Single rollover or dual rollover: How a monopoly NEV manufacturer responds to NEV credit policy

Abstract

The NEV credit policy plays a crucial role in advancing the new energy vehicle (NEV) industry and environmental conservation. This study investigates the monopoly NEV manufacturer’s optimal rollover strategy (Single Rollover (SR) vs. Dual Rollover (DR)) and pricing scheme (skimming vs. penetration) under the government’s stricter calculation criteria for NEV credit policy, considering a two-period market with strategic consumers. We find that the NEV manufacturer typically adopts a skimming pricing scheme in DR strategy, while a penetration pricing scheme in SR strategy. The choice between SR and DR strategy hinges on the government’s calculation criteria for NEV credits, product upgrade speed, and vehicle environmental performance improvement. When the calculation criterion for NEV credits is moderate, or when it is low, coupled with fast product upgrade speed and marginal improved environmental performance of the new vehicle, SR strategy is beneficial to the NEV manufacturer to avoid the cannibalization between new and old vehicles. In contrast, the NEV manufacturer can benefit from DR strategy through price discrimination between new and old vehicles to attract consumers from different market segments. However, stricter calculation criteria for NEV credits do not always result in higher social welfare.