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 has consequently commenced its transition toward producing more sustainable vehicles. Electric vehicles are contributing to sustainable development and due to new components, original equipment manufacturers are facing substantial supply chain challenges. The most critical component of an electric vehicle 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 topic is interesting to investigate within the American market where a new free trade agreement puts pressure on original equipment manufacturers to localize the supply chain. This, in combination with low demand for 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 research investigates possible future outcomes of the shift toward electrification in the automotive industry. The purpose is to investigate what sourcing mode for lithium-ion battery cells original equipment manufacturers 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 uncertain and dynamic environment of the automotive industry. With a time-frame of ten years, the outcome is four plausible future scenarios generated through qualitative interviews within three areas of investigation: politics and trade, market development, and technology. The most critical uncertainties that will shape the future development of electric vehicles and lithium-ion battery cell manufacturing in the United States are bundled along two dimensions. These are the level of Environmental Engagement in the country and the Balance of Power between original equipment manufacturers and cell manufacturers. By combining these two dimensions in a matrix, four plausible future scenarios are shaped, namely: Make America Green Again, I Have A Green Dream, Climate Change, Who?, and Electrification Awaits. Based upon these four scenarios, a core strategy is formulated adaptable regardless of how the future emerges. This allows original equipment manufacturers to adopt the most beneficial sourcing mode to strategically prepare for the future. The research concludes that original equipment manufacturers should engage in cell manufacturing through close relationships and collaborations with cell manufacturers, hence, have a relational view on sourcing. This allows for co-developing lithium-ion battery cells to fit the vehicles and also incentivize the cell manufacturers to innovate and enhance performance. This strategy enables the possibility for original equipment manufacturers to easily integrate cell manufacturing in-house and undertaking production themselves, or take a step back and allow the close relationships function as a strong supplier base, depending on how the future emerges.