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The capital market responses to new energy vehicle (NEV) subsidies: An event study on China

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  • Liu, Chang
  • Liu, Yuan
  • Zhang, Dayong
  • Xie, Chunping

Abstract

Subsidies are crutial for the development of China's New Energy Vehicle (NEV) market. With the country's ambitious goal to achieve carbon neutrality in 2060, NEV is playing a growing role in decarbonising the transport sector. This paper empirically evaluates the effectiveness of three main forms of subsidies: fiscal policy, preferential tax, and government procurement. Specifically, we pay attention to financing issues and use an event study approach to investigate how the capital market responds to these policies. Results show that both preferential tax and government procurement policies have significant positive impacts on NEV stock prices. Relative to lithium-ion battery and NEV manufacturers, charging pile companies benefit less from preferential tax or government procurement. For fiscal subsidy policies, their impacts on NEV stock prices are ambiguous, depending largely on the specific policy contents. An increase in targeted subsidies for those technology-oriented NEV firms has a positive impact on the stock market. However, subsidies falling short of expectations due to frequent policy changes and the removal of local government subsidies are associated with significant negative effects. At this critical stage when the Chinese government is re-designing subsidy policies on NEVs, special attention should be paid to setting a transparent schedule and reducing the potential negative effect caused to the stock market.

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  • Liu, Chang & Liu, Yuan & Zhang, Dayong & Xie, Chunping, 2022. "The capital market responses to new energy vehicle (NEV) subsidies: An event study on China," Energy Economics, Elsevier, vol. 105(C).
    • Handle: RePEc:eee:eneeco:v:105:y:2022:i:c:s014098832100534x
    DOI: 10.1016/j.eneco.2021.105677
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    Cited by:

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    2. Zhou, Huimin & Dang, Yaoguo & Yang, Yingjie & Wang, Junjie & Yang, Shaowen, 2023. "An optimized nonlinear time-varying grey Bernoulli model and its application in forecasting the stock and sales of electric vehicles," Energy, Elsevier, vol. 263(PC).
    3. Yushi Wang & Licheng Sun & Shilong Li, 2022. "Production Decisions of Automakers Considering the Impact of Anticipated Regret under the Dual-Credit Policy," Sustainability, MDPI, vol. 14(11), pages 1-18, May.
    4. Wenhui Zhao & Yimeng Liu & Jiansheng Hou & Lifang Liu, 2023. "Impact of Carbon Trading Mechanism Considering Blockchain Technology on the Evolution of New Energy Vehicle Industry in the Post-Subsidy Era," Sustainability, MDPI, vol. 15(17), pages 1-18, September.
    5. Hsiao, Cody Yu-Ling & Yang, Rui & Zheng, Xin & Chiu, Yi-Bin, 2023. "Evaluations of policy contagion for new energy vehicle industry in China," Energy Policy, Elsevier, vol. 173(C).
    6. Zhang, Xiang & Hu, Xiaoming & Qi, Liang, 2022. "Terminated local subsidy on electric vehicle adoption during the COVID-19 pandemic: The case of Chongqing City," Energy, Elsevier, vol. 259(C).
    7. Danlei Feng & Mingzhao Hu & Lingdi Zhao & Sha Liu, 2022. "The Impact of Firm Heterogeneity and External Factor Change on Innovation: Evidence from the Vehicle Industry Sector," Sustainability, MDPI, vol. 14(11), pages 1-15, May.

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    More about this item

    Keywords

    Capital market; Carbon neutrality; Event study; New energy vehicles (NEVs); Subsidy policy;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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