Incentivizing the adoption of electric vehicles in city logistics: Pricing, driving range, and usage decisions under time window policies

Abstract

In the presence of time window policies for electric vehicles (EVs) and internal combustion engine vehicles (ICVs), a logistics service provider (LSP) may renew her fleet by partially replacing existing ICVs with either only EVs (strategy E) or a mix of EVs and new ICVs (strategy H). In this paper, we investigate the LSP's choice between strategies E and H and the impacts of these time window policies on the LSP's EV usage rate and the social welfare. We analyze a two-echelon supply chain involving an EV manufacturer and an LSP or two competing LSPs and perform game analyses. The EV manufacturer determines the driving range and sale price of EVs and the LSP makes her EV usage rate and service pricing decisions. We find that strategy H is not always more profitable than strategy E, which depends on the unit operating cost for new ICVs and the portion of demand fulfilled by new vehicles. If they are sufficiently high or both of them are sufficiently low, then the LSP should opt for strategy E. A wider time window for EVs can encourage the monopolistic LSP's EV usage rate, whereas a narrower time window for ICVs can encourage (discourage) this LSP's EV usage rate if the demand potential for her service is sufficiently large (small). In addition, the per mile environmental impact of using EVs also influences the impacts of time window factors for EVs and ICVs on the social welfare.