685 / 2024-05-10 17:57:44

Electric Vehicle Improvement Strategy Considering Consumer Brand Preferences: Battery Swapping or Research and Development

electric vehicle; battery swapping; brand Preference; hotelling model

Problem Definition. Charging speed and price are the two main considerations for people when purchasing electric vehicles. Based on this, the two primary improvement strategies in the electric vehicle industry are currently investing in Battery Swapping Stations (SP) and investing in Research and Development (RD) for production. Under the SP model, manufacturers alleviate consumers' range anxiety by replacing partially charged batteries with fully charged ones. In the RD model, manufacturers reduce production costs by investing in research and development, thereby attracting consumers with lower prices.

Methodology and Results. In this paper, we consider consumer preferences for two types of electric vehicles and build a two-period stylized model based on the Hotelling model to study two competing firms' joint price and improvement decisions in the presence of consumer preference shifts. In the first period, consumers in the market may or may not have brand preferences. In the second period, we analyze three improvement scenarios. Firstly, Manufacturer A invests in battery swapping, causing some consumers who originally preferred Brand B to switch to Brand A due to alleviating their range anxiety. Secondly, Manufacturer B invests in research and development (R&D), leading some consumers who originally preferred Brand A to switch to Brand B due to its lower price. Lastly, both Manufacturer A and Manufacturer B simultaneously invest in battery swapping and R&D, causing some consumers who originally preferred Brand A (B) to switch to Brand B (A) due to its range (price). Our results reveal that the presence of consumer preference shifts in the market leads to more intense competition in the second stage compared to the first stage. We emphasize that the key factor for manufacturers in choosing between the SP or RD strategy lies in the level of competition in the second stage. In the second stage, pricing strategies depend on the effort coefficient of investing in Battery Swapping Stations (SP). When there are more investments in SP, consumers tend to prefer Brand A more. The increase in consumer preference shifts motivates manufacturers to invest in battery swapping.

Implications. Considering the scenario of consumer brand preference shifts with manufacturers choosing different improvement strategies, determining joint pricing and improvement decisions for the two competing enterprises, we provides insights for the development direction of the electric vehicle industry