Chinese automakers diversify battery supply chains, challenging CATL's dominance
Chinese electric vehicle makers including Li Auto, Xiaomi, XPeng, Leapmotor, and Seres are expanding battery supplier lists beyond dominant supplier CATL, investing in or partnering with second-tier firms like Sunwoda and CALB. The trend, termed "de-CATLization" or "de-Ninghua," aims to reduce CATL's pricing power amid a profit imbalance where CATL's net profit more than doubled the combined profit of 15 major automakers in H1 2026. China's MIIT has rejected the narrative as a media-driven farce, while Citi Research confirms the trend is occurring but considers CATL oversold.
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Cross-source coverage
Common ground
- CATL remains the dominant player in the global battery market, with rising market share and unmatched R&D spending.
- Automakers are diversifying suppliers, but this is a normal industry evolution, not an existential threat to CATL.
- The profit imbalance between CATL and automakers is unsustainable and needs correction.
- Battery technology is still evolving, and next-generation innovations like solid-state will reshape competition.
Points of contention
- Whether the 'de-CATLization' narrative is a Western media conspiracy or a legitimate observation of market trends.
- Whether automakers' self-developed batteries are genuine vertical integration or just marketing.
- Whether CATL's global expansion is a form of 'win-win cooperation' or a new kind of resource extraction.
- Whether centralized production at CATL's scale reduces or concentrates environmental harm.
Blind spots
- The human and environmental costs of battery production, especially in the global south, are often ignored in favor of financial or technological metrics.
- The role of China's industrial policy, particularly the MIIT, is treated as either infallible or purely political, without acknowledging its nuanced impact.
- The debate overlooks the long-term implications of technology cycles, such as CATL's lead in solid-state and sodium-ion batteries, which could widen its advantage.
WorldAttention’s read
The 'de-CATLization' narrative is largely overblown, as CATL's market share, R&D spending, and technology lead continue to grow. While automakers are diversifying suppliers to reduce dependency and negotiate better terms, this is a normal industry maturation, not a crisis. The real story is about technology cycles—CATL's investments in next-generation batteries like solid-state and sodium-ion give it a widening moat that competitors can't easily cross. However, the debate has largely ignored the human and environmental costs of battery production, from cobalt mining in the DRC to coal-powered nickel processing in Indonesia. These issues are not just moral concerns but structural vulnerabilities that could reshape the industry if left unaddressed. Ultimately, CATL will remain the anchor of the global battery supply chain for the next decade, but the industry must reckon with the extractive patterns that underpin its growth.
Reporting timeline
CATL's Stock Recovers After Early Drop Amid Automakers' Push to Reduce Dependence
Contemporary Amperex Technology Co. Ltd. (CATL), China's largest battery maker with a market cap of 1.3 trillion yuan, saw its stock price recover in morning trading after falling over 2.3%, narrowing its loss to 0.71% by the time of reporting. The stock has declined over 26% in the past two months. The volatility is linked to a growing trend among Chinese electric vehicle (EV) makers to diversify their battery supply chains, a move analysts and industry insiders call 'de-Ninghua' (去宁化). Automakers including Li Auto, Xiaomi, XPeng, Leapmotor, and Seres are expanding their battery supplier lists by investing in or partnering with second-tier battery firms like Sunwoda and CALB, aiming to reduce CATL's pricing power and market dominance. Separately, CATL's Jiangxi lithium mine project has restarted its environmental impact assessment process after a previous procedural setback, with a public comment period now open.
Read sourceCiti Says China Battery Materials See 'De-CATLization' Trend, CATL Oversold
Citi Research published a report noting that automakers are diversifying battery suppliers to strengthen cost discipline, driving a 'de-CATLization' trend in China's battery materials sector. The bank believes this trend is indeed occurring as second-tier battery makers effectively expand production and improve quality to meet downstream EV development and cost discipline. CATL Chairman Zeng Yuqun also noted that automakers have accelerated R&D and new vehicle launch cycles, which Citi interprets as negative for CATL, reflecting weakening relationships with automakers. However, Citi points out that CATL is actively expanding into non-China EV markets, with its market share reaching 45% in the first seven months of 2026, up from 44% in fiscal 2025, while maintaining a higher-end product mix. The bank believes CATL is being oversold due to pessimistic sentiment, as demand growth is expected to remain double-digit and valuations are attractive. Citi also favors CALB and Eve Energy, citing their rapid production expansion.
Read sourceCiti Says China Battery Materials See 'De-CATLization' but CATL Is Oversold
Citi has published a research report noting that the market is focused on a trend of 'de-CATLization' in China's battery materials sector, as automakers diversify battery suppliers to strengthen cost discipline. The bank believes this trend is indeed occurring, as second-tier battery manufacturers are effectively expanding production and improving quality to meet downstream electric vehicle development and cost discipline. Citi interprets comments from CATL chairman Zeng Yuqun about automakers accelerating R&D and new vehicle launch cycles as a negative factor for CATL, reflecting weakening relationships with OEMs. However, Citi points out that CATL is actively expanding outside of China, with its market share reaching 45% in the first seven months of 2026, compared to 44% in fiscal 2025, and it maintains a higher-end product mix. The bank argues that CATL has been oversold due to pessimistic sentiment, as demand growth is expected to remain in double digits and valuations are attractive. Citi also expresses a positive view on CALB (Zhongchuangxin Hang) and Eve Energy (Yiwet Lithium Energy), citing their rapid production expansion.
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Citi Says China Battery Materials Are 'De-Ningde-izing' but Sees CATL Oversold
Citi Research published a report noting that automakers are diversifying battery suppliers to strengthen cost discipline, a trend it calls 'de-Ningde-ization' (removing CATL). The bank believes this trend is indeed occurring as second-tier battery makers effectively expand production and improve quality to support downstream EV development and cost control. Citi interprets CATL chairman Zeng Yuqun's comment that automakers have accelerated R&D and new vehicle launch cycles as a negative factor for CATL, reflecting weakening relationships with automakers. However, Citi points out that CATL is actively expanding outside China, with its market share reaching 45% in the first seven months of 2026, compared to 44% in fiscal 2025, while also holding a higher-end product mix. The bank believes CATL is oversold due to pessimistic sentiment, as demand growth is expected to remain double-digit and valuations are attractive. Citi also favors CALB (Zhongchuang Xinheng) and Eve Energy (Yiwei Lithium Energy) due to their rapid capacity expansion.
Read sourceChinese automakers push to reduce reliance on CATL amid profit imbalance, but challenges remain
An article from Ofweek维科网, republished on Tencent Stock, analyzes the growing trend among Chinese automakers to reduce their dependence on CATL, the dominant battery supplier. The core driver is profit imbalance: CATL's net profit in 2025 was 50.7 billion yuan, while the combined profit of the top 12 automakers in the first half of 2026 was only 19.3 billion yuan. Automakers like Ideal, Xiaomi, and others are pursuing a multi-pronged strategy: partnering with second-tier battery makers (e.g., Xinwangda, CALB), investing in joint ventures, and developing in-house battery production. However, the article argues that full 'de-CATLization' is difficult due to CATL's strong brand recognition among consumers, its 40% market share, and its technological and quality advantages built on massive R&D spending. The article cites an industry ministry-affiliated media outlet questioning whether excessive 'de-CATLization' could harm the Chinese auto supply chain. It concludes that the goal is not to eliminate CATL but to shift from a monopoly to a multi-supplier system, with CATL itself adapting by forming joint battery factories with major automakers.
Read sourceChina's MIIT Rejects 'De-CATL' Narrative, Says Automaker Battery Self-Development Often Just Marketing
China's Ministry of Industry and Information Technology (MIIT) published an article on September 22, 2026, titled 'The 'De-CATL' Argument Is Unacceptable,' pushing back against what it calls an 'opinion farce' in the new energy vehicle industry. The MIIT argues that normal supply chain adjustments and automaker self-development efforts are being mischaracterized as a campaign to replace dominant battery maker CATL. It warns that such rhetoric risks shifting competition from technology and quality to price and marketing. The article also criticizes automakers' battery self-development claims, stating many only involve pack design or system integration, not core cell manufacturing, and that joint development is often marketed as independent R&D. This follows a late-August 2026 People's Daily piece defending CATL's high profits as justified by its technological moat. CATL's 2025 net profit was 722 billion yuan, with a 16.9% net margin in H1 2026 versus the auto industry's 3.8%. A NielsenIQ survey found 37.1% of Chinese consumers would abandon a purchase if their preferred model lacked CATL batteries. Despite automakers like Ideal, Xiaomi, and GAC pursuing self-development or multi-supplier strategies, CATL holds over 47% domestic market share and 60% of the 200,000+ yuan segment.
Read sourceChinese automakers shift from buying to making batteries to cut costs and gain control
Chinese automakers are increasingly moving from simply purchasing standardized battery cells to deeply engaging in battery research, development, and manufacturing. This trend, driven by cost pressures and the need for product differentiation, sees companies like Li Auto and Xiaomi developing their own batteries. Li Auto plans to switch to self-developed batteries after initial production runs using CATL cells, while Xiaomi has announced its 'Dragon Armor' battery co-developed with partners. The article notes that CATL's first-half net profit of 47.03 billion yuan more than doubled the combined net profit of 15 major listed automakers, highlighting the cost imbalance. Experts cited, including Liu Kai of the China Association of Automobile Manufacturers and Zhang Yongwei of the China EV100, explain that automakers are pursuing various strategies—from full in-house development to strategic investments and joint ventures—to gain control over costs, product definition, and supply chain security. However, the article cautions that battery self-development requires massive capital, rapid technological iteration, and complex manufacturing expertise, suggesting a diversified model of self-development, cooperation, and external procurement will persist.
As Automakers Develop Their Own Batteries, What Remains for CATL?
This article analyzes the strategic shift by Chinese automakers like Xiaomi, Li Auto, and XPeng to develop their own battery systems, challenging CATL's dominant business model. Rather than building full battery factories, these automakers are taking control of battery product definition, design, and integration, while outsourcing cell manufacturing to suppliers like CALB and Sunwoda. This move aims to capture more profit from the battery value chain, which has historically been dominated by CATL. The article notes that CATL's power battery gross margin fell to 20.63% in the first half of 2026. However, it argues that CATL is unlikely to be replaced entirely due to its manufacturing scale, high capacity utilization (94.86%), and global expansion. The company is also fighting back by offering standardized battery-swapping blocks and integrated chassis solutions. The analysis concludes that the industry is moving toward a balanced power structure, with automakers gaining product definition rights and CATL defending its manufacturing and global advantages, while expanding into energy storage and overseas markets.
Read sourceAutomakers back second-tier battery makers to counter CATL's dominance, not topple it
The article analyzes a recent divergence in China's A-share lithium battery sector, where CATL's stock fell while second-tier battery maker Xinwangda surged. It argues this reflects automakers' strategic shift to reduce dependence on CATL, not to replace it. Automakers like Li Auto, Xiaomi, and Tesla are investing in and partnering with Xinwangda, but on terms that keep core technology, product definition, and supply chain control in their own hands. Xinwangda acts as a contract manufacturer, following automakers' specifications. The article traces the power dynamic shift from 2012, when battery makers were suppliers, to 2014-2025, when CATL's dominance forced automakers to queue for capacity. The current strategy is described as 'de-CATL-ization' with limits: automakers maintain CATL as primary supplier for performance and stability while using second-tier suppliers as leverage for pricing and backup capacity. The author concludes this new 'core supplier + automaker-backed second source' balance is healthier than any single party's dominance.
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