Dual credit policy and product strategies: evidence from Chinese passenger vehicle manufacturers

We provide causal estimates of the Dual Credit Policy (DCP)’s effect on product strategies in China’s passenger vehicle manufacturing sector from 2016 to 2022 using detailed firm-level data. The results show that firms respond to DCP by adjusting their product portfolios, increasing the launch of green vehicles and discontinuing non-green vehicles. The findings remain robust to alternative estimation methods, alternative variable measures, controls for related policies, and placebo tests. Heterogeneity analyses show that the policy effect is stronger among firms with prior AI capabilities, higher compliance pressures, and state ownership. Furthermore, we find that the DCP also promotes innovation in new energy vehicle technologies. These findings provide insights into how firms respond to new energy vehicle policy and offer guidance for designing more effective policies.