At the UN General Assembly in 2020, China unveiled the “dual carbon” target, which combines the two objectives of carbon peaking and carbon neutrality. Excellent development potential for new energy vehicles have resulted from this. This paper examines the influence of government subsidies on enterprise innovation input and output using data from 95 listed Chinese new energy vehicle companies from 2016 to 2022. It is based on an analysis of characteristics of government subsidy policies in the renewable energy sector and the theoretical mechanism affecting enterprise innovation. According to this study, government subsidies stimulate innovation input positively while hindering innovation output negatively. Furthermore, the effect is particularly noticeable for businesses with significant total assets and a high subsidy intensity. Therefore, in light of the findings of the empirical research, the following countermeasures and recommendations are made when developing and putting into practice government subsidy programs, a number of factors should be carefully taken into account to make sure that the subsidies have the potential to both effectively stimulate the innovation vitality of businesses and support their sustainable development. To prevent misuse and waste, it is also vital to bolster the oversight and assessment of government subsidies. The study presented in this paper can offer the government both theoretical and empirical basis to logically modify the policy for new energy vehicle subsidies and encourage business innovation.