Chinese automakers shift battery strategy to curb CATL dominance amid profit imbalance
Chinese automakers including Li Auto, Xiaomi, and XPeng are reducing dependence on dominant battery supplier CATL by developing in-house battery systems and partnering with second-tier makers like Sunwoda and CALB. The shift is driven by a profit imbalance: CATL's net profit in 2025 was 50.7 billion yuan, while the combined profit of top automakers was far lower. Automakers retain control over product definition and technology while outsourcing cell manufacturing. China's MIIT has pushed back against the "de-CATL" narrative, calling it a media-driven farce.
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Common ground
- China's EV supply chain is maturing, with automakers developing in-house battery integration capabilities alongside CATL's dominance.
- Most 'self-developed' batteries involve pack-level integration and system definition, not core cell chemistry breakthroughs.
- CATL's technological leadership and market share are built on significant R&D investment and manufacturing scale.
- The EV industry has contributed to poverty alleviation by providing formal-sector jobs for rural migrant workers.
Points of contention
- Whether CATL's dominance represents a healthy collaborative ecosystem or a power imbalance that exploits automakers and workers.
- Whether labor conditions at CATL factories are a story of upward mobility and the 'Chinese Dream' or of economic coercion and wealth extraction.
- Whether the 'decolonization' framing is a valid analogy for automakers seeking independence from CATL or a misleading Western projection.
- Whether MIIT and People's Daily statements are objective market analysis or political propaganda.
Blind spots
- Both sides overlook the long-term environmental and resource sustainability of the battery supply chain.
- The discussion ignores the role of global competition and trade policies, such as Western efforts to build alternative battery supply chains.
- Neither side addresses the potential for technological disruption from solid-state or sodium-ion batteries that could reshape the power dynamics.
- The voices of consumers and their preferences beyond brand trust in CATL are largely absent from the debate.
WorldAttention’s read
The debate reveals a fundamental clash in interpreting China's EV industry evolution: one side sees a coordinated, collaborative ecosystem driving poverty alleviation and technological sovereignty, while the other sees concentrated power and labor exploitation masked by patriotic rhetoric. Both agree that CATL remains the core technology leader and that automakers are integrating batteries at the pack level, not replacing CATL's cell innovation. However, they disagree sharply on whether this is a healthy maturation or a power struggle, and whether workers are beneficiaries or victims. The blind spots include environmental sustainability, global competition, future tech disruptions, and consumer perspectives. Ultimately, the industry is at a crossroads where technical cooperation coexists with real tensions over value capture and human dignity, and neither narrative fully captures the complexity on the ground.
Reporting timeline
Chinese 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.
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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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