The Positive Reinforcement of New Energy Vehicles on the Overall Automobile Market

Abstract

New energy vehicles (NEVs), including battery electric vehicles (BEVs), plug-in hybrid vehicles (PHEVs) and fuel cell electric vehicles (FCEVs), have gained significant traction in recent years both in China and globally due to heightened environmental awareness, government support, and technological innovations. While some studies suggest that the rise of NEVs has led to a decline in traditional fuel vehicle (TFVs) sales, particularly in developed countries with high EV adoption rates, others argue that the NEV market's growth has spurred innovation throughout the entire automobile industry, which would have a positive impact on the entire automobile market. This paper delves into the intricate relationship between NEVs and the traditional automobile market, concentrating on whether the surge in NEVs causes crowding-out effects or fosters positive reinforcement. Our data analysis supports the latter notion, revealing that NEVs have not supplanted TFVs but have, in fact, energized the entire automotive sector. Drawing insights from existing literature, this paper analyses the key drivers behind this positive reinforcement, emphasizing the role of government policies, consumer behaviour, and industry innovations in shaping this dynamic.