Toward 2035: exploring a transition plan of the CAFC-NEV credits policy for NEV in China

As the penetration rate of new energy vehicles in China continues to rise, the incentive effect of the CAFC-NEV credits policy has gradually weakened. The Ministry of Industry and Information Technology therefore proposes to transform the CAFC-NEV credits policy into carbon emission management policy. Focusing on the transition plan for CAFC-NEV credits of automotive industry in China, this paper constructs a differential game model of the supply chain that simultaneously manufactures and sells internal combustion engine vehicle (ICEV) and new energy vehicle (NEV), so as to examine the transitional effect of carbon credit on CAFC-NEV credits. The results show that: (1) Implementing carbon credit for NEV on the basis of the current CAFC-NEV credits does not affect capital stock or goodwill. (2) Within a specific range of NEV standard type credit and proportional requirement, the optimal equilibrium solutions for manufacturer and retailer are higher under the carbon credit compared to the CAFC-NEV credits scenario. (3) Neither the single-channel nor the dual-channel sales model affects the basic conclusions of the research. (4) The abolition of CAFC-NEV credits exerts a greater impact on manufacturer’s profit than on retailer’s. Empirical analysis reveals that the profit margins for manufacturer and retailer under the CAFC-NEV credits and carbon credit differ by less than 7% and 1% respectively. This study provides a theoretical basis for promoting the transformation of automotive industry policy from CAFC-NEV credits to carbon emission management in China.