Geely Sells the Battery Factory It Built Over Five Years to CATL: A Business Game of Calculations and Letting Go
Hello everyone, I'm your financial journalist friend. Today, we're going to talk about a very interesting story involving Geely Automobile and CATL (Contemporary Amperex Technology Co., Ltd.).
In simple terms, Geely spent five years building a battery factory in Chongqing, but in the end, it didn't use it for its own needs and instead sold the factory (or rather, its equity) to CATL, the industry leader.
Many people might wonder, "Weren't Geely aiming to focus on new energy? Why would they sell their own battery factory? Does it mean they lack confidence?"
On the contrary, this move is not a sign of lack of confidence but a very shrewd financial decision. Geely is moving away from the obsession of trying to do everything on its own and is returning to a more practical and efficient model of division of labor.
Let me break down this decision into five key points in plain language to help you understand the behind-the-scenes logic.
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1. The Background: From Fear of Being Strangled to Five Years of Hard Work
To explain this properly, we need to go back to 2021. At that time, new energy vehicles were just starting to gain popularity, and all car companies were anxious about one thing: batteries were too expensive, and production capacity was insufficient. If the battery manufacturers stopped supplying them, they wouldn't be able to produce cars. This anxiety is known as "fear of being strangled."
To address this issue, Geely decided, "We'll build our own batteries!"
So, Geely acquired land in Fuling, Chongqing, and established "Chongqing Yaoning," planning to build a factory with an annual production capacity of 18 GWh (gigawatt-hours, a unit of battery energy). The factory was supposed to start production in 2023, but reality was much slower.
It wasn't until 2026 that the factory was finally completed. By then, CATL stepped in. In September 2026, regulatory authorities approved CATL's acquisition of the equity in Chongqing Yaoning.
The core question is: If Geely needed batteries more than ever (with increased car sales), why would they sell the factory they had built with such effort?
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2. Internal Reorganization: Geely's Major Reorganization of Its Battery Business
Before selling the Chongqing factory, Geely underwent a significant internal reorganization of its battery business, which was in a rather chaotic state:
- There were various subsidiaries within the Geely Group (such as Geely Technology and Jiyao Tongxing).
- There was also the "Yaoning Group" controlled by Li Xingxing, a senior Geely executive.
- Additionally, there were joint ventures with other companies.
Chongqing Yaoning was part of this chaotic landscape. It was originally a wholly-owned subsidiary of Geely Technology, later transferred to Li Xingxing's Yaoning Group, and its name changed several times.
In 2024, Geely announced the "Taizhou Declaration," which aimed to unify its battery operations under one entity. This meant bringing together all the scattered battery businesses (including Jidian, Yaoning, Yaoneng, etc.) under "Zhejiang Jiyao Tongxing." Li Xingxing's shares were gradually transferred to Jiyao Tongxing.
This step was crucial: Geely consolidated its scattered resources under one management team, but it realized that the combined production capacity wasn't actually necessary for all its needs.
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3. The Financial Calculations: Why Buy Instead of Produce?
This is the core of the story. Why did Geely decide to sell the factory? The answer lies in the financial calculations:
- Demand has increased, but not to the extent that it required self-production. In 2025, Geely sold 4.116 million cars, of which 2.293 million were new energy vehicles. With an average of 45 kWh of battery power per car, Geely needed about 100 GWh of batteries annually.
- The existing production capacity is sufficient for the core needs. Jiyao Tongxing has 11 bases in 8 cities, with a target production capacity of 70 GWh for 2027.
- 70 GWh (self-produced) + External purchases/joint ventures = 100 GWh (total demand).
- Geely's goal is to have about 30% of its battery supply come from its own production.
- Battery manufacturing is a capital-intensive and high-barrier industry. Building a battery factory requires:
- Economies of scale: The larger the production, the lower the cost.
- High equipment utilization: The machines must be running continuously.
Quality control: Batteries must be reliable to avoid safety issues.
Continuous investment: Technology evolves rapidly, and what's valuable today might become obsolete soon.
For Geely, keeping the 18 GWh production capacity would have meant investing heavily in maintenance, quality control, and managing market fluctuations. Selling it to CATL allowed them to recoup the investment immediately and reduce their financial burden.
- Geely's strategy has changed: It's shifting from being a "versatile player" to a "specialized player." Its new approach is:
- 30% self-production: To ensure core technology and supply chain security through Jiyao Tongxing.
- 30-40% joint ventures: Cooperation with CATL (51% owned by CATL) and Xinxinda (70% owned by Geely) to leverage technology and share risks.
- Remaining production purchased externally: Buying ready-made batteries.
In summary, keeping the 18 GWh factory would have disrupted Geely's goal of 30% self-production, potentially leading to overcapacity or higher management costs. Selling it helped maintain the desired 30% self-production ratio.
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4. CATL's Motivation: Why Buy?
If Geely found it unprofitable, why was CATL interested? For CATL, this was a great opportunity:
- High capacity utilization: CATL's capacity utilization was at 94.9% in the first half of 2026, meaning its factories were operating at full capacity. Any disruption could affect supply.
- Ready-made capacity: Although CATL is building new factories (764 GWh), construction takes time and involves various approvals and adjustments. Chongqing Yaoning was already completed and could start production by the end of the year, saving time and risk.
- Geographical advantage: Chongqing is an important base for Geely's vehicle production. Acquiring this factory would give CATL closer access to Geely's orders, reducing logistics costs and response times.
- Industry consolidation: The battery industry is moving towards greater concentration. By acquiring smaller capacities, CATL can strengthen its market position and squeeze out competitors.
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5. The deeper Implications: New Boundaries in the Automotive Supply Chain
Geely's sale of the Chongqing factory is not just a simple asset transaction but also a redefinition of the division of labor in China's automotive supply chain:
- In the past (2021): Car companies wanted to control all core components and integrate vertically, trying to do everything themselves.
- Result: Duplication of efforts, wasted resources, and low efficiency.
- Now (2026): Both car companies and battery manufacturers have realized the need for specialization:
- Car companies (like Geely): Our core competencies are car manufacturing, design, branding, and customer experience. Batteries are important, but not everything. We need to ensure supply chain security (30% self-production) and leave the rest to specialized manufacturers (CATL, Xinxinda, etc.) for higher efficiency and lower costs.
- Battery manufacturers (like CATL): Our core competencies are battery technology, economies of scale, and cost control. We don't need to produce cars; we just need to produce high-quality batteries for all car companies.
This is a victory for specialized division of labor.
What Geely sold was not the battery capacity but the obsession with doing everything on its own. What CATL acquired was not just the 18 GWh capacity but also a closer partnership and a more efficient supply chain with Geely.
**In conclusion, in the business world, "making" isn't always better than "buying," and "owning" isn't always more important than "using." By selling the Chongqing factory, Geely shed a heavy burden and focused on its core strengths. CATL, in turn, gained much-needed capacity and a more stable customer relationship.
This is a win-win transaction and a reflection of China's automotive industry's transition from rapid growth to rational maturity.
A lesson for everyone considering entrepreneurship or investment: Don't expand blindly for the sake of a sense of security. Ask yourself, "Am I really good at this, or do I just feel more comfortable doing it myself?" If the answer is unclear, consider outsourcing or collaborating, focusing your resources on your core competencies.