16 May 2025
Revamping Automotive Sourcing for the EV Market
Article Summary
Learn how EVs and supply chain disruptions are pushing procurement leaders to rethink automotive sourcing through integration and strategic partnerships.
As the automotive industry shifts towards battery electric vehicles (BEVs), procurement leaders need to reevaluate their automotive sourcing strategies for critical components, particularly batteries.
This transition is a strategic imperative, driven by numerous factors including geopolitical risks, the need for greater control over the automotive supply chain, regulatory compliance, and consumer demands.
As a procurement leader, navigating the EV transition requires you to consider how these challenges are reshaping your component sourcing landscape. It may be beneficial to adopt varied approaches to battery sourcing that align with your unique business model, market position, and technological capabilities.
The Evolving Battery Value Chain
A standard lithium-ion (Li-ion) battery comprises three main components: the cell, module, and pack. Each of these components plays a crucial role in the overall functionality and efficiency of the battery system.
As you navigate the complexities of the battery value chain, exploring different levels of control over the sourcing of these components will be critical to maintaining business efficiency and profitability.
Levels of Control in Battery Sourcing
OEMs can adopt various battery sourcing strategies, categorized into four main levels:
- Value Chain Integration: Complete vertical integration allows companies to develop and source all battery components in-house, reducing reliance on external suppliers and mitigating supply chain risks.
- Partnerships: Collaborating with cell manufacturers and component suppliers enables OEMs to leverage external expertise while retaining some control over sourcing.
- System Integration: This balanced approach allows OEMs to manage one or two components internally while sourcing the rest externally, providing flexibility and control.
- Outsourcing: While some OEMs may choose to outsource heavily, this model can expose your company to significant risks, especially amid global disruptions.
Geopolitical Uncertainties and Their Impact on Automotive Sourcing
The global battery supply chain faces increasing vulnerabilities due to geopolitical tensions, trade disputes, and resource scarcity. These factors are not only affecting sourcing strategies but are also shaping broader automotive industry trends.
Diversifying sourcing strategies and investing in local production capabilities can help mitigate these risks.
The trends in battery sourcing strategies reflect the broader transformation of the automotive industry towards electrification. According to S&P Global Mobility forecasts, the share of OEMs sourcing all three battery components in-house is projected to remain stable around 18% between 2024 and 2030.
Conversely, the reliance on outsourcing is expected to decline from about 24.4% to less than 21% in the same period. This shift indicates a growing preference for higher integration levels, which can significantly reduce the risk of supply chain disruptions.
The Future of EV Battery Sourcing
As the industry evolves, electrification trends will continue to shape automotive sourcing strategies. OEMs must adapt to the challenges and opportunities presented by this shift, focusing on vertical integration and strategic partnerships to enhance control and mitigate risks.
In conclusion, the race towards electrification is not just about adopting new technologies; it's about establishing robust sourcing strategies that reflect unique market positions and consumer demands. By leveraging data-driven insights from S&P Global Mobility, procurement leaders can position their companies for success in the rapidly changing landscape of electric vehicles.
Download our whitepaper, “How Electric Vehicles Are Reshaping Component Sourcing for OEMs," to gain more detailed insights, including how Tesla, BYD and Rivian are navigating these challenges.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.