Optimal Production and Pricing Strategies of Automobile Manufacturers in Big Cities under Subsidy Policy and Dual-Credit Policy

Abstract

Encouraging the usage of new energy vehicles (NEVs) in big cities is not only a key area of priority for the government to encourage the transformation of the automobile industry, but it is also a crucial step in reducing environmental pollution. Big cities commonly limit the number of cars because they lack the resources and space to accommodate new vehicles. A crucial policy to reduce the number of cars in metropolitan areas is the license plate auction policy. Therefore, considering the fuel vehicle (FV)’s license plate auction policy, this study investigated the effects of the subsidy policy and the dual-credit policy on the production decisions of NEVs and FVs manufacturers. A competitive game model was constructed that considered NEV and FV manufacturers and accounted for consumer environmental awareness. The manufacturer’s optimal production decision was analyzed in four different scenarios—no government intervention, a license plate auction policy, a subsidy policy based on license plate auction policy, and a dual-credit policy based on the license plate auction policy. The results suggested that the manufacturer’s profit will be significantly higher in the absence of a license plate auction policy than in the presence of one. In other words, both NEV and FV manufacturers will suffer as a result of license plate restriction. Additionally, improvements in consumer environmental awareness, government subsidies, and credit cost/benefit ratios will improve the weak position of NEV manufacturers following the introduction of a license plate auction.

Keywords

• subsidy policy
• dual credit policy
• license plate auction policy
• new energy vehicles
• big cities