This study investigates the impact of China’s Dual-Credit Policy on innovation capability in the new energy vehicle (NEV) industry using a difference-in-differences approach with dynamic panel data from 2013 to 2022. We employ multiple innovation measures, including patent counts, valid invention patents, and patent grant rates. Our findings reveal that the policy has a positive and significant effect on NEV innovation, partially mediated by R&D investment. Using GMM estimation to address endogeneity, we find the policy effect varies across subgroups based on location, ESG rating, and ownership type. Dynamic effect analysis shows the policy’s impact intensifies over time. Threshold effect analysis identifies a critical policy intensity level beyond which innovation effects are amplified. Our results have implications for policymakers in designing effective innovation incentives and for firms in strategically responding to regulatory changes in the NEV sector.

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