Electric vehicle manufacturers' decisions on investing in carbon-reduction technology under government subsidy: a Cournot game model.

This article analyzes the impact of the Chinese government’s electric vehicle subsidy scheme (EVSS), which features a subsidy threshold based on energy-saving rates, on electric vehicle (EV) manufacturers’ decisions to invest in carbon-reduction (CR) technology. Using a Cournot game model with two competing EV manufacturers and a benchmark monopoly model, the study finds that manufacturers’ investment decisions vary with the subsidy threshold: both invest when the threshold is low or high, but only one invests at intermediate levels. Economically, CR investment always benefits a monopoly manufacturer at low thresholds, but in competition, manufacturers may face a Prisoner’s Dilemma where both investing leads to losses. Environmentally, CR investment improves outcomes when the subsidy threshold is not too high, regardless of market structure. The findings highlight the critical role of subsidy thresholds and market competition in shaping manufacturers’ CR technology investments and suggest that governments should carefully design subsidy policies to balance economic incentives and environmental benefits.