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The Future of Traditional Fuel Vehicles (TFV) and New Energy Vehicles (NEV): Creative Destruction or Co-existence?

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  • Zhaojia Huang
  • Liang Zhang
  • Tianhao Zhi

Abstract

There is a rapid development and commercialization of new Energy Vehicles (NEV) in recent years. Although traditional fuel vehicles (TFV) still occupy a majority share of the market, it is generally believed that NEV is more efficient, more environmental friendly, and has a greater potential of a Schumpeterian "creative destruction" that may lead to a paradigm shift in auto production and consumption. However, less is discussed regarding the potential environmental impact of NEV production and future uncertainty in R&D bottleneck of NEV technology and innovation. This paper aims to propose a modelling framework based on Lux (1995) that investigates the long-term dynamics of TFV and NEV, along with their associated environmental externality. We argue that environmental and technological policies will play a critical role in determining its future development. It is of vital importance to constantly monitor the potential environmental impact of both sectors and support the R&D of critical NEV technology, as well as curbing its negative externality in a preemptive manner.

Suggested Citation

  • Zhaojia Huang & Liang Zhang & Tianhao Zhi, 2022. "The Future of Traditional Fuel Vehicles (TFV) and New Energy Vehicles (NEV): Creative Destruction or Co-existence?," Papers 2207.03672, arXiv.org.
    • Handle: RePEc:arx:papers:2207.03672
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    References listed on IDEAS

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    1. Troy R. Hawkins & Bhawna Singh & Guillaume Majeau‐Bettez & Anders Hammer Strømman, 2013. "Comparative Environmental Life Cycle Assessment of Conventional and Electric Vehicles," Journal of Industrial Ecology, Yale University, vol. 17(1), pages 53-64, February.
    2. Wang, Lei & Fu, Zhong-Lin & Guo, Wei & Liang, Ruo-Yu & Shao, Hong-Yu, 2020. "What influences sales market of new energy vehicles in China? Empirical study based on survey of consumers’ purchase reasons," Energy Policy, Elsevier, vol. 142(C).
    3. Lux, Thomas, 1995. "Herd Behaviour, Bubbles and Crashes," Economic Journal, Royal Economic Society, vol. 105(431), pages 881-896, July.
    4. Hommes, C.H., 2005. "Heterogeneous Agent Models in Economics and Finance, In: Handbook of Computational Economics II: Agent-Based Computational Economics, edited by Leigh Tesfatsion and Ken Judd , Elsevier, Amsterdam 2006," CeNDEF Working Papers 05-03, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    5. Hommes, Cars H., 2006. "Heterogeneous Agent Models in Economics and Finance," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 23, pages 1109-1186, Elsevier.
    6. Franke Reiner, 2012. "Microfounded Animal Spirits in the New Macroeconomic Consensus," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(4), pages 1-41, October.
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    Cited by:

    1. Hassan Qudrat-Ullah, 2022. "Adoption and Growth of Fuel Cell Vehicles in China: The Case of BYD," Sustainability, MDPI, vol. 14(19), pages 1-18, October.

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