Li Auto has begun replacing CATL batteries with its own self-developed cells across its model line-up, a supply-chain shift that has contributed to CATL's share price falling to its lowest level this year. The move underscores a deepening power struggle between Chinese automakers and the country's dominant battery supplier, according to a report from Jiemian News carried by the outlet Huxiu.
CATL (300750.SZ), the world's largest EV battery maker, saw its shares drop below the 300 yuan mark in the days after Li Auto announced the change, down more than 35% from a May peak and wiping out over 700 billion yuan (about $98.6 billion) in market value. The trigger was a series of supply-chain adjustments by downstream carmakers.
From September 7, new orders for the refreshed MEGA locked in via the Li Auto app will come with Li Auto's own 5C battery, the company said. The upcoming Li i9, due on September 16, will launch with CATL cells but switch fully to self-developed batteries once production ramps up. A more complete break comes in the fourth quarter, when the i6 arrives with no CATL version at all. "Going forward, our self-developed battery will be fitted across all our models," Li Auto said in a statement.
A decade-long partnership unwinds
CATL has been Li Auto's core battery supplier since the startup was founded in 2015, powering models from the Li ONE to the L series, and supplying the one-millionth Li Auto-dedicated battery pack last year. The two companies jointly developed the 5C Qilin battery used in the MEGA, a project involving more than 1,000 engineers that launched in March 2024 and was billed as the industry's first 5C ultra-fast-charging solution.
But tensions were already building, according to an analyst who tracks the battery industry. CATL later supplied the same 5C cell to other automakers including Zeekr, and there is disagreement over whether the battery was a true co-development or primarily CATL's work with Li Auto input, leaving intellectual property ownership unclear.
The relationship frayed further last July, the analyst said, when weak sales of the Li i8 led CATL to respond slowly when Li Auto requested larger battery volumes for the i6. When the i6 then exceeded sales expectations, Li Auto only began dual-sourcing in November, and delivery delays followed due to capacity forecasting errors and limited supply-chain flexibility. Neither company has publicly commented on the state of their relationship. Li Auto said in its announcement that "self-developed batteries do not affect the fact that CATL is a leading battery brand"; CATL has stayed silent.
Why automakers want their own cells
Batteries are the single most expensive component in an EV, accounting for roughly 30-40% of total vehicle cost, and the profit split between automakers and battery suppliers has become severely lopsided. In the first half of this year, CATL's net profit reached 43.3 billion yuan (about $6.1 billion), roughly double the combined profit of 20 major listed Chinese automakers over the same period. Li Auto, by contrast, swung to a net loss of about 4 billion yuan.
"When the supplier's gross margin is that high, you naturally wonder whether you can squeeze out a bit more margin for yourself," Qiu Kaijun, founder of EV Observer, told Jiemian News.
Profit is only one side of the equation. In May, CATL launched an online battery-check service that lets consumers confirm whether a vehicle uses CATL cells exclusively or in a mixed supply. The service has been effective: more buyers now ask at dealerships whether a car has a CATL battery. "It's a successful commercial strategy," said industry veteran Zhang Feng, speaking under a pseudonym. "But for automakers, the feeling is complicated." When consumers care more about the battery brand than the car brand, automakers lose leverage over product definition and pricing, he said.
Battery makers also prefer to supply the same cell to as many automakers as possible to maximise capacity utilisation, which has pushed the industry toward a model where the battery maker defines the product and the automaker adapts. That approach helps automakers scale quickly but leads to similar battery setups across different models and forces compromises in vehicle design, said Mo Ke, founder of Zhenli Research. A fast-charging car needs special thermal management that sacrifices energy density, while a long-range car needs high-density cells that limit fast-charging performance, he noted.
Large suppliers like CATL are rarely willing to open dedicated production lines for most automakers' order volumes. Second- and third-tier battery makers are different. "Give them an order of one GWh and they'll be overjoyed," Mo said.
Xiaomi has also moved toward self-developed batteries, with its recent Pengcheng model using Xiaomi's Longjia cells instead of the CATL batteries chosen for the SU7 and YU7. Both Li Auto and Xiaomi follow a similar "self-defined, second-tier contract manufacturing" model, and both have turned to the same two suppliers: Sunwoda (300207.SZ) and CALB (03931.HK), both ranked in the global top ten for power battery installations. Sunwoda's Deng Jie told Jiemian News that his company will "match high-quality resources to deeply participate in customer product development" and engage in "deep co-creation" with automakers, which he said is something carmakers value highly.
