Analyse the likely impact on AEV's profit of intervention by governments in the car market.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2019). The mark or mark type is shown in brackets.

1. [Knowledge] Definition of profit: revenue less costs
2. [Knowledge] Understanding of types of government intervention: Regulation. Rules that businesses have to abide by in a market and constrain business activity
3. [Knowledge] Indirect taxation (to correct market failure). Increase costs of supply to business
4. [Knowledge] Subsidies/government grants. Reduce the costs of production and encourage an increase in output
5. [Knowledge] Understanding of impact of subsidies on AEV, e.g. increase in AEV sales related to indirect tax on diesel cars
6. [Application] Ban on sale of diesel cars from 2030 will give AEV a competitive advantage over non-electric cars in the market OR government regulations on diesel cars and ban will increase competition in electric vehicle market
7. [Application] Increase in fuel duty on petrol in 2019 will benefit AEV
8. [Application] Benefit is in long term as some regulations will come into force in 2030
9. [Application] AEV vehicles with zero emissions will not be subject to the regulations
10. [Application] AEV has received $1 bn in government grants since 2010
11. [Application] Government action to increase availability of charging points for electric cars
12. [Application] 30% tax on imports of cars in country C
13. [Analysis] Diesel ban will reduce competition for AEV resulting in a potential increase in sales of electric vehicles and increase in AEV's profits as a result
14. [Analysis] Announcement of changes will influence trends in the market leading to a rise in electric vehicle sales immediately
15. [Analysis] Increase in fuel duty will make vehicles using petrol/diesel less competitive in the market. This will boost AEV sales, as electric vehicles will be relatively less expensive to run
16. [Analysis] Country C tax on imports will increase the selling price of AEV cars reducing demand and profit
17. [Analysis] Subsidies received by AEV from government may have conditions attached which impact AEV operations
18. [Analysis] Subsidies received by AEV provides finance for investment to develop products, manufacturing and workforce
19. [Analysis] Subsidies enable expansion of output by reducing costs and therefore increase sales and potentially profit