Abstract:

In addition to the consumer subsidy scheme, governments recently implemented a hybrid scheme with a separate dual-credit scheme on the supply side. It is essential to understand the impact of this new practice on a vehicle manufacturer (VM) that provides gasoline vehicles (GVs) and/or electric vehicles (EVs) and the consumer and social welfare. Implementing the dual-credit scheme leads to higher prices of GVs and EVs, but the effective price of EVs is actually lower. As the cost difference decreases and consumers’ low-carbon awareness (LCA) increases, the VM prefers the product choice strategy, including EVs under the pure subsidy scheme. Surprisingly, the hybrid scheme makes selling EVs feasible even though the cost difference is high and LCA is low. Although the additional dual-credit scheme can increase EV adoption, it is important to carefully consider the parameter values because failure to do so will harm the VM's profit and consumer and social welfare.