Can China’s BEV market sustain without government subsidies?: An explanation using cues utilization theory

Abstract

After several years of intensified implementing the subsidy policy for battery electric vehicles (BEVs) intending to boost China’s BEV market and the development of China’s domestic BEV industry, the Chinese government plans to totally abolish the government subsidy policy in 2020, one critical issue faced is that whether the BEV market can sustain without the subsidies. This work aims to answer this question, which firstly started by building a theoretical scheme for understanding the roles of China’s favorable government policies and market forces on motivating consumers to adopt BEVs based on the cues utilization theory. In particular, the commercial BEV demonstration policies and Chinese BEV brand reputation were considered in this scheme. And then by building several indexes to reflect the real effects of the market forces and government policies considered in this scheme, a structural equation model is constructed to explore how BEV sales and BEV battery technology were impacted during 2016/01–2019/12. The final results prove that China’s BEV policies succeeded a lot in providing consumers the extrinsic cues helping them to reduce perceived risks of purchasing BEVs, and thus contributed to boosting China’s BEV sales. Constructing more charging piles exerted the most significant effects, followed by the improving global reputation of Chinese BEV brands and increase in commercial BEV sales. The subsidy policy did not contribute the growth of China’s BEV sales directly, but indirectly through the mediation of improved BEV battery technologies and the magnitude is rather low, indicating that the growth of China’s BEV sales has already been less driven by the government subsidies, from which we can conclude that it is very possible for China’s BEV market to sustain without government subsidies. Policy implications for other governments are provided at the end.