Structure adjustment strategies and carbon emission performance of automobile supply chain facing the dual credit policy

Driven by China’s “Dual Credit Policy” (DCP), numerous fuel vehicles (F-vehicles) manufacturers are considering various strategies, such as withdrawing from the Chinese market, purchase credits to offset negative Corporate Average Fuel Consumption (CAFC) credits, or directly producing new energy vehicles (NE-vehicles) to obtain positive New Energy Vehicle (NEV) credits. These three strategies have produced different supply chain structures and have different impacts on the low-carbon transformation of the automotive market. In this paper, we investigate the conditions under which F-vehicle manufacturers would choose different production strategies to promote the low-carbon transformation of the automotive industry. The results show that: in the evolution of the automobile industry, the gradual electrification of F-vehicles represents a significant transformation. A large sufficient price elasticity of demand \(\alpha \) $\alpha$ can successfully induce the F-vehicle manufacturers to produce NE-vehicles completely, to achieve Pareto equilibrium with NE-vehicle manufacturers. Then, we construct a lifetime carbon emission performance index and show that an overly tight DCP may result in more carbon emissions from the automobile industry. Based on the results of the model analysis, it proposes strategies for vehicle manufacturers to produce two types of vehicles and reduce fuel consumption, and recommends the government to dynamically optimize the DCP mechanism.