The Impact of Subsidies on Pricing Decisions in the Battery Swapping Supply Chain Under the “Vehicle and Battery Separation” Model

Chao Li and Kai Fu Yuan

Managerial and Decision Economics, 2025, vol. 46, issue 3, 1816-1834

Abstract: To explore the impact of various subsidies on the battery swapping industry under the “vehicle and battery separation” model, a supply chain comprising a battery manufacturer, a vehicle company, and a battery leasing company is constructed. Based on the no‐subsidy model, decision‐making models are developed for four scenarios that involve subsidizing different entities, including the customer, the battery manufacturer, the battery leasing company, and the vehicle company. Comparative analysis is then conducted. Results show that (1) subsidies do not invariably result in companies lowering prices for their products and services. Under various subsidy strategies, companies tend to adjust their pricing strategies for products and services according to the battery leasing time and the price sensitivity coefficient of battery swapping service. (2) Government subsidies to supply chain entities may not always effectively incentivize more companies to enter the battery swapping industry. Although direct subsidy to vehicle companies could encourage their participation, promoting the involvement of battery manufacturers and leasing companies through direct subsidies may have limited effectiveness. This limitation arises because the optimal profit among various strategies is influenced by factors such as the price sensitivity coefficient of battery swapping service and the battery swapping operating cost sharing ratio. (3) To advance the demand for battery‐swapping vehicles, enhance consumer surplus, and maximize social welfare, the government may prioritize subsidizing vehicle companies. However, when aiming to boost the demand for battery swapping service, the government should consider the level of price sensitivity coefficient of battery swapping service. Specifically, when the price sensitivity coefficient of battery swapping service is low, continuing to subsidize vehicle companies may be advisable. Conversely, when the price sensitivity coefficient is high, it may be more effective to provide subsidies to consumers or battery manufacturers.

Date: 2025
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https://doi.org/10.1002/mde.4470

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