The Efficacy of the New Energy Vehicle Mandate Policy on Passenger Vehicle Market in China

This paper aims to assess the impact of the New Energy Vehicle (NEV) mandate policy on the passenger vehicle market in China, with a focus on its effectiveness in promoting NEV adoption. In response to global climate goals and energy security concerns, China has implemented various NEV policies, including the phase-out of direct subsidies and the introduction of the NEV mandate policy (dual-credits policy). This policy, which combines NEV credits and Corporate Average Fuel Consumption (CAFC) credits, aims not only to promote NEV adoption but also to support industrial policy objectives by helping the auto industry leapfrog traditional internal combustion engines and become globally competitive. In this study, a System Dynamics (SD) model was developed using Vensim software (10.2.2) to simulate interactions between automakers, government policies, and consumer behaviors. The results show that the NEV mandate policy significantly boosts NEV sales, with projections indicating that NEV sales will reach 15 million units by 2030, accounting for 55% of the passenger vehicle market. Additionally, the study finds that tightening NEV credits standards and increasing the NEV credit proportion requirements can further enhance market growth, with stricter measures post-2023 being crucial to achieving a 50% market share. In contrast, under a scenario where the dual-credits policy ends in 2024, the NEV market share would still grow but would fall short of the 50% target by 2030. The findings suggest that stronger policy measures will be essential to maintain long-term market momentum.