Can subsidies promote electric vehicles’ sustainable development? A general equilibrium perspective on substituting enterprises for government

Linling Zhang (), Shuangqun Li, Xiu Cheng and Jichao Geng ()
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Linling Zhang: Nanjing University of Finance & Economics, School of Public Finance and Taxation
Shuangqun Li: Nanjing University of Finance & Economics, School of Public Finance and Taxation
Xiu Cheng: Nanjing Forestry University, College of Economics and Management
Jichao Geng: Anhui University of Science and Technology, School of Economics and Management

Annals of Operations Research, 2025, vol. 355, issue 1, No 6, 123-146

Abstract: Abstract To facilitate the rapid expansion of the electric vehicle (EV) market, the Chinese government and major automobile companies have successively formulated a series of subsidy policies to encourage EV consumption. However, with the gradual withdrawal of the government, the effect of subsidies on the EV market and consumer demand remains unclear. From a macro-perspective, we used a computable general equilibrium (CGE) model to set up 23 subsidy scenarios. We established the connection between subsidy policies and the automobile market, as well as the government, residents, and enterprises. The final results show the following: (1) Under the 23 scenarios, both government and enterprise subsidies can stimulate EV market demand and intensify the substitution effect of EVs for traditional fuel vehicles. (2) Although the expansion of enterprise subsidy cannot fully cope with a series of negative effects caused by the decline of government subsidy in the short term, based on reality, when the government subsidy is absent, enterprise subsidy can slowly activate the vitality of EV market and have a role that cannot be ignored. (3) Government and enterprise subsidies have constructive effects on other subjects. Therefore, as government gradually withdraws, the automobile companies need to formulate more subsidy policies and reduce costs by elevating technology to benefit consumers, expand domestic demand, and promote China's economic development.

Keywords: Enterprise subsidy; Withdrawal of Government Subsidy; Electric Vehicle (EV) Price; Computable General Equilibrium (CGE) Model; EV Market Demand (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10479-024-06402-w

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