A Two-period Game Theory Model in Subsidizing the Electric Vehicle Supply Chain with Used Electric Vehicle Batteries Remanufacturing Process

Electric vehicle batteries are usually retired when the performance drops to about 70% of factory performance. At this point, they can be remanufactured into raw materials for the production of new batteries. This paper studies a two-period vehicle supply chain consisting of government, an electric/gasoline vehicle manufacturer, a EV battery manufacturer and consumers with and without retired batteries' remanufacturing process. The purpose is to understand government subsidy policy in these two different periods. By adopting Stackelberg game theory and Nash equilibrium, a mathematical model was developed. The study gives the optimal subsidy with and without battery remanufacturing process in different two periods. We also consider the quality and recycling rates of retired batteries, as well as the impact of raw material costs for new batteries and government environmental spending on subsidies and commodity prices such as vehicles and batteries. Meanwhile, the results show that government subsidy to EV manufacturers can be reduced when retired battery remanufacturing process exists. Increasing in retired batteries' quality, recycling rates, and the cost of raw materials for new batteries will lead to a reduction in government subsidies; but a rising of government spending on environmental protection will lead to the need for more subsidies to electric vehicle manufacturers.