“To be unfolding” or “be on its last legs”—Preferential tax policies between supply and demand and the development of the new energy vehicle industry based on an ABM model

Abstract

As a strategic emerging industry, governments have introduced relevant policies to promote the development of the new energy vehicle (NEV) industry. Based on the agent based modeling (ABM), this study separates China's tax incentives into supply and demand sides, examines the influence of various policies on industrial development, and further optimizes policy combinations to boost industrial development. The study found that for R&D investment and technological progress, supply-side support showed significant promotion, while demand-side policy showed crowding-out effects, and the two interfered with each other, which was not conducive to the overall effect of the policy mix. For market expansion, demand-side policy has significantly boosted NEV sales, and the effect is immediate, while supply-side policy has also boosted sales to a certain extent, but the effect is lagging. The combination of the two reflects the effect of policy synergy. Sensitivity analysis reveals that a strong supply-side level is essential to promote R&D investment and that ownership is more sensitive to demand-side changes. According to the theory of Pareto optimality, it is possible to reduce the demand-side policy appropriately based on the existing level and raise the supply-side level slightly to enhance the policy effect.