Recent battery supply chain news from China's EV industry reveals a nuanced strategy among automakers: they are not abandoning CATL, the world's largest battery maker, but rather building a more sophisticated supply chain that balances deep cooperation with CATL for premium models, multi-supplier arrangements for volume models, and in-house battery development for future technology control.
According to D1EV, a Chinese EV industry outlet, the first half of 2026 saw SAIC-GM-Wuling and BAIC Group sign strategic cooperation agreements with CATL, while Volkswagen Group gave CATL an annual award. At the same time, Li Auto invested 2.65 billion yuan (about $373 million) in Sunwoda Power, and Xiaomi's car unit partnered with CALB and Sunwoda on its Longjia battery system. This parallel activity, the outlet notes, is not a turn away from CATL but a deliberate balancing act.
Three parallel tracks
Automakers are simultaneously pursuing three strategies. For premium models, they continue to rely on CATL as the primary supplier. Li Auto's L-series, despite adding Sunwoda and self-developed batteries, still uses CATL for high-end versions requiring the highest performance and consistency. Xiaomi's SU7 and YU7 early versions, Nio's ET series, and Xpeng's G9 all keep CATL as a core partner. CATL's chief manufacturing officer, Ni Jun, explained in a September interview: "Making a good battery is not difficult; the challenge is making ten billion batteries that are equally good."
For volume models, automakers are building multi-supplier systems. The Li L8 facelift added Sunwoda, Xiaomi's Pengcheng series uses CALB and Sunwoda, the Aito M6 EV uses Gotion High-Tech, Xpeng has brought CALB into its core supplier system, and Leapmotor uses Gotion, CALB, and FinDreams among others. This approach disperses capacity risk and strengthens bargaining power.
More notably, automakers are moving beyond simple procurement to deep collaboration. Li Auto's investment in Sunwoda is aimed at battery technology and manufacturing. Xiaomi's Longjia system has Xiaomi defining the product, leading pack design, and controlling quality, with CALB developing the electrochemistry and materials per Xiaomi's specs and Sunwoda providing cell manufacturing. Xiaomi also uses a "shadow factory" mechanism with over 8,000 quality checkpoints on the production line and resident quality experts at suppliers.
Defining the technology
In parallel, automakers are investing in self-developed battery technology. Li Auto has disclosed a self-developed 5C battery plan, with cells made by partners and packs made in-house. Xiaomi, while not making cells itself, is deeply involved in the electrochemistry design. Nio is advancing mass production of its large cylindrical cells, and traditional automakers like GAC, Dongfeng, and Geely are also investing in battery R&D.
The goal is not to make cells but to control the definition of battery technology. The future model, as D1EV describes, is that automakers define technical standards and product requirements, while battery makers handle large-scale production. This shifts automakers from buyers to technology definers.
The timing is driven by three factors. CATL's net profit in the first half of 2026 was 43.2 billion yuan (about $6.1 billion), averaging about 240 million yuan (about $34 million) per day, while EV makers face margin pressure from price wars. Batteries account for about 40% of an EV's cost, and the profit gap between upstream and downstream has become unsustainable. Second, an advanced cell production line has an effective scale of about 10 GWh, enough for 170,000 to 200,000 vehicles. Automakers like Li Auto, Xiaomi, and Leapmotor now sell enough vehicles to support multiple suppliers. Third, the overall technical progress of Chinese battery makers like CALB, Sunwoda, Gotion, and EVE Energy has improved significantly in ternary lithium, LFP, and large cylindrical technologies, giving automakers more options.
