Optimal intensity of quality-oriented subsidy policy for China’s electric vehicle industry: a sequential game perspective focused on technology innovation

The improvement of the electric vehicle (EV) industry is a core strategic initiative for China to advance the green economy and enhance domestic automotive competitiveness. However, China’s EV sector still faces two critical challenges: a gap in core technologies compared to developed countries and the risk of subsidy fraud amid equal foreign market access, both hindering its high-quality development. To address these issues, this study contributes a novel quality-oriented subsidy policy (QOSP) for domestic EV manufacturers (DEVMs), designed to fundamentally drive technological innovation while mitigating moral hazard. Methodologically, we constructed sequential game models to investigate the dynamic optimal pricing strategies of DEVMs and imported EV manufacturers (IEVMs), and analyzed the policy’s impact on domestic EV (DEV) quality improvement. The results reveal three key findings: (1) The QOSP effectively incentivizes DEVMs to enhance product quality, directly addressing the core technology gap; (2) Sufficient market demand potential and technical innovation capacity are prerequisites for the QOSP’s effective implementation; (3) An optimal subsidy intensity balances national financial burden and urgent DEV quality improvement, ensuring the steady development of the DEV market. This study provides a practical policy framework for governments to optimize EV industry support, balancing innovation, market fairness and financial sustainability.