How the external environment affects the equilibrium decisions and profits of battery and EV manufacturers?

Abstract

With the rapid development of the electric vehicle (EV) industry, the problem has emerged of how to properly recycle and reuse retired EV batteries. The efficiency of battery disassembly is therefore the key factor affecting the battery’s potential for recovery. When a manufacturer considers efficiency of disassembly as an aspect of new EV battery design, it can save disassembly costs when the battery is retired, creating an incentive for used battery recycling and echelon utilization. This paper aims to promote the echelon utilization of used batteries and explore how the impact of external market environments influences decisions within the supply chain. This paper introduces a supply chain model including battery manufacturers who determine the level of battery disassembly design and EV manufacturers responsible for recycling waste batteries. Research findings indicate that when battery manufacturers consider disassembly design, both battery and EV manufacturers can enhance profitability while aligning with Extended Producer Responsibility (EPR) requirements. The proposed cost-sharing contract demonstrates that the profitability of both parties improves when the cost-sharing coefficient between them remains sufficiently low. To ensure the sustainable development of the EV industry, battery and EV manufacturers must bolster their cooperation. Additionally, they should foster a favorable market environment and actively support the establishment of more recycling enterprises. This approach will heighten consumer awareness of recycling incentives and necessitate certain subsidies for low-capacity battery trading. This study contributes valuable theoretical insights for battery manufacturers and supply chain decision-makers by analyzing the influence of external factors on the battery recycling supply chain.