IDEAS home Printed from https://ideas.repec.org/a/eee/tefoso/v99y2015icp22-34.html
   My bibliography  Save this article

Make-or-buy strategies for electric vehicle batteries—a simulation-based analysis

Author

Listed:
  • Huth, Christian
  • Kieckhäfer, Karsten
  • Spengler, Thomas Stefan

Abstract

The electrification of the powertrain leads to fundamental changes in the automotive value chain. Thereby, original equipment manufacturers (OEMs) have to decide which manufacturing steps to perform in-house and which parts to source from joint ventures or suppliers. This decision on the make-or-buy strategy is influenced by manifold uncertain parameters like technology evolution and market development. Moreover, it has considerable financial implications. We present a novel approach for the financial evaluation of strategic make-or-buy decisions for newly introduced components using the example of electric vehicle batteries. The approach is based on a Monte Carlo simulation with which the net present value of different make-or-buy strategies can be evaluated. In the model, we explicitly take into account (1) the impact of volume uncertainty on the economies of scale, (2) the financial consequences of a technology leap, (3) joint ventures as a form of quasi-integration, and (4) the option to change the position in the value chain over time. The application of the model for sample OEMs shows that make-or-buy strategies for electric vehicle batteries differ fundamentally from a financial point of view, depending not only on the degree of vertical integration but also on the size of the OEM.

Suggested Citation

  • Huth, Christian & Kieckhäfer, Karsten & Spengler, Thomas Stefan, 2015. "Make-or-buy strategies for electric vehicle batteries—a simulation-based analysis," Technological Forecasting and Social Change, Elsevier, vol. 99(C), pages 22-34.
    • Handle: RePEc:eee:tefoso:v:99:y:2015:i:c:p:22-34
    DOI: 10.1016/j.techfore.2015.06.027
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0040162515001948
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.techfore.2015.06.027?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Baxendale, Sidney J., 2004. "Outsourcing opportunities for small businesses: a quantitative analysis," Business Horizons, Elsevier, vol. 47(1), pages 51-58.
    2. Jeroen Struben & John D Sterman, 2008. "Transition Challenges for Alternative Fuel Vehicle and Transportation Systems," Environment and Planning B, , vol. 35(6), pages 1070-1097, December.
    3. Kwon, Tae-hyeong, 2012. "Strategic niche management of alternative fuel vehicles: A system dynamics model of the policy effect," Technological Forecasting and Social Change, Elsevier, vol. 79(9), pages 1672-1680.
    4. Christian Huth & Kai Wittek & Thomas S. Spengler, 2013. "OEM strategies for vertical integration in the battery value chain," International Journal of Automotive Technology and Management, Inderscience Enterprises Ltd, vol. 13(1), pages 75-92.
    5. Warth, Johannes & von der Gracht, Heiko A. & Darkow, Inga-Lena, 2013. "A dissent-based approach for multi-stakeholder scenario development — The future of electric drive vehicles," Technological Forecasting and Social Change, Elsevier, vol. 80(4), pages 566-583.
    6. Paisittanand, Sineenad & Olson, David L., 2006. "A simulation study of IT outsourcing in the credit card business," European Journal of Operational Research, Elsevier, vol. 175(2), pages 1248-1261, December.
    7. Jeroen Struben & John D. Sterman, 2008. "Transition Challenges for Alternative Fuel Vehicle and Transportation Systems," Post-Print hal-02312277, HAL.
    8. Shafiei, Ehsan & Thorkelsson, Hedinn & Ásgeirsson, Eyjólfur Ingi & Davidsdottir, Brynhildur & Raberto, Marco & Stefansson, Hlynur, 2012. "An agent-based modeling approach to predict the evolution of market share of electric vehicles: A case study from Iceland," Technological Forecasting and Social Change, Elsevier, vol. 79(9), pages 1638-1653.
    9. Collantes, Gustavo O, 2007. "Incorporating stakeholders' perspectives into models of new technology diffusion: The case of fuel-cell vehicles," Institute of Transportation Studies, Working Paper Series qt9bm1w968, Institute of Transportation Studies, UC Davis.
    10. Kazim Sari & Fuat Oktay & Arman T. Tevfik, 2010. "A simulation model for managing outsourcing decisions," International Journal of Management and Enterprise Development, Inderscience Enterprises Ltd, vol. 9(2), pages 132-146.
    11. Karsten Kieckhäfer & Thomas Volling & Thomas Stefan Spengler, 2014. "A Hybrid Simulation Approach for Estimating the Market Share Evolution of Electric Vehicles," Transportation Science, INFORMS, vol. 48(4), pages 651-670, November.
    12. Karsten Kieckhäfer & Thomas Volling & Thomas Stefan Spengler, 2012. "Supporting Strategic Product Portfolio Planning by Market Simulation," Springer Books, in: Adamantios Diamantopoulos & Wolfgang Fritz & Lutz Hildebrandt (ed.), Quantitative Marketing and Marketing Management, edition 127, chapter 6, pages 123-147, Springer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lukas, Elmar & Spengler, Thomas Stefan & Kupfer, Stefan & Kieckhäfer, Karsten, 2017. "When and how much to invest? Investment and capacity choice under product life cycle uncertainty," European Journal of Operational Research, Elsevier, vol. 260(3), pages 1105-1114.
    2. Z. Aytan Ediz & M. Atilla Öner & Y. Can Erdem & Nesimi Kaplan, 2018. "A Model for Make-or-Buy Decisions in Engineering Design Services Sector: A Case Study from Turkey," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 15(04), pages 1-27, August.
    3. Idiano D’Adamo & Paolo Rosa, 2019. "A Structured Literature Review on Obsolete Electric Vehicles Management Practices," Sustainability, MDPI, vol. 11(23), pages 1-17, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Harrison, Gillian & Thiel, Christian, 2017. "An exploratory policy analysis of electric vehicle sales competition and sensitivity to infrastructure in Europe," Technological Forecasting and Social Change, Elsevier, vol. 114(C), pages 165-178.
    2. Brito, Thiago Luis Felipe & Islam, Towhidul & Stettler, Marc & Mouette, Dominique & Meade, Nigel & Moutinho dos Santos, Edmilson, 2019. "Transitions between technological generations of alternative fuel vehicles in Brazil," Energy Policy, Elsevier, vol. 134(C).
    3. Al-Alawi, Baha M. & Bradley, Thomas H., 2013. "Review of hybrid, plug-in hybrid, and electric vehicle market modeling Studies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 21(C), pages 190-203.
    4. Pasaoglu, Guzay & Harrison, Gillian & Jones, Lee & Hill, Andrew & Beaudet, Alexandre & Thiel, Christian, 2016. "A system dynamics based market agent model simulating future powertrain technology transition: Scenarios in the EU light duty vehicle road transport sector," Technological Forecasting and Social Change, Elsevier, vol. 104(C), pages 133-146.
    5. Karsten Kieckhäfer & Thomas Volling & Thomas Stefan Spengler, 2014. "A Hybrid Simulation Approach for Estimating the Market Share Evolution of Electric Vehicles," Transportation Science, INFORMS, vol. 48(4), pages 651-670, November.
    6. Gómez Vilchez, Jonatan J. & Jochem, Patrick, 2019. "Simulating vehicle fleet composition: A review of system dynamics models," Renewable and Sustainable Energy Reviews, Elsevier, vol. 115(C).
    7. Demeulenaere, Xavier, 2019. "The use of automotive fleets to support the diffusion of Alternative Fuel Vehicles: A Rapid Evidence Assessment of barriers and decision mechanisms," Research in Transportation Economics, Elsevier, vol. 76(C).
    8. Oliveira, Gabriela D. & Roth, Richard & Dias, Luis C., 2019. "Diffusion of alternative fuel vehicles considering dynamic preferences," Technological Forecasting and Social Change, Elsevier, vol. 147(C), pages 83-99.
    9. Mohammadreza Zolfagharian & Bob Walrave & A. Georges L. Romme & Rob Raven, 2020. "Toward the Dynamic Modeling of Transition Problems: The Case of Electric Mobility," Sustainability, MDPI, vol. 13(1), pages 1-23, December.
    10. Tran, Martino, 2012. "Technology-behavioural modelling of energy innovation diffusion in the UK," Applied Energy, Elsevier, vol. 95(C), pages 1-11.
    11. Zhang, Qi & Li, Hailong & Zhu, Lijing & Campana, Pietro Elia & Lu, Huihui & Wallin, Fredrik & Sun, Qie, 2018. "Factors influencing the economics of public charging infrastructures for EV – A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 94(C), pages 500-509.
    12. Esteban Lopez-Arboleda & Alfonso T. Sarmiento & Laura M. Cardenas, 2021. "Systemic approach for integration of sustainability in evaluation of public policies for adoption of electric vehicles," Systemic Practice and Action Research, Springer, vol. 34(4), pages 399-417, August.
    13. Noori, Mehdi & Tatari, Omer, 2016. "Development of an agent-based model for regional market penetration projections of electric vehicles in the United States," Energy, Elsevier, vol. 96(C), pages 215-230.
    14. Gnann, Till & Stephens, Thomas S. & Lin, Zhenhong & Plötz, Patrick & Liu, Changzheng & Brokate, Jens, 2018. "What drives the market for plug-in electric vehicles? - A review of international PEV market diffusion models," Renewable and Sustainable Energy Reviews, Elsevier, vol. 93(C), pages 158-164.
    15. Blanco, Herib & Gómez Vilchez, Jonatan J. & Nijs, Wouter & Thiel, Christian & Faaij, André, 2019. "Soft-linking of a behavioral model for transport with energy system cost optimization applied to hydrogen in EU," Renewable and Sustainable Energy Reviews, Elsevier, vol. 115(C).
    16. Ogden, Joan & Jaffe, Amy Myers & Scheitrum, Daniel & McDonald, Zane & Miller, Marshall, 2018. "Natural gas as a bridge to hydrogen transportation fuel: Insights from the literature," Energy Policy, Elsevier, vol. 115(C), pages 317-329.
    17. Wu, Peng, 2019. "Which battery-charging technology and insurance contract is preferred in the electric vehicle sharing business?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 124(C), pages 537-548.
    18. Li, Francis G.N. & Trutnevyte, Evelina & Strachan, Neil, 2015. "A review of socio-technical energy transition (STET) models," Technological Forecasting and Social Change, Elsevier, vol. 100(C), pages 290-305.
    19. Anders F. Jensen & Elisabetta Cherchi & Stefan L. Mabit & Juan de Dios Ortúzar, 2017. "Predicting the Potential Market for Electric Vehicles," Transportation Science, INFORMS, vol. 51(2), pages 427-440, May.
    20. Azadeh, Ali & Vafa Arani, Hamed, 2016. "Biodiesel supply chain optimization via a hybrid system dynamics-mathematical programming approach," Renewable Energy, Elsevier, vol. 93(C), pages 383-403.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:tefoso:v:99:y:2015:i:c:p:22-34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.sciencedirect.com/science/journal/00401625 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.