How can taxes and fees on ride-hailing fleets steer them to electrify?
This white paper analyzes the prospect of using strategically designed taxes and fees to steer ride-hailing fleets to electrify by encouraging the cost-effective transition to electric vehicles. It identifies and discusses key principles to create revenue-neutral policies to incentivize electric vehicle adoption and fund the needed charging infrastructure.
The analysis supports the following conclusions:
Government taxes and fee structures can make electric vehicles the most economically attractive technology for ride-hailing fleets. Taxes and fees on ride-hailing vehicles are increasingly common but are not typically designed to promote cleaner cars. By applying higher fees for higher-polluting combustion vehicles, the total operating costs of electric vehicles could achieve parity with conventional vehicles within ride-hailing applications in 2020. If fees are indexed to vehicle tailpipe emissions, a per-trip fee of $0.58 to $1.12 (equivalent to 5% to 9% of ride-hailing gross revenues or $0.07 to $0.14 per mile) is sufficient for electric vehicles to be economically superior to hybrid vehicles based on U.S. operating costs.
A well-designed ride-hailing fee program can help overcome barriers to the deployment of charging infrastructure. The analysis indicates that home and public fast charging are key to the economic viability of electric ride-hailing. Fees can be used to support home charging installation for ride-hailing drivers and fund the deployment of fast charging in optimal urban locations to reduce the opportunity costs from driver downtime. Just 5% to 8% of fees collected from ride-hailing would be sufficient to create a self-sustaining charging infrastructure program.
As ride-hailing fleets transition to electric, taxes and fees will need to be adjusted over time. For government programs to maintain steady revenues while also funding broader city mobility goals, fee structures will need to evolve as more electric vehicles enter the fleet. Combustion vehicle fees will need to increase incrementally over time, and electric vehicle fees will need to be less than those imposed on combustion vehicles.