Shanjun Li, Cornell Dyson Applied Economics

The global battery industry has achieved significant cost savings: electric vehicle (EV) battery costs have dropped by more than 90% over the past decade. This study assesses the extent to which this sharp decline in lithium-ion battery prices is attributable to learning-by-doing, and quantifies the impact of government policies (subsidies and local protection policies) on learning. Our analysis is based on a rich dataset consisting of 1) model-level sales, prices, and attributes of EVs and 2) battery suppliers and characteristics, for 13 countries from 2013 to 2020, that together account for over 95% of global EV sales. We estimate a structural model of the global EV industry, accounting for consumer vehicle choices, EV makers' pricing decisions, and bilateral bargaining between EV manufacturers and battery suppliers over battery prices. We recover the model-implied battery costs and evaluate how battery costs change with the accumulated production experience of battery suppliers, finding that learning-by-doing explains a substantial portion of the observed battery cost reductions. Lastly, we use the estimated model to examine the strategies of the US and China to protect their domestic battery industries: both countries require automakers to use domestically produced batteries to receive EV subsidies. We simulate equilibrium outcomes without such restrictions to evaluate the impact of local protectionism on cost-saving innovations in the global battery industry.

DATE: Friday, October 18, 2024

TIME: 3:30-5:00 p.m.

LOCATION: Fronczak 444