EV Battery Supply Chain Economics: OEMs vs. Cell Makers
A new analysis from Future Market Insights indicates that control over EV battery supply chain economics is shared between cell makers and OEMs, with cell makers holding more near-term cost power. Key factors include battery chemistry, manufacturing yield, and platform design.
The economics of the electric vehicle (EV) battery supply chain are influenced by both battery cell makers and automotive OEMs, but near-term cost control largely remains with the cell manufacturers. A recent analysis by Future Market Insights Global and Consulting Pvt. Ltd. highlights that battery chemistry, manufacturing yield, and vehicle platform design are decisive in determining who controls the economic power.
Cell makers exert influence over costs through factors such as the chemistry used, production scale, manufacturing yield, cathode material strategies, process efficiency, and exposure to raw material price fluctuations. OEMs can increase their leverage by standardizing EV platforms, localizing battery production, selecting cost-effective chemistries like Lithium Iron Phosphate (LFP), and designing vehicles with battery pack economics as a primary consideration.
The increasing adoption of LFP batteries has shifted bargaining power, particularly towards large-scale battery suppliers and vertically integrated automakers. A common misconception is that the company selling the EV automatically controls its profit margin. The analysis clarifies that battery sourcing, chemistry selection, and manufacturing efficiency often determine the profit pool first.
Long-term winners in the EV market will be those OEMs that transition from viewing batteries as mere purchased components to managing them as the core cost architecture of the vehicle. China's significant role in global battery production, accounting for over 80% of worldwide capacity in 2025, solidifies its ecosystem and cost advantages in the supply chain.