Abstract
In order to address challenges in the sustainable development of transportation, economy, and environment, governments of China and conventional automobile manufacturers are extremely concerned about the development of the electric vehicle (EV) manufacturing industry and market. However, owing to the limitations of EVs and the government economic policies on decreasing subsidies in China, many manufacturers are worried about entering the EV market. Given the low consumer preference for EVs, using a leader-follower Stackelberg game model, we investigate the impact of government a subsidy on the optimal production and pricing decisions of an auto manufacturer who could produce both EVs and conventional vehicles. We characterize whether/under what conditions the manufacturer’s decision to offer EV products under government subsidy, whilst increasing its profits (a win-win situation). On the policy side, we delineate how government a subsidy can be set to realize the inherent economic, environmental, and social benefits of EV production (the triple win of EV production). We further investigate the impact of EV manufacturing- and society-related factors on the balance among manufacturer profits, environmental impact and social welfare. This study also finds that the adoption of EVs is not bound to be beneficial for the environment.
Highlights
Nowadays, given the global trend towards environmental sustainability [1], electric vehicle (EV) has been recognized as a promising means to reduce dependence on petroleum fuel and carbon emissions from the transportation industry [2]
Owing to the exacerbating energy crisis and the environmental pollution that is caused by GVs, EVs serving as a new kind of green transportation vehicle has received global attention
The driving factors that are related to the threshold conditions are composed of the internal and external factors of the automobile manufacturer, including the production costs of GVs and EVs, consumer acceptance of EVs, and government subsidies
Summary
Given the global trend towards environmental sustainability [1], electric vehicle (EV) has been recognized as a promising means to reduce dependence on petroleum fuel and carbon emissions from the transportation industry [2]. Zhang et al [8] argue that in China, the high purchase price is a major barrier to promote EVs. acting as a primary economic supporting policy, financial subsidies for EVs are highlighted and are widely provided by central or local governments of China (see Table 1). Government should set reasonable subsidies to induce auto manufacturers to offer EVs, only if EV production enhances economic, environmental and social benefits (referred to as the triple win for remanufacturing) in the community. Owing to fiscal limitations, our first main research objective is to delineate how a proper subsidy or subsidy range can be set for EV adoption in their infancy to realize the social, economic and environmental benefits of EV production, which is a significant concern for government at all level in China
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