  There is a rapid development and commercialization of new Energy Vehicles
(NEV) in recent years. Although traditional fuel vehicles (TFV) still occupy a
majority share of the market, it is generally believed that NEV is more
efficient, more environmental friendly, and has a greater potential of a
Schumpeterian "creative destruction" that may lead to a paradigm shift in auto
production and consumption. However, less is discussed regarding the potential
environmental impact of NEV production and future uncertainty in R&D bottleneck
of NEV technology and innovation. This paper aims to propose a modelling
framework based on Lux (1995) that investigates the long-term dynamics of TFV
and NEV, along with their associated environmental externality. We argue that
environmental and technological policies will play a critical role in
determining its future development. It is of vital importance to constantly
monitor the potential environmental impact of both sectors and support the R&D
of critical NEV technology, as well as curbing its negative externality in a
preemptive manner.
