Estimating gasoline demand under electric vehicle adoption: A spatial model for Brazil

Abstract

We investigate gasoline demand growth in Brazil over a 16-year period, assessing its response to electric vehicle (EV) adoption and taxation measures. Using a spatial-based econometric model with data from 2006 to 2021 across all Brazilian states, we observe that annual gasoline sales nearly doubled from 2006 to 2014, reaching 0.22 m³ per capita, and then stabilized. Our model reveals that the EV motorization rate negatively impacts gasoline demand, with an elasticity of -0.126, compared to 0.609 for internal combustion engine vehicles. The results show that aggressive fuel taxation alone is insufficient to achieve long-term reductions in demand. However, fleet electrification is more effective, potentially reducing per capita gasoline consumption by 90% between 2021 and 2034. A combined approach integrating taxation and electrification offers the most efficient pathway for reducing demand while generating revenue for public investment in Brazil’s transition to a carbonfree transportation sector.