and subsidies to attract investment and acquire technological innovation to
make the country a hub for producing Electric vehicles in the global market by 2030. The tax
benefits aimed at promoting the sales or purchase of high-end trucks and cars, incentives for
reducing import duties on crucial components. This initiative will encourage higher local
producers to manufacture, grants or subsidies will be provided to support the development of
charging station equipment, the incentives also include 10-year tax holidays for investments in
energy efficient electric vehicle production or assembly process regardless of the plant location.
Financial incentive includes tariff reductions, import tariff incentives for machinery purchase
and scrapping incentives, interest subventions on loans, certification of professional
competence, waive in road tax and reduced registration fees. There will also will be Product
certification and/or adherence to technical standards. These benefits will also be provided for
the installation of wide network of electric charging station systems. (Ministry of industries,
Bangladesh., 2021).
BREB has already established 6 EVCS based on solar energy in Gazipur, Dhaka, Sylhet,
and Chittagong. DPDC also established 21 kW solar EVCS in keranigonj, Dhaka. These are
the positive signs and hope for the charging stations in Bangladesh. (Ministry of industries,
Bangladesh., 2021)
Current Situation of Electric Vehicle in Bangladesh:
In Bangladesh, the Battery Electric Vehicle (BEV) is widely recognized as the "Easy Bike."
This electric vehicle is equipped with five rechargeable lead-acid batteries and can comfortably
accommodate six to eight passengers. The primary method of charging these BEVs is by
utilizing electricity from the main grid. The technological features of electric vehicles have
seamlessly integrated into Bangladesh's transport system, especially given the country's
relatively small size and heavy reliance on road transportation rather than inland waterways
and railways. Additionally, there has been a significant improvement in access to electricity in
the country, with the percentage of the population having access rising from 48% to 72%.
(DATABD.C, 2020).

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Between 2005 and 2006, the popularity of easy bikes increased in both rural and urban areas,
even without the promotion of radio, newspaper, or television advertisements. The main
reasons for their widespread adoption were their shared riding feature, affordable fare for short
distances, and the convenient hop-in and hop-out facility. Researchers acknowledge that the
demand for Battery Electric Vehicles (BEVs) in Bangladesh was primarily driven by local
commuters, manufacturers, importers, and middle to low-income individuals, as there were no
specific policies in place to support their growth. (Zvigadza, 2019).
Initially, EVs were widely accepted across the country, but over time, they started
disappearing from the city streets. This was mainly due to certain factors like the absence of
engine and chassis numbers for registration, which posed a significant obstacle and resulted in
a scarcity of power, leading to a ban on EVs in some cities. However, despite these challenges,
many divisional cities and most towns continued to utilize EVs for their daily short commutes.
As of March 2019, there were approximately one million EVs operating in Bangladesh,
predominantly in district towns and rural regions. (DATABD.C, 2020)
Because of these initiatives taken by Bangladesh government, domestic startups such as
Palki Motors already came with a four-door & four-wheel battery-swappable electric vehicle
at a Starting at a price of Tk. 4.99 lakh. (Rahman S. , 2022). Another domestic manufacturer,
Walton has recently revealed their e-bikes and currently working on electric buses. (The Daily
star, 2023). The launch of Nitol-Niloy's 'Suvare,' the first domestically assembled four-wheeler
electric vehicle (EV) for the market, faced a setback due to the pandemic. The project, which
had a projected cost of BDT 3.5 billion, was being established in Pabna and Bogura [3].
Additionally, Bangladesh Auto Industries Ltd. (BDAuto) has made a substantial investment of
$200 million to locally produce electric SUVs, sedans, hatchbacks, two-wheelers, and three-
wheelers in the country. (Chakma, 2020). Moreover, Bangladesh Auto Industries Ltd.
(BDAuto) has invested $200 million in the country to locally manufacture electric SUVs,
sedans, hatchbacks, two-wheelers, and three-wheelers. (Chakma, 2020).
While the four-wheeler EV market is not yet thriving in the country, electric vehicles have
gained significant traction in the three-wheeler market of Bangladesh, particularly with
motorized rickshaws and easy-bikes. The total count of easy bikes and motorized rickshaws
stands at 1 million and 0.24 million, respectively, providing transportation solutions for
approximately 250 million people in the nation (Rahman, Islam, & Al-Hossain, 2019). Given
the socio-economic context of Bangladesh, these vehicles serve as an ideal mode of transport

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due to their affordability. Furthermore, their popularity is bolstered by the option of ride-
sharing, which lowers the per-head fare cost. The increasing prominence of three-wheelers has
attracted both domestic and foreign investments, with India's automaker Omega Seiki recently
announcing a significant investment of INR 1 billion to establish EV manufacturing facilities
in Bangladesh (The Daily Star, 2021). Additionally, local auto manufacturer BDAuto is gearing
up to manufacture three-wheeler EVs for both the domestic and international markets. Similar
to the popularity of three and four-wheelers, electric motorbikes are also capturing the interest
of Bangladeshi consumers due to their cost-effective nature and convenience. Recently,
Walton, a prominent local company, revealed their new range of e-bikes. The manufacturer
claims that these vehicles will be highly economical to run, with an operating cost per kilometer
ranging from only 10 to 15 paisa. Additionally, the electric bikes are expected to be priced more
competitively compared to traditional two-wheelers. Charging the vehicles will be affordable
too, requiring only 7 to 8 Taka for a full charge.
Aside from Walton, other local manufacturers like Runner, Akij, and Duranta are also
gearing up to distribute locally assembled two-wheeler electric vehicles in the Bangladeshi
market. While the current adoption of electric vehicles in Bangladesh is starting off slowly,
there is hope that initiatives being taken will lead to increased acceptance and usage in the near
future. (DATABD.C, 2020)
As per the Bangladesh Power Development Board's findings, the country is presently
utilizing just 40% of its power generation capacity. By introducing electric vehicles (EVs) and
hybrid vehicles, the nation can alleviate the strain on fossil fuel demand without significantly
increasing power generation expenses. Consequently, embracing electric vehicles in
Bangladesh would lead to optimal utilization of available power resources (Bangladesh Power
Development board, 2020)
In recent years, the increasing popularity of hybrid vehicles can be attributed to their
reduced operational expenses. Sales figures had been steadily rising before the COVID-19
pandemic struck in 2020. In 2018, the market for hybrid four-wheelers witnessed a remarkable
surge in sales, with a staggering 900% increase. (LightCastle BD, 2021)

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Policies taken by government from other countries:
Developed and developing countries around the world have already taken necessary steps
to substantially increase the sells of electric vehicle through subsidy programs, tax incentives
and EV charging infrastructure schemes. For instance, in 2009, the government invested
substantial amounts in R & D and market demonstration projects. The electric vehicle (EV)
incentives were created to meet the goals of the German Electromobility Development Plan.
The goals were to reach energy and climate policy targets, to be able to become a market leader
for electromobility, to develop competitiveness by innovation, to reduce dependency on oil,
and to increase the social acceptance of electromobility. (Bundesregierung, 2009). An effective
program was taken by the German Federal government in order to reach one million electric
vehicle and reduce CFC and CO2 emissions by 2022. The federal government also
implemented and subsidized a mathematical model for the use of EVs to optimize electricity
tax rates. (Hirte & Tscharaktschiew, 2013).
In 2004, the United States federal government offered several nationwide incentives to
consumers to promote the use of efficient hybrid electric vehicles. According to (Jenn,
Azevedo, & Ferreira, The impact of federal incentives on the adoption of hybrid electric, 2013)
Financial incentives successfully increased the adoption rate for plug in hybrid electric vehicle
(PHEV) in the US if the incentive was greater than US $1000. Moreover, US has proposed to
develop an affordable plug-in EV for the average American family within 2025 as handy as
today’s gasoline-diesel powered vehicles (US Department of Energy, 2013). By using the
National Energy Modelling System (Morrow & Gallagher, 2010)estimated the energy,
economic, and CO2 implications of different policies from 2010 to 2030 in the US. In the
research paper they studied 16 vehicle technology options, including PHEVs and came with
the conclusion that purchase tax credits are not that much effective in cutting the overall
emissions, while imposing an additional tax on petroleum fuels will result in massive
reductions in both CO2 emissions and oil imports, and significant reduction in annual travel
distance. (Tseng, 2013) did a thorough study in five different vehicle types in the US
(conventional, electric and hybrid with and without plug-in), and found that with federal tax
incentives, all EV types that were driven over 120,000 miles in 12 years became affordable and
the additional lifetime costs compared to conventional vehicles were about 5%.
In another study done by (Chandra, Gulati, & Kandlikar, 2009) analyzed the effect of tax
rebates on EV sales in across all the provinces in Canada by offering different incentives. They

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did multiple counterfactual simulations by using a series of models that aggregate all the rebate
values and then they compared it with a base case. The researcher found that the market share
of hybrids increased by approximately 31–38% when there was a $1000 increase in the rebate.
(Sánchez-Braza, Cansino, & Lerma, 2014) in their research utilized a cross-section Probit
model where they studied the main drivers that motivated the local governments of Spain to
adopt a reduction on avenue tax for all types of EVs to motivate the use of such cars or trucks
as a solution for CO2 pollution.
(Hong & Koo, 2012) used a mixed logit model showed that in South Korea the tax
incentives for EVs are more effective compared to a lump-sum incentive as the consumer
choice probability for EVs would rise by approximately 14% because of the tax incentives,
compared to 7% for lump-sum incentives.
(Wangsa & Siswanto, 2023) in their research paper developed a mathematical model
(integer linear programming (ILP) model) to show the overall effect of subsidy and tax
incentive to encourage the use of electric trucks in Indonesia. A numerical example and
sensitivity analysis were used to justify the model and provided marginal insight for
Indonesian govt and other industries. They came up with the result that a tax incentive of 36.0%
without any subsidies will never attract the customers to purchase of electric trucks. On the
contrary, when the incentives reach 36.5% to 40.0% and various subsidies stays between $1000
and $25,000, then sells of electric truck rises substantially.
(Jones, 2013) in his research proved that sales tax has a considerable effect on the
purchasing decision and it can be used as a useful tool to stimulate the overall e-scooter demand
in Vietnam.
(Alhulail & Takeuchi, 2014) discussed the policy impacts of acquisition tax cut and Tonnage
for eco friendly electric vehicle in Japan and this scheme enhanced the sell of Electric vehicle
more positively. They also found out that in Japan tax incentive was more effective than
gasoline price whereas in United States and Canada, increase in gasoline price had gigantic
effect on increasing the sells of Electric vehicles.
(Chu & Gau, 2015) came up with a project where their aim was to transform all diesel
engine vehicle into e-trucks in the Xiluo production market. In Taiwan the Xiluo product
market is expected to set an example for other wholesale markets. These developments of e-
trucks were done due to the subsidies from the Taiwanese government.

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(Bahamonde-Birke & Hanappi, 2016) created a hybrid discrete choice model and estimation
model to assess the acceptance of electric vehicles by the Austrian people and the perspectives
of electromobility in the country. The researchers used functional models to examine how
various features of alternative-powered vehicles impact their adoption in Austria and also
analyze the impact that different incentive programs may have on the acceptance of electric
vehicles.
Even though the EV incentives in Norway, which dates back to 1990, were meant to
establish an EV industry, the major reason for Norway’s adoption of electric vehicle is to meet
the climate goals (Figenbaum, Assum, & Kolbenstvedt, Electromobility in Norway:
Experiences and Opportunities, 2015). (Mersky, 2016) studied the impacts of government
incentives on battery powered EVs sales in Norway and found a positive relationship between
them. Market share of EV in Norway accounted for more than 22% of all new car sales in in
2015 (ICCT Europe, 2016) which assured that EVs were getting popular to consumers due to
powerful incentives. (Figenbaum, Electromobility in Norway: Experiences and Opportunities,
2015) tried to find out the possible explanations to the Norwegian development considering
the incentives given and the users behaviour. He found out that the taxation scheme taken by
Norway government offered a great opportunity to motivate the public to purchase Ev for long
term benefits and to compensate for marketing challenges
The Dutch government introduced CO2- related vehicle taxation in 2007 and EV incentive
policy in 2010, to improve energy-efficiency, reduce CO2 emissions, reduce full dependency
on fossil fuels, (E-mobility in the Netherlands, 2017)
(Yan, 2018) in his research paper thoroughly discussed the role of tax incentives in reducing
the total cost of ownership of battery-powered electric vehicles (BEVs), promoting it, and
achieving environmental benefits. By using cost-benefit analysis and ordinary least squares
regression he was able to compare the results based on tax incentives in European countries
such as in Italy, Hungary, Austria, Portugal, Norway, France, the United Kingdom, and
Germany. He also indicated that moving from conventional diesel-powered vehicles to EVs is
particularly attractive in Iceland due to the availability of renewable energy sources that can
power it. (Frances, 2016) investigated the role of consumer incentives in 14 different countries
during the duration from 2009 to 2011 and discovered that incentives have a statistically
significant effect on the sales of electric vehicle but very high incentives are required to
significantly increase sales.

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(Lévay, Drossinos, & Thiel, 2017)in his research paper tried to show the real importance of
Fiscal incentives (total or partial tax exemptions, or direct subsidies) as they directly influence
the Electric vehicle purchase decision of individuals or companies and focused on year 2014
and covered approximately 66% of all EV sales in the EU28 and European free trade
association (EFTA) countries in 2014. The aim of his study was to assess and find out how
different fiscal incentives had stimulated the market penetration of EVs in European countries,
such as in France, Hungary, Germany, Italy, Netherlands, Norway, Poland, and United
Kingdom. He concluded that initial lump-sum subsidies were favouring small EVs while any
exemptions from registration and annual taxes were beneficial for big EVs.
To achieve the transition to electric vehicles in Island through tax incentives (Shafiei &
Davidsdottir, 208) used a dynamic simulation modeling approach and utilized the integrated
energy and transportation systems.
(Agaton, 2019) delineated the Philippine government’s new policy to accelerate the
establishment of sustainable public transport system by introducing a public utility vehicle
(PUV) modernization program with electric jeepneys (e-jeepneys). They see this potential to
overcome problems related to air pollution, traffic congestion, dependence on imported fuels,
and carbon emissions, transport groups. The only problem in implementing government
programs are the problem of investment costs and risks. Having focused on the vehicle
ownership cost.
(Hao, 2014) analysed two-phase EV subsidy scheme in China and estimated its success and
impacts on the electric vehicle market penetration, by focusing on the ownership cost of battery
electric vehicles (BEVs). He concluded that for the battery electric vehicle to be cost
competitive China’s EV subsidy scheme was very necessary. By focusing on the impacts of
federal subsidies (Helveston, 2015) have used data from choice-based conjoint surveys in
2012–2013 in China and the U.S. in order to find out consumers preferences for conventional,
HEV, PHEV, and BEV. In his research he came with the conclusion that Chinese respondents
are more receptive to BEVs than American respondents regardless of subsidies.
The EV incentives in the UK which started in 2010 were considered a way to transform the
UK automotive sector into an energy efficient low emission manufacturing sector. Improving
energy security, getting to the carbon reduction target were other motivation behind the EV
incentives. (Office for low emission vehicle, 2013) With the help of a system-dynamics
approach (Sierzchula, The influence of financial incentives and other socio-economic factors,

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2014) in research paper assessed the impact of subsidies and taxation to on the uptake of battery
electric vehicle during a 40-year period in the UK and also evaluated the effectiveness of
vehicle subsidies in different situations. (Brand, Jillian, & Tran., 2013) implemented the UK
Transport Carbon Model to quantify the impacts of fiscal incentives on Electric car sales and
emissions until 2050 in the UK. His results concluded that in reducing life cycle GHG
emissions, the feebate policies and car purchase tax are the most effective policies. In the UK,
the purchase subsidy covers 25% of the purchase price of different EVs regardless of their CO2
emissions and the upper limit is exactly £5000 (≈€6200) (European Automobile Manufacturers
Assosiation, 2015)
In 2009 France declared a plan for decarbonised vehicles. It is believed that the official
ambitions of such plans were energy independence, to cut CO2 emissions to meet within EU
criteria, and to ensure the competitiveness of the French automotive industry (Hildermeier &
Villareal, 2011-12). In France, the government established a bonus-malus system based on
type-approval CO2 emissions. Vehicles that emit CO2 between 0 and 20 g per kilometre are
required to a subsidy covering 27% of their purchase price with an upper limit of €6300.
Vehicles with CO2 emissions between 21 and 60 g/km are ordered to a subsidy covering 20%
of their purchase price with an upper limit of €4000 and if the emission is above 131 g/km then
the tax is increased. (European Automobile Manufacturers Assosiation, 2015)
In the Austria, (Gass, Schmidt, & Schmid, 2014) analysed govt subsidies and tax incentives
such as; (i) upfront price support, (ii) CO2 tax, and (iii) tax increase on fuel for internal
combustion engine vehicles (ICEV) And also calculated the total ownership costs for ICEV
and EV from 2011 to 2020, from a survey response from the automobile manufacturers and
importers in Austria. The researchers came to the decision that introducing an upfront vehicle
price support would be more effective than the estimated tax levels for CO2 and fuel
consumption.
Developed European countries like Italy has focused on other low carbon emission fuel rater
than focusing on Electric vehicle manufacturing. A great number of CNG cars were deployed
in the market in 2017. Even the biggest Italian car manufacturers are sceptical about the
viability and future prospects of electric vehicles. (Beech, 2014). Unlike Italy, other European
country Hungary takes electric vehicle as a significant way to strengthen its automotive
industry by supporting research and development. (Varga, 2014). Among the European
countries, Germany, Hungary, Italy and Poland did not provide high incentives. In Germany,

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Hungary, and Italy Electric vehicles s are exempted from the annual circulation tax, however
the amount is not sufficient; on the other hand, for conventional vehicles, it is typically a few
hundred euros per year. For non-monetary incentives, the German and Italian governments
subsidized the installation of electric charging points in main city locations. (European
Automobile Manufacturers Assosiation, 2015) . In Hungary, BEVs are also exempted from
registration tax but again, the amount is quite negligible (Registration tax calculator Hungary,
2023). In Poland there are no incentives at all.
Review of Other research papers:
In order to promote EVs sales and infrastructure there are mainly two standard policies; they
are: using the government’s financial and fiscal approach, namely tax incentives and financial
subsidies (Jenn, Azevedo, & Ferreira, The impact of federal incentives on the adoption of
hybrid electric vehicles in the United States, 2013). Most of the recent research has focused on
optimizing and increasing the sales of EVs and electric charging stations by using updated
financial fiscal policies whereas most of the previous studies that were published used
mathematical models to optimize EV sales and electric charging station infrastructure.
(Andrenacci, Genovese, & Ragona, 2017) came up with a simulation model approach to find
out the correct number for the charging infrastructure in an urban area of the city of Rome
based on the best service given to the local drivers and the results were used to determine the
optimal number of charging stations based on that scenario that always maintained given level
of service. (Rahmani-Andebili & Fotuhi-Firuzabad, 2017) used an adaptive approach for
distribution system and charging stations for plug-in electric vehicles (PEV). They studied the
issue of optimal distribution system reconfiguration and charging management of Plug in EVs
(PEVs). In their research paper they used stochastic, adaptive, and dynamic predictive control
tool of the stochastic model to find a solution and manage the variability and uncertain power
of renewable energy sources.
(An, Yang, Yu, & Zhao, 2020) designed and developed an intriguing online auction scheme
for electric vehicle bidding and charging which was capable of allocating limited energy
sources to EVs with multi-unit demands of electricity. This scheme also matched the EVs and
geo distributed charging stations, and gave proper protection to location privacy. The
researchers proved that the LoPro scheme was able to achieve individual rationality, incentive

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compatibility, and e-differential privacy. They also explained the effectiveness of LoPro based
on of EV utility, buyer satisfaction ratio, energy allocation, efficiency. (Soleimani &
Kezunovic, 2020) worked with a model to investigate the economic positive aspects of
postponing EV charging on transformer conditions. The objective of the model was to
determine the incentive amount that should have been paid if the charging was postponed and
compared it with the economic impact of transformer loss of life and failure hazard to find the
global optimum. (Ouramdane, Elbouchikhi, Amirat, & Gooya, 2021) did an important review
and analysis of multiple works on MicroGrids (MGs) topologies and components, electric
vehicles integration, its bidirectional energy management and energy management system. The
research paper takes into consideration of the distributed energy generation, energy storage
systems, EVs, and provides an overview of MGs technology advancement in recent decades,
it also discusses regarding the main MGs architecture, operating modes, sizing, energy
management systems, and integration of EVs.
(Danial, Azis, & Abas, 2021) did his research in the e Bruneian market and discussed about
the feasibility of implementing an electrical charging station by doing a life cycle cost analysis
and comparing it with the Life Cycle Cost Analysis of a conventional filling station. Their
research suggested crucial recommendations to the government, investors, and manufacturers.
They were: i) recommendation to the government on current subsidies for electricity cost and
initial subsidy for the acquisition cost; ii) recommendation to an investor to find a suitable site
for electric charging stations to minimize the acquisition cost and iii) recommendation to
manufactures was about reduction of equipment and installation costs. Finally, the research
also estimated the approximate number of public electric charging stations required for Brunei
to serve expected electric vehicles by 2035. - (Falcão, Teixeira, & Sodré, 2017) did a
comparative study between an EV and its conventional version and were investigating on
techno-economic and carbon emissions analysis for commercial EVs, light duty and IC
vehicles and buses. Their final result about the environmental analysis showed the result that
CO2 emissions from the EV was 4.6 times lower compared to the diesel vehicle
Research gaps and shortcomings:
The reviews presented above delivers an overview of the recent research studies focusing
on the implementation of various policies on the adoption of EVs, reduction of GHG emissions
and consumer expenditures in the United States, East Asia, and Europe. The methodologies

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that are applied include regression models, system-dynamics, mixed logit model and choice-
based surveys. The explored policies have perfectly covered a wide range of subsidies and tax
incentives schemes, including purchase tax credit, emissions taxes, vehicle registration fees,
and tax on conventional fuels. While numerous research studies have shaded light on the total
cost of vehicle ownership and impact of fiscal incentives on consumer's behaviour.
There are no studies that discusses and gives idea about optimal tax incentives and subsidies
for comprehensively promoting electric vehicles and electric charging stations, especially in
Bangladesh, based on cost minimization and reduction in transport emissions. At the same time
the long run implications of transitions to EVs for government revenues and overall
macroeconomic benefits from both government and consumer perspectives are not discussed
properly and the key fiscal parameters including value added tax, excise duty tax, distance tax,
weight tax, disposal charge, carbon tax and various fuel taxes are not fully explored. They also
do not give us any proper idea about:
1) The number of incentives and subsidies that can be prepared by a government with a
limited budget to optimize the number of electric vehicles.
2) The approximate amount of reduction in carbon emission and transportation costs.
Effect of tax incentive and subsidy on innovation performance:
Continuous improvement in innovation and performance is the key ingredient for the
development of Electric vehicle industry in any country. Numerous literatures support the
inevitable fact that the tax incentives and subsidies provided by the government directly affect
the overall innovation of an industry.
(Zhang, Chen, Yang, & Xin, 2015) in their paper proved that government subsidies have a
significant positive effect on enterprise innovation. (Boeing, 2016) said that without a doubt
government subsidy can improve the innovation performance of any enterprises, but it also
causes a certain crowding out effect on the R&D investment of enterprise. Many scholars found
that most of the previous literature never distinguished between R&D subsidies and tax
incentives and only did empirical research on government subsidies as a whole. However now
we know that, R&D subsidies and tax incentives are not the same, instead they are quite
different, and their impacts and mechanisms on various enterprise innovation are also different.
(He, Jiang, & Fang, 2023) Therefore, many scholars explained government subsidies

17. 17 | P a g e
according to the subsidy details, and analyzed how different forms of subsidies affect enterprise
innovation performance, and comes up with policy suggestions based on this. Some started to
to subdivide government subsidies. (Miaoa & Li, 2023) explain that fiscal incentive policies
which are imposed by the respective government are certainly more flexible and easier to
implement than tax policies, and it ensures the improvement of innovation performance in
high-tech industries. The fiscal incentives should be applied to high-tech industries for higher
returns from innovation. (Liu, 2016) studied strategic emerging industries (Electric vehicle and
pharmaceutical industry) and divided government subsidies into fiscal subsidies and tax
incentives. After that he still found that fiscal subsidies had more considerable effects. On the
other hand, other researchers had the opposite answer. Gustavo did his research on Argentina
and other countries and found that the effect of tax incentives on improving enterprise
innovation performance was seen in low-technology sectors (Crespi, Giuliodori, & Rodriguez,
2016)
From above we can see that researchers have compared and analyzed the impact of R&D
subsidies and tax incentives on enterprise innovation performance from different perspectives.
However very few scholars have studied how different types of government subsidies affect
the innovation performance of the Electric vehicle industry in detail. Nowadays most high-tech
industries are technology and capital-intensive industries, but compared to the other high-tech
industries, the EV industry has certain particularity, which is discussed in the following aspects:
first of all the Electric vehicle industry needs a larger scale of research and development
investment for the R&D of battery and other manufacturing products in the initial stage;
secondly, the EV industry should get high R&D investment, and the rate of return and gross
profit margin is relatively high. If the initial research and development are successful, high
monopoly profits are expected to be obtained under the condition of high patent protection
level. Thirdly, the EV industry is an industry with low product price elasticity and this unique
and high demand successful new products are often sold at a higher price, which is also an
important reason why the gross profit rate of this industry is higher than that of other industries.
But the industry is also a high-risk industry as the research and development failure probability
is very high. Therefore, the early stage of research and development of the capital demand is
more urgent, that is, if the initial research and development subsidies can be obtained, it will
be more conducive to easing the financial constraints of R&D of the EV industry. Based on the
above analysis it can be said that R&D subsidies can promote the improvement of innovation
performance of EV industry, more than the tax incentives.

18. 18 | P a g e
Disadvantages and challenges in Bangladesh’s EV adoption:
Despite of having positive and sufficient support from the government Bangladesh faces
certain challenges in Electric vehicle adoption. There are several barriers limiting the electric
vehicle (EV) adoption in Bangladesh. They are:
1)Lack of Infrastructure: One of the crucial barriers is the limited charging infrastructure
for electric vehicles. Bangladesh has a well-established network of fuel stations for gasoline
and diesel vehicles. Transitioning to electric vehicles would require additional investment in
charging infrastructure and could affect the existing businesses. The availability of charging
stations is significant for potential EV buyers to feel confident about owning and using an
electric vehicle in the long run. To promote EV adoption, there should have a lot of charging
stations throughout the all corners of Bangladesh. Almost all the charging stations are private
and they charge higher rate for EV charging. On the other hand, the national grid is under
pressure for such type of EV charging demand especially at peak hour (Rasel, 2014). Charging
an electric vehicle generally takes longer than refueling a conventional car. This can be
perceived as an inconvenience by some potential customers. There is another problem which
is finding the right space for EV charging anytime due to long queue. Due to this situation, the
EV owner has to wait and kills the time which decreases the income of the EV drivers. Lack of
charging infrastructure can also cause Range anxiety, which refers to the fear of an electric
vehicle running out of charge before reaching its destination or a charging station. This concern
can be more prominent in countries with inadequate charging infrastructure, like Bangladesh.
(Ahmed M. R., 2019)
2) Battery price and capacity: There are multiple types of battery in Bangladesh, such as:
lead-acid, lithium ion, NiCad, Zn/air, Ni-Zn, Ni-MH, Na/S batteries. Among these lead acid
batteries are popular due to its low cost. But this lead acid batteries contain a number of
drawbacks such as- it cannot be discharged more than 20% of the rated capacity, low power
density, heavy weight, lower life cycle. On the contrary, lithium-ion batteries are advantageous
over lead acid batteries Lithium-ion batteries have few disadvantages like high cost, recharging
takes large time. On top of that Bangladesh does not have the battery industry which could
have cheaply supplied good quality battery to Electric vehicle production. (Changfu, 2018)
3) High Initial Cost and Limited Model Choices: Almost all the efficient Electric vehicles
tend to have a higher initial market cost compared to other regular and conventional internal
combustion engine vehicles. This cost disparity can deter potential buyers, particularly in a

19. 19 | P a g e
country with lower average incomes like Bangladesh. Besides, initially the availability of
electric vehicle models in the market may be limited, which certainly restricts consumers'
choices. A diverse range of options, including different vehicle types and price ranges, would
make EVs more intriguing and appealing to a broader segment of the population. (Ahmed S. ,
2019)
4) Quality of road and Rural Challenges: For better transportation Electric vehicles require
smooth and undamaged roads. The state of road infrastructure in some areas of Bangladesh
might not be perfect for electric vehicles. EVs often require smooth and well-maintained roads,
and inadequate infrastructure can affect the driving experience and potentially impact the
vehicles themselves. Even today some of the roads in Dhaka city (capital of Bangladesh) aren’t
even suitable for ICEV transportation and this will surely demotivate potential customers from
purchasing a Electric vehicle. On the other hand, the rural areas in Bangladesh may face even
larger barriers to EV adoption, as charging infrastructure and access to information and
technical support might be limited compared to urban areas. Basic knowledge and awareness
and education about electric vehicle engines among the general public may be insufficient
(Ahmed S., 2019)
5) Corruption: Even though Bangladesh government has initiated some major rules and
regulations to adopt electric vehicles still there is a possibility that the producers of ICEV
(Internal combustion engine vehicle) might bribe the political leaders to change the regulations
which might make it for foreign and local producers to manufacture EV in Bangladesh. (The
Daily Star, 2022)
Disadvantages and challenges:
While studying the development of innovations, (Arrow, 1962) determined that in a
capitalist system, firms sometime underinvest in research and development of new
technologies. This happens because of uncertainty, and innovation's public benefit often
outweighs its private value to the company. The externality, which is also known as “positive
knowledge spillover”, occurs when innovations provide valuable information to non-
consumers sometimes to the competitors (Horbach, 2008).

20. 20 | P a g e
For example, firms are not always able to prevent their competitors from taking advantage
from their R&D efforts. The degree to which a firm can defend the profits of an innovation from
competitor imitation is known as appropriability (Teece, 1986). The reason for this is that it is
quite impossible for a firm to keep every news and element of a new technology secret, and
this why other companies can gain by learning from the new information and in some cases
stealing the work of the original innovating firm. Because of this knowledge spillovers,
businesses are less likely to invest in the development of new innovations that are easily copied
(lower levels of appropriability) because they will not be able to capture all of the rewards from
a successful new technology (Teece, 1986). Positive knowledge spillover forces the firms to
invest in the research and development of new technologies but they do so at a lower level than
would be expected based on the financial benefits that innovations provide.
However, learning by doing and economies of scale can rapidly lower costs and improve
performance (Foster, 986). On top of that, emerging technologies have to face further barriers
as they often compare poorly to existing dominant designs in important criteria for example in
price and performance (Adner, 2002). Most of the early/late majority adopters are much more
risk adverse, and are not willing to purchase an innovation that is different from the dominant
design (Rogers, 1995). It is important for new technologies to attract a significant enough
number of early adopters to develop a market niche (Geels, 2002). In order for the innovation
in electric vehicles to have a significant impact, it needs to be widely adopted (and have
comparatively lower emissions levels than combustion engines). To make it happen, there must
be higher demand within the EV niche market that manufacturers continue to develop and sell
the automobiles. Beside that the governments must employ financial incentives to help attract
early EV adopters. (Sierzchula, Bakker, Maat, & Wee, 2014)
Products (EV) that come from Eco-innovations differ from other new products and services
because they provide a lower environmental impact than the conventional products (Internal
combustion engine vehicles) (Rennings, 2000). Examples of such goods range from
incremental improvements to existing designs such as turbocharging in automobile engines to
more common technologies, like solar cells. The eco-innovation products improve the overall
general social utility through lower pollution and emission levels. Unfortunately, this
externality also creates market failure, and ultimately limits their development and adoption
(Jaffe, Newell, & Stavins, A tale of two market failures: Technology and environmental policy,
2005)

21. 21 | P a g e
Investments in eco-innovation are specifically demotivated because the received benefits
from lower pollution levels are not counted in the product's final price. The externality pollution
function is such that that even though many societal members profit from eco-innovations
through improved health and safety, firms are not entitled to charge those individuals for their
marginal gains. Due to this, eco-innovations have lower adoption levels as the societal benefits
from decreased pollution are not included in product costs (Brown, Market failures and barriers
as a basis for clean energy policies, 2001).
Another barrier that is also responsible for lower eco-innovation diffusion is bounded
rationality, which has the capability to influence consumer valuation of a product's purchase
price, lifetime cost and operating expenses. Individuals are aware of only a portion of the
available options instead of using rational choices to maximize an individual's utility, and thus
act on the imperfect information (Nelson & Winter, 1985). So, instead of calculating out the
total cost of ownership of a good, consumers often end up using rules of thumb to guide their
purchasing behavior (Jaffe & Stavins, The energy-efficiency gap What does it mean?, 1994);
This pushes an individual to place too much importance on the purchase price instead of in
value operating expenses (Levine, Koomey, McMahon, Sanstad, & Hirst, 1995). The reason
for this is that many eco-innovations have high purchase prices and low operating expenses,
they have often experienced slow diffusion rates than others (Brown, Market failures and
barriers as a basis for clean energy policies, 2001).
Regarding EVs, majority of the consumers looking to purchase alternative fuel vehicles do
not accurately consider the fuel economy in their vehicle purchase decisions, which leads to
irrational behavioral outcome (Turrentine & Kurani, 2007)
Conclusion and work for future:
This paper, portrays the impact of government subsidies and tax incentives on the current
and future perspective of electric vehicle in Bangladesh and also discusses the situation of other
developed and developing countries around the world through the review of multiple research
papers.
Bangladesh as a developing country has both high hopes and demerits for the adoption of
Electric vehicles. Initially, electric vehicles such as auto-rickshaws, electric bikes, electric
bicycles, cars and electric tri-cycles must be registered on the national website. Once the

22. 22 | P a g e
registration process is finished, it becomes possible to determine the total number of charging
stations needed in various locations across Bangladesh. The charging rate for these EVs should
be chosen based on their energy consumption patterns. With the help of the antitrust authority
Bangladesh government should make sure that the local/domestic producers including the,
foreign investors are getting the full from the new imposed rules and regulations. Once the
electric vehicle industry gets running at full tilt the government must impose certain regulations
on the EV producers to provide long term technical support to the consumers. New investments
must be done on improving the roads and transportation system, especially in the rural areas.
To reduce the occurrence of frequent road accidents, it is advisable to have dedicated lanes
for electric vehicles on highways. The government institution should offer training facilities
to electric vehicle drivers to enhance their performance and ensure safe driving practices. The
Bangladesh Road Transport Authority (BRTA) can organize training and workshops to fulfill
this objective. The government ought to promote the establishment of additional research
centers focusing on transportation vehicles to drive technological advancements. Such research
centers can play a crucial role in extending the range of electric vehicles and enhancing battery
capacity. Furthermore, raising awareness by disseminating the environmental advantages of
using electric vehicles can foster greater adoption of this technology in Bangladesh. It's
important to note that despite these barriers, there has been a growing global trend toward
electric mobility, and many countries, including Bangladesh, have been taking steps to address
these challenges and promote EV adoption. As the technology continues to advance and
infrastructure improves, some of these barriers may gradually diminish.

23. 23 | P a g e
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