Should an electric vehicle manufacturer buy its own ship? Investment and pricing strategies under uncertainty

Abstract

Rising EV exports and regional instability have increased shipping costs. Many electric vehicle manufacturers (EVMs) purchase and operate newly built pure car and truck carriers (PCTC), which are greener and more energy-efficient than traditional car carriers, to lower shipping costs and improve global supply-chain resilience. Meanwhile, EVMs strategically adjust EV prices and production quantities in response to demand shocks caused by unexpected tariffs and economic crises in end markets. To address these challenges, a two-stage decision-making model is proposed to optimize the investing and operating strategies for the EVM. In this model, the EVM first decides whether to purchase PCTC and the ship size, and then decides the optimal EV price and production quantity facing demand uncertainty. Theoretical analysis indicates that the EVM should utilize self-operated shipping under stochastic or linear deterministic demand to enhance cost efficiency while relying on other shipowners under non-linear deterministic demand. Furthermore, the EVM should increase the EV price under the additive stochastic demand and decrease the EV price under the iso-elastic stochastic demand, compared to deterministic consumer demand. In numerical analysis, we consider an emerging EVM, NIO, that exports Chinese EVs to the European market. Numerical results suggest that the EVM should create an “artificial shortage” to maintain a tight market during increased shipping costs or rising demand uncertainty while fostering a loose market to serve all available consumers when demand uncertainty is low.