The subsidies for new energy vehicles have influenced changes in the demand for the automobile market and have further impacted the direction of industrial technological upgrades. Based on passenger car sales data in China from 2016 to 2019, structural estimation methods were applied to estimate the demand parameters of automobile products. Through counterfactual analysis, the role of subsidy policy design in promoting the technological upgrade of the new energy vehicle industry was studied. The research findings indicate that the subsidies for new energy vehicles have indeed promoted the adoption and industrial technological advancement of new energy vehicles, but there is still room for policy optimization. In terms of extending vehicle range, the existing subsidies have effectively promoted the development of high-mileage technologies, but a linear subsidy based on mileage would be more efficient. In the area of lightweighting, subsidy policies have guided pure electric vehicles towards a direction of lower power-to-weight ratios. This is primarily because subsidy designs based on range have encouraged companies to stack battery packs, leading to an increase in the weight of new energy vehicles. In terms of energy efficiency, subsidies have had a more pronounced impact on reducing energy consumption for electric vehicles with medium energy intensity, while their influence on other consumption is limited.