Li Auto is deepening its move into battery manufacturing, investing 2.65 billion yuan (about $373 million) in Sunwoda Power and preparing to switch several models to its own 5C cells, according to a report by Chinese outlet Huxiu. The move is part of a wider industry trend in which automakers are trying to weaken CATL's grip on pricing and supply.
On September 4, Sunwoda announced that Li Auto would inject 2.65 billion yuan into its power battery subsidiary, taking an 8.79% stake after the capital increase. Combined with earlier holdings, Li Auto's related entities will hold 11.17% of Sunwoda Power, making it the second-largest shareholder. A year earlier, the two companies had already set up a joint venture, Shandong Li Auto Battery Co., to build cells together.
Three days later, Li Auto disclosed that its self-developed batteries are already installed in the L6, L8 and i8 models, with more models to follow. The new MEGA will initially use CATL's 5C ternary lithium cells, then switch entirely to Li Auto's own 5C cells once production ramps up. The 2026 i6 will use Li Auto-designed 5C cells, manufactured by Sunwoda and CALB, with the battery pack assembled by Li Auto itself.
Automakers seek alternatives to CATL
Li Auto is not alone. Xiaomi has also partnered with Sunwoda and CALB on its Longjia battery, with Xiaomi defining the product and leading the pack design. AITO has brought in Gotion High-Tech as a supplier, and Gotion has confirmed it is preparing volume deliveries for the AITO M6 EV. Leapmotor has said it uses two or three cell suppliers for its battery packs and negotiates prices monthly.
The motivation is clear: batteries account for 30% to 40% of a vehicle's bill of materials (BOM), according to industry estimates, making them the single most expensive component. Nio's CEO Li Bin has said batteries and chips together now account for more than 50% of BOM. For a car with a 200,000 yuan (about $28,200) BOM, that means battery costs of 60,000 to 80,000 yuan (about $8,500 to $11,300).
Second-tier battery makers are undercutting CATL on price. Industry supply chain data cited by Huxiu shows that equivalent cells from Sunwoda, CALB and Gotion are priced 10% to 20% lower than CATL's, with CALB sometimes 10% to 15% cheaper. That can translate into a cost difference of 8,000 to 12,000 yuan (about $1,100 to $1,700) per vehicle. In the first half of 2026, CATL's gross margin was 23.93%, while CALB's was 16.7%, Gotion's 15.60%, Sunwoda's 15.33%, and EVE Energy's 14.31%.
CATL's dominance is also under pressure from its own consumer-facing moves. The company has given its batteries names like Shenxing, Qilin and Xiaoyao, held its own technology launches, and is expanding a battery-swap network called Chocolate Swap, a service Nio pioneered. CATL opened 10 direct experience centers in August and plans to enter 100 cities globally in the second half of the year. This brings the supplier into direct contact with end consumers, a role automakers have traditionally reserved for themselves.
Profit pressure pushes automakers to act
The tension is amplified by diverging profits. CATL is in its most profitable phase ever, with first-half 2026 revenue of 276.9 billion yuan (about $39 billion), up 54.80% year on year, and net profit of 43.28 billion yuan (about $6.1 billion), up 41.98%. Its share of China's passenger EV battery installations reached 46.7% in the first half, up 5.6 percentage points from a year earlier.
Automakers, meanwhile, are struggling. Li Auto's vehicle gross margin fell to 7.8% in the first half of 2026 from 19.8% a year earlier, and the company posted a net loss of about 3.98 billion yuan (about $560 million) on revenue of 48.65 billion yuan (about $6.9 billion). With margins in single digits, shaving 5% off battery costs could free up 1.5% to 2% of BOM, a crucial buffer for survival.
By investing in suppliers and developing in-house cells, Li Auto and its peers are trying to shift the balance of power. They no longer want to be mere buyers of batteries; they want to define the product and let factories compete for their business. According to Huxiu, the strategy is to put CATL, Sunwoda and CALB in direct competition, forcing each to offer better prices and terms.
