Battery outsourcing decision and product choice strategy of an electric vehicle manufacturer

This paper examines an electric vehicle manufacturer's (EVM) battery outsourcing decision and product choice strategy in a two-stage supply chain consisting of a battery supplier and an EVM that have different power structures. We analyze two game scenarios: the EVM outsources battery production versus the EVM produces batteries in-house. In each scenario, the EVM has three product choices: producing an electric vehicle (EV) with a low driving range only, with a high driving range only, and with both driving ranges. We show that the conditions of the EVM's product choice strategy depend on two thresholds related to the production cost of batteries, the manufacturing and assembly cost of EVs, the government subsidy and the range anxiety, while the conditions are independent of the EVM's market position and battery outsourcing decision. Furthermore, the EVM inclines to produce batteries in-house as its market position and operation cost decrease.

Automated summary

This paper examines the strategic decisions and product choices of electric vehicle manufacturers in battery outsourcing. The study shows that the product choice strategy of the manufacturers depends on various factors, and they tend to produce batteries in-house.