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A Car for Recognition: The Heterogeneous Market Responses to the Emergence of Electric Vehicles

Author

Listed:
  • Liu, Shimeng
  • Xu, Hangtian
  • Zhang, Wenqin
  • Zheng, Wenzhuo

Abstract

In the automobile market, where consumers value the social recognition associated with car ownership, how would introducing a lower-cost alternative influence the market outcomes of traditional internal combustion engine vehicles (ICEVs)? Leveraging high-frequency sales data from China's entire automobile market from 2018 to 2022, we investigate the heterogeneous market responses to the emergence of electric vehicles (EVs) across different price-tier segments. Overall, the emergence of EVs reduces ICEV sales while boosting total automobile sales. More importantly, while EV penetration reduces ICEV sales in low- and mid-end segments, it enhances ICEV sales in the high-end segment. We provide further evidence that the rise of EVs amplifies the symbolic value of high-end ICEVs, resulting in improved sales for ICEV brands with strong social recognition.

Suggested Citation

  • Liu, Shimeng & Xu, Hangtian & Zhang, Wenqin & Zheng, Wenzhuo, 2024. "A Car for Recognition: The Heterogeneous Market Responses to the Emergence of Electric Vehicles," MPRA Paper 125224, University Library of Munich, Germany, revised 01 Mar 2025.
    • Handle: RePEc:pra:mprapa:125224
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    Keywords

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    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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