Performance Advantage for Electric Vehicles under Competition

Although most electric vehicles (EVs) can cover the majority of daily driving needs, customers are anxious that they will run out of electricity on the road before arriving at the destination. Thus, the availability and accessibility of charging stations become critical for increasing sales in EV market. As well as charging convenience, customers are attracted by high-performance, meaning that all relevant features (acceleration, maximum speed, braking, riding comfort, durability, safety, charging time, etc.) need to be balanced. However, in many cases, achieving the optimal balance requires additional expense so that it may cause pressure on price despite its expected benefits. Thus, we investigate how the EV manufacturers can cope with the trade-off between lowering price and improving performance under competition. Then, we compare the equilibrium performance levels and prices of EVs when performance improvement costs of competing firms differ. We also examine the equilibrium decision from the social perspective and provide the implications of how the socially favorable decision is different from that for manufacturers.