Chinese automakers are increasingly moving away from their reliance on CATL (Contemporary Amperex Technology Co., Limited), the dominant player in the electric vehicle battery market, as they seek to diversify their supply chains and develop their own battery technologies.
The most notable example of this trend is Li Xiang, which has opted for batteries manufactured by Xinwangda instead of CATL for its new L8 model launched in June. The company has also invested 2.6 billion yuan (approximately $520 million) in Xinwangda's electric vehicle battery subsidiary, acquiring an 11.17% stake.
Xiaomi is also diversifying its supply chain, incorporating battery suppliers such as Zhongchuang Xinhang and Xinwangda alongside CATL. Notably, on September 4, Xiaomi announced a strategic partnership with Zhongchuang Xinhang to co-develop batteries. Meanwhile, Xiaopeng Motors is using batteries from Eve Energy, and Seres has chosen Guoxuan High-Tech batteries. All these companies previously relied solely on CATL batteries but are now expanding their supply options.
Analysts attribute the shift away from CATL to declining profitability and the pricing power of the battery supply chain. According to industry analysis, CATL's net profit for the first half of 2026 reached 43.2 billion yuan, a 41.98% increase from the previous year. In contrast, the combined net profit of 15 major automotive companies listed in China and Hong Kong was only 21 billion yuan, indicating that CATL's profit exceeds that of these automakers combined.
CATL remains the clear leader in the Chinese battery market, holding a 46.7% share of the passenger car battery installation market in the first half of 2026. Its significant market share gives it considerable influence over pricing.
For Chinese automakers, reducing reliance on CATL could help improve profit margins. With CATL's competitors also gaining substantial competitiveness, it appears that automakers are actively seeking to diversify their supply chains.
* This article has been translated by AI.
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