Evolution and Resilience of Electric Vehicle Industry: Complex Network Approach

In modern economy, any firm cannot sustain by itself. Whatever the type of a firm, it is tangled up with other firms in any relation of supply and demand, partnership or competition, etc. In 2021, for example, chip shortage caused by the spread of COVID-19 and the sanction on Chinese chipmakers stroke the global automotive industry. As a result, major car original equipment manufacturers (OEMs) such as GM, Ford, Toyota, and many others stopped their production, which serially stopped their automotive component supplier’s production as well. However, the business magazine Forbes warns the worse situation with the messages “Battery scarcity could dwarf chip shortage impact on global auto sales” and “The semiconductor shortage will cut a total of 8.1 million cars from global production between 2021 and 2023, while between 2022 and 2029, 18.7 million rechargeable electric cars will be lost because of battery cell shortages” (Winton 2021). Due to the interdependence between firms, if any disruption erupts in the industry, its ripple effect impacts the cross-over in a multi-tiered value chain (Cachon and Lariviere, 2001). In 2010s, electric vehicle industry emerged by strong environment regulations and the hyper growth of the industry pioneers who are strongly based on information technology (IT), such as Tesla. Actually, automotive industry including electric vehicle is no longer limited to manufacturing, but is growing rapidly through a complex value chain combined with advanced IT technologies. Therefore it is highly required to understand the complex pattern and sustainability of the highly entangled system. In this research we investigate how the electric vehicle industry emerges and the resilience of the value chain changes. To tackle the research question, we introduce the novel methodological framework based on complex network theory and agent based model approach. From the empirical data on electric vehicle value chain of 6 years, we apply the framework to address the evolution of the industry using weighted network analysis (Figure 1). We found that the electric vehicle industry becomes more heterogeneous structure (Figure 2). This means that the companies. In complex network theory, the heterogeneous network structure has been well known to have the properties of “double-edge swords” in the robustness of the system, that is, it is usually very robust, but the collapse of a few central firms can cause whole system to collapse with a huge ripple effect (Albert et al. 2000). With the understandings of structural properties of electric vehicle value chain network, we examine the resilience of the network with introducing the agent based simulation model. From our simulation results, as year goes, the electric vehicle value chain becomes less resilient. Furthermore, from the result of the distinction between individual firm’s impact of unweighted and weighted aspect, we found some firm’s influence would be underestimated when one only consider the unweighted network properties. Our novel approach based on weight network analysis and agent based modeling would more capture the characteristics of electric vehicle industry and shed light on understanding systemic risks due to the individual firm’s disruption.