When to invest in electric vehicles under dual credit policy: A real options approach

Feng Liu, Yingshuang Tan, Sudipto Sarkar, Xueqing Zhang and Xingjun Huang

Managerial and Decision Economics, 2023, vol. 44, issue 4, 2186-2198

Abstract: This research aims to investigate traditional vehicle manufacturers' green technology investment theory under dual credit policy from the perspective of real options, overcoming earlier investigations of this issue that considered it only from a stability or single uncertainty perspective. An analytical real options model was first provided for traditional automaker investment. Then we solved the analytical solution for the electric vehicle investment threshold based on the uncertainty of credit price and fuel vehicle market scenarios. The optimal electric vehicle investment timing is demonstrated using numerical simulation. Results show that (1) when the fuel vehicle market demand falls to a certain level, automakers will choose to make electric vehicle investments regardless of how the credit price changes in the market; (2) the effect of volatility on the investment threshold depends on the covariance or correlation coefficient; (3) the numerical simulation results revealed that the credit price drift rate, risk‐free rate, correlation parameters, and electric vehicle production cost all have a positive impact on the electric vehicle investment region, whereas the drift rate of fuel vehicle and electric vehicle production cost have a negative impact. These results can be used to make theoretical conclusions about electric vehicle investments.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1002/mde.3811

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:44:y:2023:i:4:p:2186-2198

Access Statistics for this article

Managerial and Decision Economics is currently edited by Antony Dnes

More articles in Managerial and Decision Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().