Toward mass adoption of electric vehicles: policy optimisation under different infrastructure investment scenarios

Mass adoption of electric vehicles (EVs) is seen as a key solution for environmental degradation and a low-carbon economy. To promote EV adoption, the government's should choose the most efficient subsidy scheme from three options: a pure purchase subsidy for consumers, a pure infrastructure subsidy for automakers, or a combination of both. This study models the interactions among the government, automakers, and consumers using a Stackelberg game to identify the optimal subsidy structure, considering supply chain structures and infrastructure investments. Our findings show that a pure subsidy is optimal only when the supplier invests in charging infrastructure. However, if the automaker invests in infrastructure, a combination of both subsidies becomes beneficial. The government’s subsidy strategy depends on the adoption target and infrastructure investment costs. A combined policy is optimal when both the target and costs are high; otherwise, a pure subsidy is more cost-effective. Additionally, we find a complementary relationship between government subsidies and competition. Competition within the EV supply chain reduces the need for large subsidies, helping alleviate the government’s financial burden. Finally, while the most cost-effective subsidy scheme may be efficient in reducing costs, it can lead to poor economic performance and lower profits in certain cases.