CATL's Chief Manufacturing Officer Responds to 'De-Ninghua' Trend: Professionals Do Professional Work

Source: Business Insights

The "Leading Brother" Holds the Line

CATL, the undisputed leader in China's power battery market, possesses the capability to crush second-tier competitors but has refrained from launching a price war. This restraint has objectively stabilized the overall profit floor of the domestic power battery industry, leaving operational room for smaller players.

CATL Responds to "De-CATL" Movement

The "de-CATL" trend in the new energy vehicle (NEV) industry continues to intensify. As automakers actively cultivate second and third battery suppliers to reduce CATL's supply chain influence, CATL's Chief Manufacturing Officer, Ni Jun, publicly stated: "Automakers may know how to build cars, but they don't necessarily know how to build batteries. Let professionals do what they do best." This marks CATL's first official response to the ongoing controversy.

Market Impact

Since May of this year, over just four months, CATL's stock price has fallen by more than 35% due to the anticipated impact of the "de-CATL" trend. The combined market value of its A-share and H-share listings has evaporated by over 700 billion yuan, signaling a significant cooling of capital market sentiment.

Is High Battery Profit the Root Cause of Automaker Losses?

Are low profit margins in the vehicle manufacturing sector caused by excessive profits at the battery giant? What does "de-CATL" truly mean? And how much can second-tier battery makers like Sunwoda and CALB actually benefit?

The Real Cause: Intense Competition Among Automakers

Consider two sets of data from the first half of 2026:

• CATL reported a net profit of 43.2 billion yuan.
• The combined net profit of all major publicly listed NEV manufacturers in China was less than 21 billion yuan.
• The entire vehicle manufacturing industry earned less than half of what this single battery supplier made.

During the same period:

• CATL's power battery business gross margin was 20.63%, with an overall net profit margin of 16.9%.
• The average gross margin for domestic NEV manufacturers was only 16%, with a net profit margin of just 1.2%–1.5%, indicating razor-thin profitability.

This massive profit gap might suggest that "automakers toil for slim margins while upstream suppliers enjoy easy profits," implying that CATL captures most of the industry's profit and squeezes downstream players.

However, the root cause of weak automaker profitability lies not in high battery procurement costs, but in excessive competition at the consumer end.

• Severe product homogenization has led automakers into undifferentiated price wars, continuously cutting prices to gain market share.
• Faster vehicle iteration cycles drive up costs in marketing, sales channels, and services, steadily eroding per-vehicle profits.
• Even when some leading automakers achieve gross margins above 20%, high R&D, operational, and channel costs prevent stable net profit growth.

Therefore, the low profitability, revenue growth without profit growth, and even periodic losses in the vehicle sector stem from disorderly internal competition and worsening terminal market conditions, not from profit appropriation by CATL.

The "Leading Brother" Protects the Industry's Profit Floor

CATL has held the top global spot for power battery installations for years, with a market share of approximately 38%. Its industry advantage is not due to supply chain monopoly, but from barriers built through long-term technological depth and strong manufacturing capabilities.

According to its 2025 annual report:

• CATL invested 22.1 billion yuan in R&D for the year, with a cumulative total exceeding 90 billion yuan over the past decade.
• It holds 54,538 patents, ranking second among domestic companies in international patents, behind only Huawei.
• With six global R&D centers and 23,000 R&D personnel, its high gross and net profit margins represent a reasonable industrial premium derived from advanced manufacturing technology, quality control, and economies of scale.

With its strong financial resources, technological barriers, and cost advantages from scale, CATL is fully capable of initiating an industry-wide price war to exchange lower prices for market share and squeeze competitors.

Looking at mature domestic manufacturing sectors—such as solar energy, consumer electronics, and home appliances—price wars are typically started by market leaders. This often leads to collapsed profits, idle capacity, and mass elimination of second- and third-tier brands.

Currently, second-tier battery manufacturers like Sunwoda, CALB, and Gotion High-tech have overall gross margins of only 13%–18% and net profit margins of 2%–7%. If CATL were to actively engage in price competition, the already limited profit margins of these smaller players would be shattered, trapping them in a cycle of revenue growth without profit, sustained losses, and declining capacity utilization.

From an industry ecosystem perspective, CATL, as the "leading brother," has not initiated a large-scale price war. This has objectively stabilized the overall profit floor of the domestic power battery industry and indirectly preserved operational space for second-tier manufacturers.

Of course, as a profit-seeking commercial entity, CATL's restraint is not altruistic. It is a rational choice based on its own business logic. Sustained large-scale R&D investment, heavy asset capacity deployment, long-term stable profit expectations, and capital market valuation all require the company to maintain above-average profit levels. CATL also needs to avoid a vicious price war that could harm its own core interests.

The Three Drawbacks of "De-CATL"

Automakers pursuing "de-CATL" have two core demands:

1. Ensure supply chain security
2. Optimize vehicle cost structure

Due to its massive installation scale and industry concentration, CATL holds strong bargaining power in the supply chain. For automakers, over-reliance on a single core supplier creates uncertainties in capacity allocation, delivery schedules, and regional supply. Therefore, cultivating second and third suppliers to diversify the supply chain is a normal strategic choice for automakers to hedge against supply risks.

However, the current aggressive "de-CATL" push has deviated from its original purpose of hedging supply chain risks. In essence, it is an attempt by automakers to shift the pressure of terminal market competition upstream.

In the long term, aggressive "de-CATL" has three major drawbacks:

1. Price suppression may temporarily lower battery procurement costs and improve book profits, but it does not solve the core problem of product homogenization and internal competition among automakers. As terminal price wars continue, any cost benefits will eventually be consumed, and automaker profitability will not see substantial improvement.

1. Continuous compression of upstream profits will directly weaken battery makers' R&D investment. This will slow the iteration of core technologies such as fast charging, new materials, and safety systems, ultimately constraining the high-end and intelligent upgrade of vehicles.

1. Second-tier battery makers, in order to secure orders, will be forced to passively adapt to automakers' stringent cost standards and technical parameters. They will gradually lose their R&D initiative and technological premium capabilities, eventually becoming mere contract manufacturers. This will steadily erode the industry's long-term innovation vitality.

Conclusion: Cure Internal Competition First

Vicious internal competition has become a malignant tumor in the industry. The Chinese government is implementing multiple policies to rectify disorderly competition in sectors like NEVs and solar energy, guiding the industry from price-based competition toward technology-based competition.

Compared to the brutal infighting among automakers, the domestic power battery landscape is relatively healthy:

• Leaders maintain reasonable high margins through technology and quality.
• Second-tier players are expanding steadily.
• Lagging players with inefficient capacity are being phased out.

This creates a gradient, orderly ecosystem.

CATL's high profit margin is a reasonable premium based on its technological, standardization, quality control, and scale advantages at the current stage of industry development.

The fundamental path for automakers to break through is to stop ineffective internal competition and enhance product competitiveness. Rather than blindly pursuing "de-CATL," the industry should first cure the chronic disease of vicious internal competition.