Dynamic subsidies for synergistic development of charging infrastructure and electric vehicle adoption

Abstract

The governmental subsidy is an important instrument for catalyzing the early adoption of Electric Vehicles (EVs)}. A sustainable subsidy policy must balance between promoting EVs and expanding the charging infrastructure. This paper proposes a dynamic game approach to accelerate the adoption of EV technology. The government observes two correlated processes - the penetration of the EV market and the expansion of the charging infrastructure. It finds an optimal strategy that maximizes the cumulative social benefit in the face of uncertainty. A case study of China's EV industry finds that \blue{the established EV subsidy policies are inadequate to support EVs' growth over the next decades}. In contrast, the optimal subsidies will achieve \blue{the target EV market share and ensure the accessibility to charging infrastructure by 2030}. This non-myopic strategy can prioritize the infrastructure expansion, eliminate policy enforcement's monitoring costs, prevent compensation evasion, and help achieve long-term targets by making proactive regulatory policies.