Specialised vertical integration: the value-chain strategy of EV lithium-ion battery firms in China

Abstract

China has developed a fully-fledged industrial value chain for electric vehicle (EV) batteries within a short period. Such industrial dynamics are often seen as the product of a policy of protecting infant industries. However, extensive empirical observations from the field show that firms' value-chain strategies can also help answer the question of why China is so far the only country to have formed a complete and dynamic value chain for EV batteries so quickly. This paper explores the driving forces behind the emerging Chinese EV lithium-ion battery industry. Based on the analysis of the main moves made by actors along the battery value chain, we identify that many Chinese firms deploy a strategy that we term 'specialised vertical integration', i.e., actively entering related upstream and/or downstream segments within the EV lithium-ion battery supply chain, while continuing to reinforce their existing capacity using specific established assets in the original segment of the value chain, which serves as an expansion base. This specific approach, which is typical of strategies rooted in the resource-based view of the firm, has given the Chinese EV lithium-ion battery sector a unique internal dynamism, helping to secure its competitive advantage in the global value chain.