Driving Electric Mobility Considering Manufacturers' Power Asymmetry in Presence of the Government's Policy Instruments

With electric mobility gaining traction worldwide, manufacturers are constantly aligning their strategies in line with the government's policy interventions. Therefore, we consider a supply chain wherein a manufacturer sells gasoline vehicles (GVs), and another manufacturer sells electric vehicles (EV) exclusively. We investigate the competition among vehicle manufacturers vis-a-vis their relative positioning in the presence of government policy instruments. We develop a stylized game-theoretic model, wherein the government is the leader, and manufacturers are the followers. We examine three distinct supply chain structures by varying strategic positioning of the manufacturers: 1) no dominance by either manufacturer, 2) EV manufacturer's dominance, and 3) the GV manufacturer's dominance. This article is the first to include manufacturer's power asymmetry in the EV supply chain and subsequently generates multifaceted insights for the government, manufacturers, and consumers. For instance, in the case of nondominance, higher social welfare is generated when either tax or subsidy is deployed as a policy instrument. We find that supply chain profit is highest for the EV dominance case, followed by the GV dominance case for low values of the EV's cost-coefficient. Similarly, we find important thresholds regarding the environmental impact of vehicles and consumer hassle depending on the manufacturer's power asymmetry.

Automated summary

This study investigates the competition and relative positioning among vehicle manufacturers in a supply chain under government policy interventions. By developing a game-theoretic model, we examine three different supply chain structures and generate multifaceted insights for the government, manufacturers, and consumers. The results show that higher social welfare can be generated when either tax or subsidy is deployed in the case of nondominance.