Optimal decisions of the automotive supply chain in China under a jointing government subsidy and dual credit policy

Abstract

The operation of the automotive supply chain in China is primarily influenced by government subsidy policies and the dual credit policy. Based on a two-echelon automotive supply chain consisting of one manufacturer and one retailer, this paper incorporates the technological decisions regarding battery performance improvement of new energy vehicles, including battery electric vehicles and plug-in hybrid electric vehicles, as well as the energy-saving efficiency improvement of traditional fuel vehicles. Four policy scenarios are considered, namely a baseline scenario with no policy intervention, scenario of government subsidy-only policy, scenario jointing subsidy-dual credit policy, and scenario of dual credit-only policy. A supply chain pricing and technological performance decision model is developed for each policy scenario. Using a Stackelberg game approach, we derive the optimal decisions and profits of supply chain members under the four policy scenarios. The results show that: (1) an increase in the credit trading price generates a stable positive price incentive effect on battery electric vehicles, whereas its impact on the prices of plug-in hybrid electric vehicles and traditional fuel vehicles is jointly moderated by government subsidies and consumers’ green preferences. (2) R&D subsidies and credit trading price effectively promote improvements in the battery performance of new energy vehicles, whereas purchase subsidies may weaken incentives for the battery performance enhancement of new energy vehicles. Meanwhile, the energy-saving efficiency of traditional fuel vehicles exhibits differentiated responses depending on policy instruments and the level of green utility. (3) R&D subsidies and purchase subsidies can simultaneously improve the profits of all members in the automotive supply chain. Moreover, under the scenario joining government subsidy-dual credit policy, the credit trading price can further enhance the profitability of supply chain members. This paper clarifies the differential impacts of various policy instruments on automotive supply chain decisions and benefit incentive mechanisms.