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Optimal production and pricing strategies in auto supply chain when dual credit policy is substituted for subsidy policy

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  • Yu, Yi
  • Zhou, Dequn
  • Zha, Donglan
  • Wang, Qunwei
  • Zhu, Qingyuan

Abstract

The Chinese government has proposed a dual credit policy (DCP) as a substitute for electric vehicle (EV) subsidies, which fluctuates the auto market. To investigate the policy substitution influences for the production and pricing strategies, we use Stackelberg game paradigms to model a two-stage auto supply chain. The manufacturer regulated by the DCP produces both EV and internal combustion engine vehicles (ICEV). The retailer sells them to heterogeneous consumers. By backward induction, the optimal production and pricing strategies are derived for the subsidy policy only (scenario B) and with a joint subsidy policy and DCP (scenario DS). Our findings show, 1) different with only one case in scenario B, the manufacturer and the retailer have three corresponding optimal production and pricing strategies in scenario DS, according to the manufacturer’s Corporate Average Fuel Consumption credit (CAFC credit); 2) the demand for the ICEV may also decline like EV as the subsidies are phased out in scenario DS when the manufacturer’s CAFC credit is in balance case; 3) the changes of DCP rules may have different effects on the optimal production and pricing strategies in different CAFC cases.

Suggested Citation

  • Yu, Yi & Zhou, Dequn & Zha, Donglan & Wang, Qunwei & Zhu, Qingyuan, 2021. "Optimal production and pricing strategies in auto supply chain when dual credit policy is substituted for subsidy policy," Energy, Elsevier, vol. 226(C).
    • Handle: RePEc:eee:energy:v:226:y:2021:i:c:s0360544221006186
    DOI: 10.1016/j.energy.2021.120369
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    3. Ying Xie & Jie Wu & Hannian Zhi & Muhammad Riaz & Liangpeng Wu, 2023. "A Study on the Evolution of Competition in China’s Auto Market Considering Market Capacity Constraints and a Game Payoff Matrix: Based on the Dual Credit Policy," Sustainability, MDPI, vol. 15(4), pages 1-24, February.
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    6. Haoyi Zhang & Fuquan Zhao & Han Hao & Zongwei Liu, 2021. "Effect of Chinese Corporate Average Fuel Consumption and New Energy Vehicle Dual-Credit Regulation on Passenger Cars Average Fuel Consumption Analysis," IJERPH, MDPI, vol. 18(14), pages 1-13, July.
    7. 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.
    8. Yangyang Wang & Yongxi Yi & Chunyan Fu & Yuqiong Li, 2023. "Price competition and joint energy‐consumption reduction technology investment of new energy and fuel vehicles under the double‐points policy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2278-2291, June.
    9. Feng Liu & Yingshuang Tan & Sudipto Sarkar & Xueqing Zhang & Xingjun Huang, 2023. "When to invest in electric vehicles under dual credit policy: A real options approach," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2186-2198, June.
    10. Ma, Miaomiao & Meng, Weidong & Li, Yuyu & Huang, Bo, 2023. "Impact of dual credit policy on new energy vehicles technology innovation with information asymmetry," Applied Energy, Elsevier, vol. 332(C).
    11. Yi, Yongxi & Zhang, Meng & Zhang, Aoxiang & Li, Yuqiong, 2024. "Can “dual credit” replace “subsidies” successfully? -based on analysis of vehicle supply chain decisions under the digital transformation of technology," Energy Economics, Elsevier, vol. 130(C).
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