Charging forward or falling behind? Effects of electric vehicle subsidy removal

• The removal of the Swedish EV subsidy led to a sharp increase in EV-leasing prices. • Without the subsidy EVs have become the most expensive leasing option. • Private leasing of EVs decreased when the subsidy was removed. • Private leasing was central for lightweight EVs and low-income groups. • EV acquisition by organisations was not impacted by the subsidy removal. To reach climate goals in the transport sector the pace of electrification needs to speed up. Sweden has one of the highest shares of electric vehicles (EV) in the world, and 45% of the EV fleet operates under leasing agreements. In 2018, the Swedish government introduced a bonus for low emission cars and a taxation on fossil-fuelled vehicles. The bonus was however eliminated in November 2022, effective immediately. We show that this led to a significant decline in private leasing of EVs while other market segments remained stable. Private leasing played a key role in expanding the stock of lightweight EVs and dominated new EV registrations among low-income households, which declined following the bonus withdrawal. We also show that the subsidy removal led to a significant increase in EV-leasing prices, making EVs the most expensive option across price segments.