354 / 2024-04-24 17:05:38

Complete Vehicle Selling versus Battery as a Service: The Optimal Sales Strategy for Electric Vehicles to Compete with Fuel Vehicles

Electric vehicles; fuel vehicles; battery supply; Battery as a Service (BaaS)

In the automotive market, electric vehicles (EVs) have emerged as a formidable competitor to traditional fuel vehicles (FVs). However, the exclusive challenges associated with EVs, such as range anxiety and low residual values, have the potential to impede consumer willingness to purchase. To address these issues, EV manufacturers have introduced a Battery as a Service (BaaS) model, a novel operational strategy related to battery supply. BaaS allows consumers to purchase an EV with no battery and then lease the battery from battery suppliers. In this paper, we employ a game-theoretic model to depict a competitive market consisting of an EV manufacturer, a battery supplier, and an FV manufacturer. The profit-maximization EV manufacturer chooses between the complete vehicle selling strategy (CVS) and the BaaS strategy. Given the fixed strategy of EVs, we then consider that a representative consumer makes purchasing decisions for two types of vehicles. This paper analyzes the optimal sales strategy for the EV manufacturer and the corresponding impacts on other stakeholders. Our analysis yields three main findings. First, BaaS will be more profitable for EV manufacturers as long as the depreciation rate for EVs is slightly lower under BaaS than under CVS. Secondly, if the depreciation rate of EVs is reduced to a moderate level under BaaS, then BaaS can achieve a win-win outcome for both manufacturers. If the depreciation rate is sufficiently low, a win-win outcome can be achieved for the EV manufacturer and the battery supplier. Thirdly, BaaS will only be beneficial for consumers and the environment when the depreciation rate of EVs is lower, and its carbon emissions are significantly less than those of FVs. These findings provide insights into the design and choice of sales strategies for EV manufacturers.