The electrification of the transportation sector through the diffusion of plug-in electric vehicles (EVs), coupled with cleaner electricity generation, is considered a promising pathway to reduce air pollution from on-road vehicles and to strengthen energy security. However, the diffusion of electric vehicles in the United States has had mixed results so far. Annual new EV sales increased nearly 7-fold from about 18,000 in 2011 to 116,100 in 2015. Yet, the market share of EVs was only about 0.73% in the new vehicle market by 2014. A similar trend exists in the deployment of public charging services. The U.S. has built about 9900 charging stations with about 26,000 charging outlets, due in part to the direct and indirect investments of federal and local governments. For example, the Department of Energy (DoE) provided 230 million dollars from 2013 to establish 13,000 charging stations. It has been hoped that such investments will stimulate the EV market, driving its market share toward long-term growth and stability.

The reason behind the growth of the EV market, or the lack of it, is multifaceted. The growth is driven partially by the increasing awareness of the environmental impacts of gasoline vehicles, superior designs and performance of some EVs, and, by no small measure, subsidies in the form of tax credits provided by the federal and state governments. However, the EV industry faces stiff skepticism due to the high purchase cost of EVs, the limited driving range, the long charging time, and the lack of public charging facilities.

We provide a solution to the sequential game that includes the optimal decisions for the consumers and the investor. A random utility maximization (RUM) model with two different distributions of the consumer vehicle preference is considered.