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Are China's subsidies for electric vehicles effective?
Author(s) -
Deng Zhongqi,
Tian Peng
Publication year - 2020
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3114
Subject(s) - subsidy , china , maximization , battery (electricity) , welfare , business , social welfare , electric vehicle , automotive engineering , environmental economics , industrial organization , economics , microeconomics , engineering , market economy , political science , power (physics) , physics , quantum mechanics , law
China has implemented high subsidy schemes to promote the adoption of electric vehicles. This study constructs an industrial organization model to theoretically analyze and numerically simulate the subsidy efficacy of battery electric vehicles in China. We find that subsidies for battery manufacturers and those for electric vehicle manufacturers are equivalent. Fixed subsidies are better for social welfare maximization than linear subsidies are. Simulation based on Chinese empirical data shows that China's subsidies for electric vehicles are effective but not optimal. It could be a better option overall to enable the vertical integration of the supply chain.