Vehicle Replacement, Technological Progress, and the Fate of Old Cars

The energy transition largely hinges on replacement decisions in durable goods markets. Electric vehicles (EVs), appliances, heating systems, and industrial equipment are not replaced every year. Consumers decide not only which product to buy, but also when to replace it, whether to sell it in a secondary market, and whether to wait for future technologies. These dynamic decisions become particularly important when cleaner technologies are improving rapidly. On the one hand, consumers may replace vehicles more quickly as older models become obsolete, reducing the need for policy intervention. On the other hand, if consumers expect future vehicles to be substantially better and cheaper, technological progress may increase the value of waiting and delay replacement, thereby widening the gap between private and socially efficient turnover rates. Understanding how these competing forces interact is central to evaluating the role of replacement and scrappage subsidies in accelerating fleet turnover and reducing emissions.