The New Energy Vehicle R&D Competition with Innovation Uncertainty Under Dual Credit Policy

Abstract

In the automotive industry, especially among fuel vehicle manufacturers, three challenges arise in the research and development (R\&D) of new energy vehicles. The First is the demand-yield unmatch caused by technology uncertainty. The second is the multi-dimension competition generated by the R\&D of new energy vehicles. The third is the punishment for the carbon regulation against the vehicle industry. We develop a newsvendor framework to consolidate the three challenges into a static game to investigate how these three factors shape the new energy vehicle development. We find that the recognition of technology uncertainty cannot always benefit the new energy vehicle development. Moderate competition within the new energy vehicle market enhances the dual credit policy's promotion to the new energy vehicle development. While perfect competition may induce the fuel vehicle manufacturer's freeriding, it also promotes new energy vehicle development by increasing the new energy vehicle market's occupation and improving its quality. Finally, the conjunction of perfect competition and technology development can substitute the role of dual credit in the new energy vehicle development.

Keywords: new energy vehicle development, R\&D uncertainty, competition structure, dual-credit policy