Optimal incentive schemes to achieve a given market share target for new energy vehicles under China's dual credit policy

Abstract

The Chinese national government and local governments have introduced multiple incentive measures to increase the market share of new energy vehicles (NEVs), such as dual credit policy, financial subsidies, and building new charging infrastructures. However, the government's budget to support the development of NEVs is limited. In this paper, we consider a duopolistic market consisting of a gasoline vehicle (GV) firm and an electric vehicle (EV) firm and develop a multi-level game-theoretic model based on the fact that the Chinese government seeks to achieve a given market share target with the minimum expenditure. A comparison of the equilibrium results in three incentive schemes differentiated by the financial subsidy is conducted to investigate the effectiveness of various incentive schemes. Furthermore, we consider a real situation in China that the government attempts to achieve a target for the total number of charging infrastructures through a reasonable policy design. The results in this study reveal that, with the EV market share target in mind, raising the requirements of dual credit policy has no effect on the EV firm's profit under EV purchase subsidy, is beneficial to the EV firm's profit under construction cost sharing subsidy, and is detrimental to the EV firm's profit under per-unit construction subsidy. It is worthwhile for the government to subsidize for infrastructure construction effort rather than consumers' purchase cost. Given a target for the total number of charging infrastructures, construction cost sharing subsidy can provide more motivation for the EV firm to build charging infrastructures than per-unit construction subsidy.