The supply chain: produce or outsource?

When pro-PEV industrial policy began in the US in 2009-2010, the Obama administration recognized that the US was in a poor competitive position on manufacturing of LIBs and components. Concerted efforts by DOE to boost the ability of US-based firms to compete achieved mixed results. The big success is the Nevada operations of the Panasonic-Tesla partnership but other efforts faltered. A decade later, Asian dominance of LIBs remains but Panasonic, LG Chem and SK Innovation now have established large cell-production facilities in the US. Chinese firms capitalized on China’s growing domestic market for LIBs and aggressive industrial policies that favor Chinese companies. Some Chinese battery makers are now globally competitive, which is precisely what China’s industrial policies sought to accomplish. European policy makers responded to the LIB-production issue much later than the US and China. Large-scale investments in European battery factories are now occurring with substantial governmental subsidies but Asian battery suppliers are also investing in European facilities. On corporate strategy, Tesla, Nissan and BYD pioneered vertically integrated approaches to production of PEVs and LIB cells but the global trend among automakers is to outsource battery-cell production to specialized suppliers. The relationships between automakers and battery producers range from formal joint ventures with shared interest to standard supplier agreements. No global automaker has, or is planning to become, a major producer of battery cells. The sector started with some exclusive battery-supplier deals but more than half of automakers are pursuing a multi-supplier strategy. Despite some setbacks in competition with Chinese firms, Japanese and Korean battery producers are major players in the sector with continuing support from their governments. In the less-visible but important components sector, China has secured an almost dominant global position with the exception of cathodes, where there is robust competition among suppliers around the world. From a supply-chain perspective, FCVs and BEVs have very different requirements. Countries currently dependent on ICE supply chains may find the transition to FCVs less painful than a transition to BEVs but an optimal strategy might entail development of supply chains for both FCVs and BEVs, since the vehicles may appeal to different consumer segments.