Scenario analysis on subsidy policies for the uptake of electric vehicles industry in China

The development of the electric vehicles (EVs) industry increasingly attracts attention from many countries all over the world, which aims to reduce transportation carbon emissions. Existing studies only focus on the impact of government subsidies on the performance of EVs industry, but overlook the interaction of subsidy policies and the performance of EVs industry. This research therefore develops a system dynamics (SD) model to describe the feedback relationship among subsidy policies, EVs sales, and the uptake of EVs. Different scenarios of combined subsidy policies are designed to simulate and analyze the future development of China's EVs industry. The results indicate that an optimal reduction rate chosen by the government would enable the EVs industry to develop steadily when the purchasing subsidy is going down. Considering combined effects of multiple subsidies, a policy portfolio of industrial subsidy and purchasing subsidy could improve the efficiency of government funds in promoting the development of EVs industry. A dynamic industrial subsidy outperforms a static purchasing subsidy in terms of government funds saving. In addition, a subsidy increase for charging facilities is still an important supplementary policy to ensure the uptake of EVs, even if the government has adopted an appropriate reduction rate of purchasing subsidies. Based on these results generated from the SD model, policy suggestions are provided to advance the development of EVs industry in China and policy implications are also helpful for other countries.