Drive Down the Cost: Learning by Doing and Government Policy in the Global EV Battery Industry
Prof. Shanjun LI
Professor, Cornell University
Date: 10 May 2024 (Friday)
Time: 10:30 am – 12:00 pm
Venue: E22-G015
Host: Prof. Jia YUAN, Associate Professor in Business Economics
Abstract
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 in battery production, and quantifies the impact of two types of government policies (e.g., consumer subsidies and domestic content requirement) on learning, technology diffusion, and industry dynamics. Based on rich data consisting of model-level sales, prices, and attributes of EVs for 13 top EV countries, and information on battery suppliers and characteristics, 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. Our estimates show that learning-by-doing explained a substantial portion of the observed battery cost reductions, and that learning-by-doing greatly magnified the impact of EV consumer subsidies on adoption. We then conduct simulations to examine the impacts of domestic content requirement, a strategy adopted by China and more recently the US., on market share dynamics and global EV adoption. Our results suggest that China’s whitelist policy nearly doubled the market share of Chinese battery suppliers mostly at the expense of South Korean suppliers.
Speaker
Prof. LI is a Professor of Applied Economics and Policy, and he holds the Kenneth L. Robinson Chair in the Dyson School of Applied Economics and Management at Cornell University. He serves as Director of the Cornell Institute for China Economic Research (CICER), an editor for the Journal of the Association of Environmental and Resource Economists, and a co-editor for the International Journal of Industrial Organization. He is a research associate at the National Bureau of Economic Research (NBER) and a university fellow at Resources for the Future (RFF).
His research areas include environmental and energy economics, urban and transportation economics, empirical industrial organization, and Chinese economy. His recent research examines pressing sustainability issues in China and their global implications in order to inform evidence-based policymaking.
All are welcome!
