Abstract: As the environment deteriorating, the government has introduced a series of policies to promote the development of the new energy vehicles industry. Therefore, it has become an urgent issue that whether traditional manufacturers of fuel vehicles need to adjust their product strategies and launch hybrid vehicles, when considering consumer anxiety and alternative incentives from the government, to cope with the challenge from manufacturers producing new energy vehicles. Based on this, this paper builds a duopoly competition model from the perspective of fuel vehicle manufacturers. The optimal equilibrium results obtained by different strategies considering conversion cost, and the corresponding optimal strategy and implementation conditions are obtained by comparative analysis. Results show that the mixed strategy always outperforms the hybrid vehicle strategy. However, under the condition of low conversion cost, when consumers have low alternative incentives and the anxiety relief coefficient is lower than a certain threshold, manufacturers better choose the fuel vehicle strategy. In contrast, under the condition of high conversion cost, the mixed strategy is the optimal one. Additionally, once the anxiety relief coefficient or the alternative incentive is higher than a certain threshold, the fuel vehicle strategy should be chosen. Social welfare demonstrates a decreasing trend with the increase of consumer anxiety, while the social welfare of the three strategies shows a trade-off trend.

Key words: new energy vehicles, duopoly competition, consumer anxiety, conversion cost, social welfare