Coordinating Electric Vehicle Charging Station Installation between the Government and Automakers

Yu, Jiayi & Tang, Christopher & Li, Musen & Shen, Max. (2020). Coordinating Electric Vehicle Charging Station Installation between the Government and Automakers. SSRN Electronic Journal. 10.2139/ssrn.3561317.

Accessibility of Electric Vehicle (EV) charging stations is an important factor for adoption of EV, which is an effective green technology for reducing carbon emissions. Recognizing this, many governments are contemplating ideas for achieving EV adoption targets, such as constructing extra EV charging stations directly or offering subsidies to entice automakers to construct more EV charging stations. To achieve these targets, governments need to coordinate with automakers to ensure that the total number of charging stations is planned optimally. We study this coordination problem by considering the interactions among the government, automakers, and consumers, our equilibrium analysis yields three major results. First, both the government and the automaker should build extra EV charging stations when their construction costs are independent. Simultaneously, the government should offer a per-station subsidy to the automaker only when the adoption target and the construction cost are both high. However, when the construction costs are dependent, the government should delegate the construction to the automaker by offering a per-station subsidy. Second, when the government considers consumer purchase subsidy as an extra lever, we find that the purchase subsidy for consumers is more cost-effective than offering a per-station subsidy to the automaker. Third, the structure of the optimal government policy remains the same regardless of whether the government’s goal is to improve EV adoption or consumer welfare. Our results can serve as guidelines for governments when contemplating coordination with automakers for the construction of EV charging stations to improve EV adoption as well as consumer welfare further.