Automakers Shift from Buying to Making Batteries: Li Auto, Xiaomi Deeply Involved in Cell Design and Manufacturing

In a notable trend, multiple automakers have recently announced plans to develop their own batteries. Li Auto has stated that its self-developed batteries will be fully deployed across its entire vehicle lineup, while Xiaomi Auto has also entered the fray.

Unlike the traditional model of directly purchasing standardized battery cells from suppliers and focusing solely on vehicle integration, automakers are now deeply involved in the entire battery development process—from definition and material selection to development, validation, and quality control. Automakers are gradually transitioning from being battery buyers to becoming battery product definers and technical rule-setters.

The Inescapable Cost and Profit Equation

On September 16, Li Auto launched its all-electric six-seat SUV, the Li i9. The first batch of vehicles will be equipped with CATL's 5C ternary lithium batteries. Once battery production capacity ramps up, the vehicles will switch to Li Auto's self-developed batteries. Earlier, Li Auto announced that its self-developed batteries would be fully adopted across all models.

Li Auto also holds an 11.17% stake in Sunwoda, making it the company's second-largest shareholder. Li Auto stated that the two companies will engage in deeper, long-term collaboration in power battery R&D, manufacturing, and quality management.

Xiaomi Auto recently unveiled its "Dragon Armor Battery," claiming that the battery pack was designed and developed under Xiaomi's leadership, with deep involvement in cell-level design and development in partnership with suppliers. Xiaomi emphasized open and transparent cooperation across R&D, manufacturing, and quality control.

Currently, aside from BYD, which has achieved full-stack self-development, the most practical driver for automakers to develop their own batteries is cost. As the most expensive component in new energy vehicles, power batteries account for 40% to 60% of total vehicle cost. With prices rising again this year, battery costs directly impact automakers' profitability and supply chain stability.

Financial data shows that in the first half of this year, CATL's net profit reached 47.031 billion yuan, a year-on-year increase of 45.31%. In contrast, the combined net profit of 15 major automakers listed on A-shares and Hong Kong stocks was only 21.048 billion yuan, with 11 of them reporting declining net profits or sustained losses. CATL's net profit was more than double the combined net profit of these 15 automakers.

Liu Kai, Executive Secretary-General and Senior Engineer of the New Energy Vehicle Battery Branch of the China Association of Automobile Manufacturers, noted that as new energy vehicles rapidly develop, automakers have always considered self-developing batteries and building their own battery production capacity. "Power batteries are the largest cost item for vehicles. Once automakers achieve规模化 (scale) in self-developed batteries, they can effectively reduce costs and alleviate previous supply chain pressures caused by lithium price fluctuations."

How to Differentiate with Self-Developed Batteries?

According to Zhang Yongwei, President of the China EV100 Research Institute, automakers are entering the battery industry through various means to avoid the previous imbalance in the relationship between vehicle manufacturers and battery suppliers. "One approach is technical definition—not making batteries but having the capability to control them. Another is to actually produce batteries, either through joint ventures, wholly owned subsidiaries, or investments," Zhang said. He added that automakers' deep involvement in the battery sector through technical definition, R&D investment, and manufacturing will significantly reshape the industry's relationships and landscape.

Beyond cost considerations, product differentiation is another key reason automakers are entering the battery space. Previously, the industry standard was for battery companies to supply standardized cells and solutions, with automakers adapting them for integration. However, amid intensifying homogenized competition, standardized cells and solutions no longer provide a competitive edge.

This is especially true as technologies like 800V high-voltage platforms and ultra-fast charging continue to evolve. Batteries can no longer be viewed as standalone components. Only by truly tailoring batteries to their specific needs can automakers solve real pain points and create differentiated advantages.

However, the path to self-developed batteries is not easy. Industry insiders point out that self-development requires massive capital investment, rapid technological iteration, and long cycles for production ramp-up and yield rate control. Liu Kai emphasized that the scale of investment required for automakers to develop and produce their own batteries is enormous, and the entry barrier is very high. "Experience in technology transfer and manufacturing is critical to battery performance."

"Power batteries are a highly specialized, asset-heavy, and manufacturing-intensive industry. Cell manufacturing requires not only long-term accumulation in materials, processes, equipment, yield rates, and quality management but also large-scale industrial coordination capabilities," a Li Auto representative said. Through strategic investments and deep collaboration, Li Auto can more deeply engage in cell technology, manufacturing quality, and long-term capability building, while leveraging partners' expertise in manufacturing. "This is a model more aligned with industrial division of labor and long-term efficiency."

As a result, there is no single model for automakers' self-developed battery strategies. Some opt for full-stack self-development and self-built production capacity; others make strategic investments in battery companies; some form joint ventures; and others define their own battery specifications and outsource manufacturing to professional battery companies. This多元化 (diversified) model is likely to persist in the long term.

Automakers' push into self-developed batteries is not about competing for market share in the power battery sector, nor is it a simple "de-supplierization." Rather, it is driven by the desire to control costs, define products, and secure supply chain autonomy over this core component. The question battery companies must answer going forward is not "Will automakers make their own batteries?" but rather, "As automakers become increasingly knowledgeable about batteries, what will keep us irreplaceable?"

In the future, automakers' self-developed batteries, collaboration between automakers and battery companies, and diversified external procurement are likely to develop in parallel.

(Source: The Beijing News)