How to reduce range anxiety among electric vehicle consumers through government subsidies?

Abstract

With the growing global focus on electric vehicles, governments worldwide have implemented various subsidy policies to promote their adoption and usage. These policies significantly influence competitive behaviors in the automotive market. This study develops three game-theoretic models to examine the competitive behaviors of internal combustion engine vehicle (ICEV) manufacturers and electric vehicle (EV) manufacturers under three scenarios: no subsidies, subsidies for consumers, and subsidies for manufacturers. Through both theoretical and numerical equilibrium analyses, the study investigates optimal pricing strategies and profitability across different scenarios. The results indicate that adjusting the per-mile cost difference between ICEVs and EVs plays a pivotal role in shaping their pricing strategies. Furthermore, governments can influence the dynamics of the automotive market by strategically adjusting fuel and electricity prices. Notably, when the ratio of consumer sensitivity to subsidy intensity and the subsidy coefficient for EV manufacturers is low, subsidies targeting manufacturers prove more effective in promoting EV adoption than those directed toward consumers. This study provides critical insights and actionable policy recommendations for designing effective subsidy programs to accelerate the transition to electric vehicles. It provides valuable guidance for policymakers and stakeholders in the automotive industry, contributing to the sustainable development and competitiveness of the sector.