Synergistic Impacts of China’s Subsidy Policy and New Energy Vehicle Credit Regulation on the Technological Development of Battery Electric Vehicles

Abstract

With the phasing down of subsidies, China has launched the new energy vehicle (NEV) credit regulation to continuously promote the penetration of electric vehicles. The two policies will coexist through 2020 and definitely pose a dramatic impact on the development of the Chinese and even the global electric vehicle market. However, few studies have systematically investigated the relationship between the two policies as well as the synergistic impacts during the overlap period. This paper interprets the rationales of China’s subsidy policy and NEV credit regulation and establishes a bottom-up model to estimate the synergistic impacts of the two policies on the technological trends of battery electric vehicles (BEVs) from the perspective of credit cost-effectiveness. The results suggest that the subsidy policy still maintains strong support for the development of electric vehicles in China. For small BEVs whose driving ranges are higher than 300 km, subsidies even account for 40–50% of the manufacturing cost. In addition, we conclude that the two policies will complement each other in the transitional period and small BEVs are preferred by both policies. Under the NEV credit regulation, 350 km will consistently be the optimal driving range, which will definitely limit the development of other ranges. With the addition of the subsidy, the limitation will be amended in the short run. However, the effect of the subsidy is decreasing and is going to be canceled after 2020, so the focus should be on the optimization of the NEV credit regulation.