How do government subsidies influence pricing strategies and market equilibrium in the electric vehicle industry?

With the growing global focus on low-carbon development and the accelerating transition toward electric vehicles as a central strategy for reducing transport emissions, this study examines the strategic interactions between electric vehicle and fuel vehicle manufacturers under alternative government subsidy regimes, using game models. Three subsidy scenarios are considered: no subsidy, a fixed lump-sum subsidy, and a quantity subsidy. The findings show that fixed subsidies do not enhance perceived value. Moreover, we prove that subsidies can lead to an inefficient allocation of resources when the investment coefficient is low, as they fail to achieve objectives such as driving technological innovation or supporting sustainable industry development. Quantity subsidies, by contrast, offer greater flexibility and can shift the game equilibrium by adjusting subsidy intensity, thereby fostering mutually beneficial outcomes. The cost differential between electric and fuel vehicles also plays a critical role: subsidy policies prove effective only when this differential falls within a moderate range. Through analytical and numerical analyses, the study yields managerial insights and policy recommendations for the automotive industry.