Supply Chain Determines the Development of Electric Vehicle OEMs

Article By : Dr. Y.-C. Hsu, Researcher and Research

The control of battery metals brings China global advantage of EV supply chains.

Global electric vehicle (EV) market growth exceeds expectations in 2021. According to Worldwide Monthly BEV & PHEV Tracker from Researcher and Research LLC, global EV sales volume in 2021 will be 6.389 million units, a year-on-year (YoY) growth of 97%.

The growth of Chinese EV OEMs is extremely obvious, especially BYD, SAIC, Great Wall Motors, GAC, Xiaopeng, NIO, Chery Automobile, CHJ Automotive, Changan Automobile and Geely Auto Group, which have achieved considerable market shares. And it is worth noting that Chinese OEMs have successfully stepped out of the domestic market this year and made inroads around the world, and opened up the European market with entry-level models such as the hot sale of MG ZS EV.

The control of battery metals brings China global advantage of EV supply chains. In addition, EV OEMs have clearly felt the tight supply of batteries in the future since Q3, and have signed supply contracts with battery suppliers with advance payments to stabilize future supply. These highlight management of battery supply chain is the key for EV OEMs to win electrification race.

Moreover, first-come-first-served basis cannot be the key to a secure supply chain. For example, Toyota, which once missed a good opportunity, recently announced its entry into the EV market. For this belated action, Toyota has ensured the smooth supply of batteries and chips in the future, demonstrating the operational advantages of established automakers in the supply chain. This is also the biggest supply chain challenge in 2022 for automakers that have not yet developed a complete supplier network or have just entered the market. In addition, South Korean battery suppliers are also heavily dependent on Chinese metals. For example, they sourced 71% of cobalt, 63% of manganese and 82% of lithium from China. This poses a potential risk for South Korean automakers and some American and European automakers that are closely tied to South Korean battery manufacturers.

It’s not just EV OEMs that are at risk, but battery suppliers as well. Rising prices for key materials have forced battery makers to control some key materials as much as possible. However, larger battery makers have clear advantages over smaller ones in negotiations, leading to the increasing concentration of resources in the hands of larger battery makers.

Each EV OEM actively arranges the supply chain, and follow Tesla to forward integration of key raw materials, however, the EV market is limited by supply chain constraints in 2022, prompting EV OEMs to sign long term contracts to lock in supply. The long term contract model will accelerate the big ones to become even bigger in the EV industry.


About the Author

Dr. Y.-C. Hsu is the co-founder and CEO of market and strategy research company Researcher and Research.


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