Supply chain integration plays a crucial role in making battery production in China more economical. Here are some key factors contributing to cheaper battery production:
- Comprehensive Supply Chain: China’s battery ecosystem covers all stages of the supply chain, from mineral mining and refining to battery production. This integrated approach allows for better control over raw material costs and logistics, contributing to cost savings.
- Manufacturing Know-How: Extensive experience in manufacturing has enabled Chinese companies like CATL and BYD to scale up production more efficiently. High manufacturing yields and centralized expertise have supported innovation and reduced manufacturing costs.
- Supply Chain Integration through Acquisitions and Collaboration: Companies in China often integrate through acquisitions or collaborate with other firms, facilitating faster innovation and reduced costs. This integration allows them to access raw materials at below-market prices, further lowering production costs.
- Prioritization of Cheaper Battery Chemistry: Chinese producers have focused on lithium-iron phosphate (LFP) batteries, which are about 30% less expensive than lithium nickel cobalt manganese oxide (NMC) batteries. This cost-effective chemistry has significantly contributed to the affordability of Chinese batteries.
- Fierce Domestic Competition: The presence of nearly 100 battery producers in China fosters intense competition. To maintain market share, these companies must cut profit margins, leading to lower battery prices.
- Government Support and Economies of Scale: China’s large EV market and supportive government policies provide economies of scale, further lowering costs in logistics, labor, and land management.
Overall, China’s advanced supply chain integration, coupled with its strategic focus on cost-effective technologies and business practices, makes it a leader in affordable battery production.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-supply-chain-integration-contribute-to-cheaper-battery-production-in-china/
