R&D or marketing? The choice for a battery electric vehicle supply chain under dual credits policy

Purpose This study examines how China's dual-credit policy shapes research and development (R&D) and marketing choices in a battery electric vehicle (BEV) supply chain and identifies when different strategy combinations are preferred. Design/methodology/approach We develop a Stackelberg game with one BEV manufacturer and one seller. The manufacturer chooses driving-range-oriented R&D or quality-oriented improvement and sets the wholesale price. The seller then decides whether to undertake marketing and sets the retail price. Demand depends on price, driving range, quality, and marketing effort, while the policy is represented by the credit trading price and a range-related credit rule. Findings Both R&D strategies expand BEV demand, and marketing amplifies this effect. However, high marketing sensitivity can induce costly effort and tighter margins, making the seller better off foregoing marketing and free riding on demand generated by the manufacturer's improvement. Quality improvement is preferred when the credit price or range sensitivity is low. Otherwise, range-oriented R&D is optimal. The credit trading price directly reshapes the manufacturer's improvement choice and can also affect the seller's marketing threshold under driving-range-oriented R&D. Research limitations/implications To keep the manufacturer + seller interaction under the dual-credit policy as transparent as possible, we adopt a stylized setting with one manufacturer and one seller. This parsimonious structure helps separate the core trade-offs between R&D direction and marketing effort and allows us to derive simple decision rules that can be used as a benchmark. We also use a tractable demand specification and treat the credit trading price as an external signal to maintain analytical clarity. These choices abstract from competition, consumer heterogeneity, and dynamic adjustments, which are natural directions for future extensions. Practical implications Managers can treat the dual-credit market as an operating signal rather than a background policy. Track the credit trading price regularly and update the R&D focus accordingly. When credits become more valuable and customers care about range, prioritize range-related R&D; when that signal weakens or quality improvement is cheaper, shift the budget to quality. On the retail side, invest in marketing only when the expected margin lift covers the effort cost, and target messages that match the chosen R&D focus (range or quality). A joint quarterly plan helps avoid misaligned decisions. Social implications Clear credit signals can speed up EV adoption by steering firms toward attributes customers value. When range incentives are strong, firms are more likely to reduce range anxiety, which can help hesitant buyers switch to EVs. When quality innovation is more efficient, firms can improve reliability and user experience, reducing complaints and waste from premature replacement. The risk is one-sided innovation if policy rewards only a single attribute. Regulators can use these insights to balance credit rules so that both usable range and product quality improve, supporting consumer welfare and decarbonization. Originality/value This study treats the dual-credit mechanism as an R&D-related revenue channel. It distinguishes driving-range-oriented R&D from quality-oriented improvement and jointly models the manufacturer's improvement choice and the seller's marketing decision. It further identifies the threshold conditions under which the manufacturer switches between the two improvement paths and the seller forgoes marketing and free rides on the demand generated by the manufacturer's improvement effort. These findings provide guidance for BEV technology and marketing decisions.