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Chinese Journal of Management Science ›› 2018, Vol. 26 ›› Issue (10): 152-163.doi: 10.16381/j.cnki.issn1003-207x.2018.10.015

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Optimal Building Policies of Charging Stations with Automobile Supply Chain Analysis

WANG Tian1, DENG Shi-ming2   

  1. 1. School of Business Administration, Zhongnan University of Economics and Law, Wuhan 430073, China;
    2. School of Management, Huazhong University of Science and Technology, Wuhan 430074, China
  • Received:2016-12-19 Revised:2017-12-26 Online:2018-10-20 Published:2018-12-25

Abstract: Greenhouse gases and criteria pollutants from transportation vehicles harm our green environment. Electric vehicles (EVs) offer great potential to dramatically reduce local air pollution and greenhouse gas emissions. Switching the conventional transportation vehicles (petroleum) to alternative fuel vehicles (electricity) is the goal of the governments in China, the U.S. and Europe. However, range anxiety, which is caused by the very limited driving range of EVs, impedes potential consumers from adopting EVs. The question of alleviating range anxiety has become increasingly important for achieving a large adoption level of EVs.
As the associated charging infrastructure building plays a key role in affecting the psychological understanding of consumers. The extension of charging network is an approach to alleviate consumers' range anxiety and to increase the EV adoption level. The automobile supply chain members, EV manufacturers and EV dealers, have incentives to offer building investment on charging network because that the expansion of charging ability on the road increases the willingness to pay of potential consumers, which may enable them to sell more cars and set higher prices. Two business models, M-Building (manufacturers take the charge of the building) and D-Building (dealers take the charge of the building) are considered and finding which one, the EV manufacturer of the EV dealer, is more suitable to take the charge of building charging network for larger EV adoption level is focused on. In addition, the preferences of the manufacturer and the dealer on the choices between M-Building and D-Building are also provided.
Specifically, the Stackelberg Game is used to model the question in two scenarios, wholesale price is fixed or a decision made by the manufacturer. Optimal pricing and building strategies are obtained through sequential backward induction. Used values in the numerical studies are normalized by satisfying our model specifics. Our conclusions show that when the wholesale price is fixed, M-Building facilitates the adopting of EVs better at the beginning stage of the development of an EV market; D-Building facilitates the adoption of EVs better when the market becomes mature. However, neither of the two builders have an incentive to offer building investment. When the wholesale price is a decision made by the manufacturer, M-Building always better facilitates EV adoption. The manufacturer is voluntary even with high building costs.
Our paper can provide the governors and builders with rich insights and recommendations. First, governors should subsidize the builders especially when the market is at its early stage. Second, the participation of EV dealers in building charging network is very important for the mass adoption. Finally, governors should pave the ways for implementing D-Building.

Key words: electric vehicles, range anxiety, charging stations building, automobile supply chain

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