Improvement strategies of battery driving range in an electric vehicle supply chain considering subsidy threshold and cost misreporting

Abstract

This paper investigates a two-stage supply chain consisting of a battery supplier (BS) and an electric vehicle manufacturer (EVM). Considering consumers’ sensitivity to the battery driving range, the BS can improve the driving range level by investing, and obtain subsidies if the driving range level exceeds the subsidy threshold set by the government. Meanwhile, the BS may misreport his private information of the investment cost to the EVM. We mainly examine the effect of cost information misreporting and how the BS determines the optimal improvement strategy when the subsidy threshold increases. Firstly, a low (high) subsidy threshold makes the BS raise the driving range level above (below) the subsidy threshold; when the subsidy threshold is moderately raised, the choice of the improvement strategy is controlled by both the degree of raising the subsidy threshold and the technical upper limit. Secondly, participants may show different preferences for the improvement strategy under certain conditions. Finally, cost information misreporting brings adverse effects to participants and reduces the driving range level.