The optimal design of differentiated subsidy policies for new energy vehicle firms by considering the difference in market share and endurance mileage

Abstract

To promote the development of the new energy vehicle industry, China has introduced many subsidy policies. Existing policies rarely consider the difference in market share of new energy vehicle enterprises, but the difference in market share will directly affect consumer demand, and then affect the development of the new energy vehicle industry. Therefore, we consider the difference of the market share and endurance of the new energy vehicle firms at the same time, establishing a Stackelberg model and considering three most common subsidy forms, which are quantity-based subsidies, price-based subsidies, and endurance-based subsidies to derive the optimal differentiated subsidies of the government. The analysis of this paper shows that for the new energy vehicle firms with different market share and endurance, differentiated subsidies can achieve higher social welfare. In addition, for any subsidy form of the sale-based subsidies, price-based subsidies, and endurance-based subsidies, the final cost for consumers will be reduced, and the total sales quantity of the new energy vehicles in the market will increase, but the profits of firms and the sales quantity of one firm could increase or decrease. Lastly, under the assumption of this paper, the optimal price of both firms and social welfare are the same under the three aforementioned subsidy forms.