**1. Introduction**

The new energy vehicle industry is a strategic emerging industry that China focuses on developing. Over the past 40 years, China's economic development has progressed significantly. The Chinese government has constantly adjusted economic policies to achieve coordinated development between the economy and environment. Developing strategic emerging industries is the key to achieving high-quality development in China. The new energy vehicle industry has been listed as one of the seven key strategic emerging industries in the file issued by the State Council named *Decision on Speeding up the Cultivation and Development of Strategic Emerging Industry* in 2010. Today, the development of the new energy vehicle industry can ensure China's energy security and is an important means of low-carbon consumption under carbon peaking and carbon neutrality goals (China aims to reach a CO2 emissions peak before 2030 and achieve carbon neutrality before 2060 to accelerate the world's transition to green and low-carbon development).

Developing a new energy vehicle industry is vitally important to energy security for China, since it has relatively insufficient oil resources and a low crude oil reserve, but has a very high demand on oil consumption as China has become the world's second largest oil consumer in recent years due to economic growth. The country depends significantly on imported oil from foreign countries, and China's dependence on imported oil has been

**Citation:** Li, H.; Qi, H.; Cao, H.; Yuan, L. Industrial Policy and Technological Innovation of New Energy Vehicle Industry in China. *Energies* **2022**, *15*, 9264. https:// doi.org/10.3390/en15249264

Academic Editor: Bert Scholtens

Received: 4 October 2022 Accepted: 4 December 2022 Published: 7 December 2022

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**Copyright:** © 2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

<sup>1</sup> Hunan Key Laboratory of Macroeconomic Big Data Mining and Its Application, School of Business, Hunan Normal University, Changsha 410081, China

rising from 5% in the early 1990s to as high as 70% by 2020. The increasing dependence on imported oil reflects the great risk of China's energy security. New energy vehicles use electricity and clean energy fuels as driving forces that can reduce China's demand on oil resources, and further ensure China's energy security.

Developing the new energy vehicle industry can help China achieve carbon peaking and carbon neutrality goals. In September 2020, the Chinese government proposed the goals of reaching peak carbon emissions in 2030 and carbon neutrality in 2060. China's transportation, thermal power generation, and steel industries are the most important industries for carbon dioxide emission. Automobile carbon emissions account for up to three-quarters of the total carbon emissions in the field of transportation [1]. The use of new energy vehicles has enormous advantages in reducing carbon emissions. The well-to-wheel greenhouse gas emission intensities of battery electric vehicles (BEVs) is 22–293 g CO2eq/km, while that of gasoline internal combustion engine vehicles (ICEVs) is 227–245 g CO2eq/km [2]. Developing new energy vehicles is a fast and effective way to achieve the goal of carbon peaking and carbon neutrality in China.

The development of a new energy vehicle industry cannot do without technological innovation. Many studies have shown that to promote industry development and achieve low-carbon transformation, it is necessary to gradually shift from factor driven to innovation driven. Zhao et al. [3] analyzed the R&D incentive mechanism of China's photovoltaic industry based on the system dynamics model, and believed that technological progress in the photovoltaic industry could reduce carbon emissions. Wu et al. [4] studied the listed companies of new energy vehicles in China as a sample, and found that the firm's technological capability is an important factor to promote industrial development and increase R&D investment. These studies all show that technological innovation is a driving force for industrial development.

The new energy vehicle industry and its technological innovation have strong positive externalities. Technological innovation has a long cycle and causes great uncertainty. At the same time, the benefits generated by innovation are difficult to be fully owned by private individuals [5], which is prone to "free riding" behavior, thus inhibiting the R&D momentum of micro subjects [6]. Therefore, the Chinese government has paid much attention to the guidance of industrial policies in the new energy vehicle industry and its technological innovation.

The Chinese government has started to provide policy guidance for the new energy vehicle industry since the beginning of the 21st century. Before 2009, there were few supporting policies for China's new energy vehicle industry, and these mainly focused on planning from the production-side. From 2009–2015, China's new energy industry policy has focused on consumption. Meanwhile, the central government and local governments have launched industrial policies intensively to stimulate the technical breakthrough of key links such as new energy vehicle drive systems, battery management systems, and vehicle integration, and also began to encourage the construction of new energy vehicle supporting facilities. Since 2015, the government's industrial policy has begun to attach importance to the combination of promising governments and effective markets. *The Notice on the Financial Support Policy for the Promotion and Application of New Energy Vehicles from 2016–2020* in 2015 indicated that the subsidy would gradually decline after 2016. "The dual credit policy" issued in 2017 represents the industrial policy's impact on leading the new energy vehicle industry transit from being policy driven to market driven, the gradual withdrawal of subsidy policy, and the function of the market mechanism (In September 2017, the Ministry of Industry and Information Technology and other five departments jointly issued *the measures for the parallel management of average fuel consumption and new energy vehicle credits of passenger vehicle enterprises* (hereinafter referred to as *"the double credits policy"*), which was implemented on 1 April 2018. "The double credits policy" set up two credits for the average fuel consumption of automobile manufacturers and new energy vehicles, and established a credit trading mechanism. "The double credits policy" is an assessment system. The assessment indicators are the average fuel consumption credits and new energy vehicle credits. The purpose is to promote enterprises to develop new energy vehicles to alleviate the energy and environmental pressure.) The subsidy policy for energy vehicles after 2018 has increasingly higher standards for key technical indicators such as the energy density of power battery systems, vehicle energy consumption, and endurance to stimulate the innovation vitality of enterprises and improve the product quality [7].

Government subsidies are the most common industrial policy tool in China's new energy vehicle industry. However, industrial policies such as government R&D subsidies may lead to distortions in resource allocation and incentives, resulting in negative effects [8]. Therefore, the policy's impact on technological innovation remains controversial. Some scholars have shown that government subsidies have a positive impact on the technological innovation of enterprises. Hottenrott and Lopes-Bento [9] used the Belgian Community Innovation Survey data and found that public R&D support had a significant incentive effect on enterprise innovation output. Huergo and Moreno [10] used Spanish company data and found that obtaining any type of direct assistance significantly increased the possibility of carrying out R&D activities. However, some believe that government subsidies have had a negative impact on the enterprises' technological innovation. Wallsten [11] found that the Small Business Innovation Research (SBIR) program funding in the United States had a significant negative effect on enterprise R&D expenditure. Link and Scott [12] also found that the commercialization probability of the R&D achievements funded by the SBIR program was very low, while other studies have shown that the impact of government subsidy on technological innovation is uncertain. Marino et al. [13] used the data of French companies from 1993 to 2009, and based on the DID model, found that public subsidies had neither an incentive effect nor crowding out effect on private R&D expenditure. Montmartin and Herrera [14] used a database of 25 OECD countries and found that there was a nonlinear relationship between R&D subsidiaries and financial investments implemented within a country and private R&D.

The effects of government subsidies on the new energy vehicle industry are also controversial. Some scholars hold a positive attitude toward the effect of government subsidies on the new energy vehicle industry. Using data from 32 European countries, Münzel et al. [15] found a significant positive correlation between financial incentives and plug-in electric vehicle (PEV) adoption. Xing et al. [16] found that federal income tax credits from the United States could increase the sales of electric vehicles. Breetz and Salon [17] found that government subsidies could significantly improve the cost competitiveness of new energy vehicles by studying 14 cities in the United States. Jiao et al. [18] and Wang and Li [19] believe that government subsidies could significantly promote the expansion of China's new energy vehicle market. Gao and Hu [20] found that the subsidy policy for new energy vehicles played a significant role in promoting enterprise performance through two mechanisms: enterprise size and patent behavior. Some scholars also hold a negative attitude toward the implementation effect of government subsidies for the new energy vehicle industry. Zhang et al. [21] found that in Beijing, the license plate lottery policy was better than the subsidy policy in promoting electric vehicles. Sheldon and Dua [22,23] explored the impact and cost-effectiveness of electric vehicle subsidies by using the data of U.S. new car buyers and Chinese new vehicle consumers. Both research results showed that the cost of the subsidies was too high and the subsidy target should be determined according to the policy objectives.

Reviewing the existing studies, scholars have used data from various countries to conduct extensive research on the impact of industrial policies on energy vehicles and their technological innovation. Relevant research includes the impact of industrial policies on the use and diffusion of new energy vehicles [24], the new energy vehicle industrial policies on environmental pollution [25], and industrial policies on the R&D and development strategies of new energy vehicle enterprises [26]. Only a few studies have examined the impact of industrial policies on technological innovation in the new energy vehicle industry [27,28]. So far, whether the existing industrial policies have really improved the technological innovation level of the new energy vehicle industry is open to debate. Furthermore, the impact of government industrial policies on the quantity and quality of technological innovation in the new energy vehicle industry has not been compared and analyzed yet. This study examined the impact of government subsidies on technological innovation in the new energy vehicle industry from the dimensions of the quantity and quality of technological innovation and explored how government subsidies impact the effect of policies to enrich the research in related fields.

The marginal contributions of this study are as follows. First, the different effects of government subsidies on the quantity and quality of technological innovation in the new energy vehicle industry were investigated; it was found that government subsidies could significantly promote the quantity of technological innovation but could not improve the quality of technological innovation. Second, it was found through empirical study that the industrial policy could increase the number of innovations in the new energy vehicle industry through three mechanisms: improving the attention of enterprises, increasing the R&D investment, and mitigating the financing constraints. Third, we examined the differences in the impact of industrial policies on technological innovation in different links of the industrial chain, which provides valuable insights for industrial policies to promote technological innovation in the new energy vehicle industry.

The rest of this paper is organized as follows. Section 2 introduces the empirical method and data. Section 3 presents the benchmark regression and robustness test results. Section 4 discusses the mechanism test and a series of heterogeneity analyses. Section 5 concludes the study and puts forward policy implications.
