Production coopetition strategies for an FV automaker and a competitive NEV automaker under the dual-credit policy

Abstract

This paper investigates the strategic choices in production between competition and coopetition for a fuel vehicle (FV) automaker and a rival new energy vehicle (NEV) automaker under the dual-credit policy. A benchmark competition model and three coopetition models are formulated: a Cournot competition production strategy, a unified production strategy, an FV priority production strategy, and an NEV priority production strategy. Based on these four production strategies, this study examines the optimal strategies for both parties in a stable credit market and with credit trading risk. The unified production strategy is always the most profitable strategy in a stable credit market, although it is also the most difficult strategy for the coexistence of FVs and NEVs in the vehicle market. However, cooperation in credit trading rather than competition in production has proven to be the optimal strategy in any scenario for coping with risk in an unstable credit market. Moreover, for the dual-credit policy, maintaining a relatively high credit price is often more conducive to promoting the expansion of NEVs than setting a high production ratio of NEVs. This study also examines the impact of the credit coefficient, credit equilibrium and NEV substitutability on both parties’ production decisions and profits. Our study provides important managerial implications that can be utilized as strategic guidance for FV/NEV automakers to pursue coopetition under the dual-credit policy.