Optimal subsidy decisions for building electric vehicle charging piles: unit subsidy vs percentage subsidy

The shortage of electric vehicle charging piles (EVCPs) has seriously restricted the adoption of electric vehicles (EVs). To support the EV industry, policymakers such as the Chinese government propose two schemes to encourage automakers to build EVCPs: unit subsidy (US) where the policymakers provide a certain subsidy per EVCP, and percentage subsidy (PS) where the policymakers provide a percentage of funds based on the construction cost of EVCPs. Our study shows that the PS scheme leads to more EVCPs and higher EV adoption and subsidy efficiency than the US scheme when the policymaker’s objective is to maximize subsidy efficiency, defined as EV adoption minus subsidy expenditure. However, when the policymaker pursues social welfare maximization, the policies are equivalent. Basically, the automaker makes less profit under the US scheme than the PS scheme only if the policymaker’s EV adoption target is low and the automaker’s unit EV production cost is small. Nevertheless, when we consider market competition or social welfare, the automaker’s profit under the US scheme is always higher than under the PS scheme. Finally, if the government raises its EV adoption target, it will need to increase subsidies, so automakers will gain more profits, but the government’s subsidy efficiency will be reduced.