Navigating Waves in a Stormy Sea: How Initially Less Powerful Players Gain Power in China’s Electric Vehicle Ecosystems

Résumé:

Abstract

The electrification of the automobile industry presents unique challenges for technological transformation, particularly in managing a broader and more complex “business ecosystem” that extends beyond traditional value chains (Adner, 2017). Existing literature on business ecosystems and the automotive industry predominantly emphasizes the role of powerful actors, such as regulators and dominant original equipment manufacturers (OEMs). However, limited attention has been given to less powerful players and how they navigate power relations to influence interdependencies and drive the industry’s evolution. This paper seeks to address this gap by conducting an in-depth case study of Contemporary Amperex Technology Co., Limited (CATL). Using extensive qualitative data, the study traces CATL’s early development and rise within the ecosystem, focusing on how an initially resource-constrained player managed to adapt and reshape power dynamics over time. By analyzing CATL’s strategic responses and its evolving relationships with other ecosystem actors, this research provides new insights into the role of less powerful players in shaping ecosystem coordination, interdependencies, and long-term industrial transformation.

Background and Research Question

The traditional automotive value chain was characterized by a tightly hierarchical structure centered around OEMs. However, the EV sector diverges from this model, evolving into a more interconnected and dynamic ecosystem. Success in this sector hinges on collaboration among diverse actors—including OEMs, upstream suppliers (e.g., battery makers), downstream complementors (e.g., infrastructure providers), regulators, and external stakeholders (e.g., industry associations and investors)—to navigate uncertainties surrounding technology, policy, and shifting consumer preferences. As a result, traditional market players are increasingly compelled to operate beyond their established boundaries, managing complex interdependencies and aligning with multiple stakeholders (Jacobides et al., 2018).

Existing studies often emphasize the role of central firms, such as ecosystem "architects" or "hubs," in creating alignment structures through coercive mechanisms, including rule-setting and profit allocation (Wareham et al., 2014). In contrast, less powerful players, such as suppliers, have historically been portrayed as passive followers or constraints in both ecosystem literature and industry analyses. However, emerging evidence challenges this assumption. In China’s rapidly expanding EV sector, for instance, battery suppliers have gained significant influence, wielding considerable bargaining power and playing a critical role in strengthening the industry’s competitive position. This raises important questions: how do actors traditionally occupying low-power positions effectively exert influence, and what is their role in the evolution of broader ecosystems?

Addressing this challenge requires further exploration of how less powerful players develop and navigate power relations within ecosystems. Firms in lower power positions are typically constrained in their ability to employ “hard” power strategies—such as rule-setting or vertical integration—due to the significant resource demands of these strategies and the risk of retaliation or absorption by dominant players. Despite these challenges, recent studies in other industries, such as consumer electronics (Shi et al., 2024), demonstrate that resource-constrained actors can assume central ecosystem roles by leveraging alternative power sources and strategies. This highlights the need to reconsider power distribution in ecosystems, as less powerful players may exert influence through subtle and unconventional means that are not adequately explained by traditional, resource-centric models of power.

Thus, we pose the following questions: how do less powerful players, such as emerging EV battery manufacturers in their early years, gain power and shape ecosystem alignment structures in the presence of powerful counterparts like OEMs? How do these evolving power dynamics influence the competitive positioning and long-term development of the ecosystem?

Methodology

Due to the absence of existing theories or evidence that can adequately address the research question, this study will adopt an inductive theory-building approach through an in-depth case study (Eisenhardt and Graebner, 2007). We have chosen CATL as a singular case study due to its remarkable trajectory, making it a “revelatory case”: founded in 2011, CATL started as a late entrant with limited resources compared to established competitors such as LG, Panasonic, and Samsung, who had been investing in the sector for a decade and had secured most top clients. However, CATL has undergone an exceptional transformation, becoming the world’s largest battery manufacturer since 2018 (SNE research, 2024). This significant shift provides a valuable case to explore the distinct opportunities and challenges faced by less powerful players during ecosystem transitions. A combination of archival data, interviews, and direct observations from participants in the broader Chinese EV ecosystem was collected to address the research question.  The data collected was triangulated across these sources to ensure the findings' credibility and reliability. An overview of the data sources is presented in the appendix.

Findings and Implications

Our analysis reveals how CATL gained an initial foothold, strategically accumulated influence, and eventually struggled to sustain this power, forming a three-stage process model for how less powerful entities navigate power. Furthermore, through the inductive analysis of the process by which CATL gained power in the EV ecosystem, three "smart power" (Nye, 2009) strategies emerged: exploiting structural advantages, gaining power from a broader audience, and defining market boundaries. This innovative blend of soft and hard power allows CATL to maintain a competitive edge and navigate the complex interdependencies of the global automotive market effectively.

Theoretically, by detailing how less powerful entities navigate the challenges posed by resource constraints and progressively harness and wield power in an emerging ecosystem, this study deepens our understanding of power as a multisided and multidimensional concept within ecosystem contexts. The research highlights novel "smart" power strategies that deviate from traditional resource-based approaches. Empirically, this research has broader implications for understanding China’s central role in the global automotive industry’s transition toward electrification. Specifically, this paper contributes to the ongoing discourse on the evolving structure of the global auto industry by providing a case-based understanding of how initially less powerful players can drive technological and organizational change. The findings have practical implications for both Chinese and non-Chinese companies seeking to navigate power dynamics and strategic interdependencies in the electrification transition. The findings offer valuable guidance for policymakers and industry practitioners in preparing for shifts in competitive positioning, supply chain governance, and industrial policy amidst future ecosystem-driven transformations in the automotive industry.