THE SHIFT TOWARD ELECTRIFICATION IN THE AUTOMOTIVE INDUSTRY - A Scenario Analysis Investigating What Sourcing Mode for Lithium-Ion Battery Cells Original Equipment Manufacturers Can Take to Meet Future Demand in The United States
Abstract: The automotive industry is one of the main contributors to greenhouse gas emissions and hasconsequently commenced its transition toward producing more sustainable vehicles. Electric vehiclesare contributing to sustainable development and due to new components, original equipmentmanufacturers are facing substantial supply chain challenges. The most critical component of an electricvehicle is the lithium-ion battery cell, and because of deficits in the supply of lithium-ion battery cells,original equipment manufacturers are facing challenges in sourcing to meet future demand. This topicis interesting to investigate within the American market where a new free trade agreement puts pressureon original equipment manufacturers to localize the supply chain. This, in combination with low demandfor lithium-ion battery cells in the United States, forces original equipment manufacturers, in particular,to rethink their sourcing mode of lithium-ion battery cells in the United States.From the perspective of an original equipment manufacturer present in the United States, this researchinvestigates possible future outcomes of the shift toward electrification in the automotive industry. Thepurpose is to investigate what sourcing mode for lithium-ion battery cells original equipmentmanufacturers can take today in order to adapt to future changes and meet demand for electric vehicles.By using a customized scenario planning framework, the research enables investigating the uncertainand dynamic environment of the automotive industry. With a time-frame of ten years, the outcome isfour plausible future scenarios generated through qualitative interviews within three areas ofinvestigation: politics and trade, market development, and technology. The most critical uncertaintiesthat will shape the future development of electric vehicles and lithium-ion battery cell manufacturing inthe United States are bundled along two dimensions. These are the level of Environmental Engagementin the country and the Balance of Power between original equipment manufacturers and cellmanufacturers. By combining these two dimensions in a matrix, four plausible future scenarios areshaped, namely: Make America Green Again, I Have A Green Dream, Climate Change, Who?, andElectrification Awaits.Based upon these four scenarios, a core strategy is formulated adaptable regardless of how the futureemerges. This allows original equipment manufacturers to adopt the most beneficial sourcing mode tostrategically prepare for the future. The research concludes that original equipment manufacturersshould engage in cell manufacturing through close relationships and collaborations with cellmanufacturers, hence, have a relational view on sourcing. This allows for co-developing lithium-ionbattery cells to fit the vehicles and also incentivize the cell manufacturers to innovate and enhanceperformance. This strategy enables the possibility for original equipment manufacturers to easilyintegrate cell manufacturing in-house and undertaking production themselves, or take a step back andallow the close relationships function as a strong supplier base, depending on how the future emerges.
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