EV Market Share and Profit Driven Competition with Service Sharing

Abstract

In the EV industry, it is frequently reported that market share is included by EV companies (e.g., Tesla, XPeng, and Li Auto) as an important part of their objective. This will intuitively hurt their profitability because the objective is no longer profit maximization. We are therefore interested in the EV companies' decision rationality, especially when we observe that they are selling the ``EV product + charging service", and some of them share their superior charging networks with their rivals. Our question is whether these efforts/decisions for market share are really beneficial. We interestingly find that the company making decisions under a weighted average objective of market share and profitability could indeed obtain a higher profit than that under a profit maximization objective. Sharing superior charging networks promotes competing EV companies' cooperation and diversifies their competition when the consumers can switch between EV product purchasing and charging service competition. This not only benefits the companies but also the social welfare, so an all-win situation can be achieved.

Keywords: Product and service operations; Co-opetition; Market share; Horizontal sharing; Game-theoretic model