Chinese automakers shift from reliance on CATL, regain control from Huawei as supply chain power balance evolves

By Wang Xiaowei, Securities Times Correspondent

Two landmark events have recently occurred in China's automotive industry, both for the first time in the over-decade-long development of China's new energy vehicles (NEVs).

Key Developments

1. Automakers Accelerate "De-Ninghua" (Reducing Reliance on CATL)

• Automakers that once proudly advertised "Powered by CATL" are now diversifying battery orders to second-tier suppliers such as CALB and SVOLT.
• Some automakers have even begun producing their own batteries.

2. Restructuring of the SERES-Huawei Relationship

• SERES has regained control over product definition, channel operations, and brand marketing for the AITO brand.
• Huawei has shifted to a supporting role as an enabler.

While these two events appear independent, they point to the same underlying issue: In the early stages of the industry, automakers could quickly fill gaps and bring products to market by partnering with external players. However, as sales volumes grow, the pain points of being locked into core components and seeing the majority of profits captured by upstream suppliers become apparent. As China's automotive competition moves from the "electrification" phase to the "intelligent + ecosystem" phase, rebuilding autonomy over "three-electric systems" (battery, motor, electronic control) and the "soul" (intelligent systems) has become more urgent. Automakers are seeking greater leverage in the supply chain to gain an edge in the brutal elimination race.

The Battle Over Supply Chain Profit Distribution

As a core component, the battery is transitioning from a "faith" to a "commodity." Around 2017, CATL became the global leader in power battery installations and has since held the title of "market cap king" on the ChiNext board. Automakers once touted CATL batteries as a selling point, and consumers considered them a purchase standard, with CATL's market share once exceeding 50%.

From Xiaomi's "Dragon Armor" to Li Auto's self-developed 5C battery, from BYD's "Blade" to Geely's "Gold Brick," a "surname movement" for power batteries led by automakers is sweeping the industry.

Why are automakers no longer willing to pay the "King Ning" (CATL) premium? The fundamental reason is not a lack of product quality from CATL, but a renegotiation of supply chain leverage and profit distribution.

In the first half of 2026, CATL reported a net profit attributable to shareholders of RMB 43.284 billion. During the same period, the combined net profit of 15 major listed automakers was less than half of CATL's profit. Against the backdrop of price wars, automakers hope to regain cost bargaining power and product definition rights through multi-sourcing, self-development, and joint development.

This mirrors the evolution of the smartphone industry. Qualcomm's Snapdragon was once the flagship standard, but the rise of Huawei's Kirin and Samsung's Exynos chips meant Qualcomm was no longer the only choice. When technology diffuses to a certain stage, a redistribution of supply chain power naturally follows.

Automakers Reclaim Dominance

The restructuring of the SERES-Huawei relationship reflects another trend. In 2021, SERES and Huawei jointly launched the AITO brand. Leveraging the collaboration of both teams and the supply chain ecosystem, AITO became the first high-end NEV brand under the HarmonyOS Smart Mobility ecosystem to surpass one million units in sales. SERES, once in crisis, saw its market value soar to over RMB 100 billion. However, the debate over whether "automakers should hand over their soul" never ceased.

Recently, AITO and Huawei have moved toward a new symbiotic relationship, with the brand officially entering a phase of dedicated upgrades and management. SERES recently responded: AITO will explore a new model under the HarmonyOS Smart Mobility cooperation framework, with SERES leading product definition, product design, brand marketing, channel retail, and service systems, while Huawei Terminal participates as an enabler.

This change was foreshadowed. In previous years, SERES purchased AITO-related trademarks and design patents, acquired the factory producing the M9 flagship model, and bought a 10% stake in Yinwang (Huawei's smart car solutions company). This is a "rebalancing of power." SERES has moved from being a contract manufacturer to reclaiming control over brand, product, channel, and pricing. Huawei has shifted from a full-chain operator to a lighter-asset technology supplier. This is essentially the same industry proposition as "de-Ninghua": automakers want to reclaim dominance in the supply chain and redefine the boundaries of rights, responsibilities, and profit distribution between automakers and suppliers.

In recent years, China's NEV industry has advanced on multiple fronts. In the early stages, smart cockpits and advanced driver-assistance systems (ADAS) were scarce "black tech," and some automakers were willing to cede control in exchange for technology and traffic dividends. Now, with more intelligent solution providers available, automakers need to master product planning, cost control, and pricing power, and cannot remain permanently dependent on external technology integrators.

Given these changes, brand owners should use this restructuring to accelerate the development of complete in-house R&D and operational capabilities, while also addressing challenges such as the loss of traffic dividends and rising channel costs.

Entering a New Phase of "Ecosystem Competition"

"De-Ninghua" and SERES's "quest for change" point to the same trend: When automakers are weak, they are willing to cede control in exchange for technology. When they scale up, they inevitably demand to reclaim brand, product, and pricing power. Automakers will not permanently cede core decision-making power and the majority of profits to upstream core suppliers, whether they are battery hardware giants or intelligent software giants. This is an inevitable result of market forces.

Looking at the history of the automotive industry, "intelligent connected new energy vehicles" are a phenomenon of only the last decade or so. Whether it's the game between automakers and CATL or the restructuring of the SERES-Huawei relationship, these are explorations consistent with business rationality. The market and industry players should remain open to such changes. For powerful upstream players, the approach can be "help them mount the horse and see them off on their way," rather than permanent binding. Instead, they should leverage industry shifts to find other growth curves and continuously optimize their business structures.

Currently, China's automotive competition is gradually entering an "ecosystem competition" phase. The first half was about electrification, centered on batteries, motors, and electronic controls, giving rise to "kings" like CATL and vertically integrated winners like BYD. The second half is about intelligence and ecosystems, centered on chips, operating systems, autonomous driving, and user ecosystems. The decisive factor will shift from "product power" to "definition power"—CATL must prove it is more than just a "battery maker," Huawei must prove it is more than just a "supplier," and automakers must prove they are more than just "contract manufacturers." This is expected to drive market competition to a higher dimension.

This change is not about confrontation between automakers and their core suppliers, but normal market behavior. It is not about one replacing or weakening another, but about enabling more excellent companies to grow together in new forms of competition and cooperation, collectively advancing China's intelligent connected NEV industry from large to strong.

Of course, no matter how the ecosystem evolves, it must ultimately deliver "better products, better prices, and safer experiences." "De-Ninghua" must not compromise battery safety, and SERES's adjustment of its cooperation model must not affect after-sales service. The goal of competition is progress, not involution.