Strategic battery procurement in new energy vehicle supply chains

Ruxia Lyu, Sobhan (Sean) Arisian and Zhitang Li

International Journal of Production Research, 2025, vol. 63, issue 22, 8540-8569

Abstract: While New Energy Vehicles (NEVs) cause minimal environmental impact during operation, their battery manufacturing process carries a significant carbon footprint. This environmental impact compels NEV manufacturers to evaluate trade-offs between in-house battery production and outsourcing, balancing R&D investments with fiscal constraints under carbon policy frameworks. Meanwhile, the emergence of Automotive Financial Services (AFS) has fundamentally reshaped market strategies by enabling direct customer access and enhancing product value propositions. This study develops a Stackelberg game-theoretic model to analyze optimal NEV supply chain configurations under varying carbon taxation regimes. Our findings reveal non-monotonic relationships between consumer perception of AFS and key market outcomes. Market demand and wholesale prices initially decline as consumer AFS acceptance increases, then recover and grow substantially beyond a critical threshold. Battery supplier profits exhibit similar non-monotonic patterns, declining through market penetration investments before recovering, while automobile manufacturer profits demonstrate consistent monotonic growth as consumer perception of AFS strengthens. We identify four distinct demand paradigms characterising consumer choice between traditional bank loans and AFS. AFS adoption effectively moderates carbon tax burdens, creating sustainable competitive advantages. This study advances theoretical understanding of AFS integration within NEV supply chains while providing actionable insights for navigating economic-environmental trade-offs and optimising strategic decision-making in sustainable battery procurement.

Date: 2025
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DOI: 10.1080/00207543.2025.2546652

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