Tailoring tariffs on electric vehicles (EV) according to vehicle segment may help reduce the effect these levies are having on adoption of smaller EVs in key markets around the world and thus boost the transition to cleaner transport, says a new article in the journal Nature Energy co-authored by David Reiner, Professor of Technology Policy at Cambridge Judge Business School.
“Despite the complexities of tariff setting, we argue that there is huge potential for nuance” to help alleviate the effect tariffs have on EV sales through “recognising the complexity of EV products themselves”, says the journal article by academics in China, the Netherlands, the UK and the US.
Adds co-author David Reiner: “Higher tariffs will discourage adoption among those least able to afford EVs, who are already the ones least inclined to take up EVs.”
Smaller vehicles are 55% of the global market but electric penetration lags
Slowing uptake of EVs in some important global markets such as the EU and US is notably due to weak market penetration rates in mini, small and compact vehicles, the authors say. Such smaller vehicles in 2024 accounted for nearly 55% of the global auto market but less than 16% of EV sales, compared to an average EV penetration of 24% across all vehicle segments.
In China, by contrast, where there has been widespread adoption of lithium iron phosphate batteries, which are far less expensive than lithium nickel–cobalt–manganese oxide cells, EV penetration in smaller vehicle segments reached 38% in 2024.
How an overlooked pillar in tariff policy can help electric vehicle expansion
“A vehicle segment-differentiated tariff policy, for example in the form of exemptions or reduced tariffs for smaller vehicles, may be needed to maintain growth in these critical market segments,” the article concludes.
“Addressing this overlooked pillar in tariff decision making could help alleviate some of the challenges tariffs pose to EV market expansion, particularly in key global markets. While there is no simple solution to the broader challenges tariffs pose – especially to the global low-carbon transition – segment-based tariff distinctions offer a targeted approach that could support and accelerate the transition to cleaner transport worldwide.”
The co-authors of the article are from:
- the Energy Policy Research Group at Cambridge Judge Business School
- the School of Vehicle and Mobility at Tsinghua University in Beijing
- the Tsinghua-Rio Tinto Joint Research Center for Resources Energy and Sustainable Development at Tsinghua University
- Integrated Research on Energy, Environment and Society (IREES), Energy and Sustainability Research Institute at the University of Groningen
- the Global Development Policy Center at Boston University
- the Robert Frederick Smith School of Chemical and Biomolecular Engineering at Cornell University
- the School of International and Public Affairs at Shanghai Jiao Tong University
Featured research
Liu, M., Hao, H., Sun, X., Geng, Y., Reiner, D., Hubacek, K., Qu, X., Lu, J., You, F. and Zhao, F. (2025) “The potential for differentiated vehicle segment tariffs.” Nature Energy
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