Research on the Trade-in Pricing Strategy for the Electric Vehicle Manufacturer

Abstract

Recycling waste products through trade-in programs is of great importance for firms. Interestingly, many new energy vehicle (NEV) manufacturers, such as NIO, XPeng, and BYD, have offered both trade-in for new energy vehicles and trade-in for new energy batteries to customers. In this paper, we develop a two-period game-theoretic model to analyze the pricing strategies of NEV manufacturers while taking into account customers’ purchasing behaviors. Our findings reveal several key insights. First, strategic customers exhibit varied purchasing behaviors depending on the selling price of NEVs. Moreover, myopic customers also display heterogeneous preferences, and manufacturers can achieve effective market segmentation by implementing a preannounced pricing strategy (PPS) in markets with myopic consumers. Second, when the additional innovation level (the incremental innovation level of the new-generation product relative to the old-generation product) surpasses a certain threshold, NEV manufacturers are more likely to adopt a dynamic pricing strategy (DPS). Conversely, if the additional innovation level falls below this threshold, PPS becomes the preferred approach. Finally, government subsidies for trade-in programs are shown to significantly enhance customer participation and enthusiasm in such initiatives.

Keywords

Trade-ins / NEVs / pricing strategy / trade-in subsidy

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Systems Engineering Society of China and Springer-Verlag GmbH Germany

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