- The graph shows the simplified supply network of a Chinese battery maker (at the center) with 136 direct and 594 indirect suppliers in 40 component categories, based on data drawn from the Sinolytics Secure Supply Chain Database
- Among the suppliers, 76 percent deliver from China. China content is 90 percent or more for some materials such as aluminum products, cathode active materials, and separators. For others, it is less, such as battery manufacturing equipment (70 percent), manganese mining and refinery (60 percent), and nickel mining and refinery (20 percent).
- Even for comparable non-Chinese battery manufacturers, the China content is high, with 57-64 percent of direct and indirect suppliers based in China. Dependency is high not only for obvious materials such as refined lithium and graphite and active materials, but also for electrolytes (its solutes and solvents) and plastics
- Given this enormous complexity, effective supply network strategies require several steps:
- Build transparency along the entire supply network to be able to assess risks
- Automated software solutions can help to identify geopolitical risks faster and easier
- Diversification needs priority and selection of criticality, for everything all at once it is hard to achieve
- It also needs long-term planning, as switching suppliers takes time, and it needs clear decision-making on the right balance between the benefits of risk reduction and the costs of diversification
- Finally, de-risking may not always mean diversification. For example: in supply chains with deep dependence, a Chinese tier-1 supplier may have better access to upstream supplies and therefore in fact be less vulnerable to disruptions (e.g. trade barriers) of upstream materials
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.