This growth has led to market consolidation, with the number of battery firms significantly decreasing from about 240 in 2015 to only 69 by the end of 2019. However, this process is set to continue in the coming years. The leading Chinese battery firms have also begun to internationalize through different strategies, including greenfield investment, mergers and acquisitions, and strategic cooperation.
For instance, CATL, one of the largest battery makers in China, is building its first overseas battery plant in Germany to supply European automakers such as BMW, Volkswagen, Daimler, Jaguar Land Rover, and PSA. Gotion Hi-Tech, another major player in China’s battery industry, has signed an agreement with Tata AutoComp from India for the joint design, development, and production of Li-ion cells, packs, and a battery management system. Meanwhile, BYD is considering building a battery cell factory in the UK to supply Jaguar Land Rover, and Envision AESC has acquired 80% of Nissan’s power battery business through its battery sector fund.
The dominant practice of core firms in the Chinese Li-ion battery sector can be analyzed as a value chain strategy. The strategy is characterized by two combined aspects: growing through vertical integration and competition based on industrial specialization. When Li-ion battery firms grow through vertical integration in the value chain, they do not abandon their original segments and business. On the contrary, firms continue to compete in their original market and try to become more specialized in their original segments as bases for further market expansion and growth.
According to etui, the boundary between Li-ion battery manufacturers and original equipment manufacturers (OEMs) is still relatively open, with all players in the Li-ion battery value chain in China adopting vertical integration strategies at various levels of production networks. This adoption of a vertical integration strategy by all the major firms in the battery value chain has resulted in the emergence of a bundle of specialized players who have quickly occupied every stage of the battery value chain, capable of supplying OEMs with lower costs and flexibility.
The Chinese development pathway is highly complementary to the vertical integration strategies of OEMs. It supports a battery electric vehicle industry based on the vertically specialized mass production of various interacting industry segments, similar to the electronics and other high-tech industries.
Source: On the way to electromobility – a green(er) but more unequal future? | Etui.
