Is Li Auto Really Trying to Get Rid of CATL? No, It’s About Car Companies Collectively “Protecting Themselves”
Hello everyone, I’m your financial journalist. Recently, there’s been a big development in the automotive and battery industries. On the surface, it seems that Li Auto has changed its battery supplier for the 2026 i6 model from a sole reliance on CATL to a combination of Xinnengda, Zhongxin Innovation Aviation, and its own in-house development.
But if you only focus on the change of suppliers, you’re missing the bigger picture. Behind this is a significant shift in power dynamics between the car companies and the battery giant CATL—specifically, who really has the final say.
In the past, car companies were the “client” and battery manufacturers were the “supplier,” with each operating independently. However, CATL has become so powerful that it’s now directly interacting with consumers and even trying to get involved in after-sales services and battery swapping operations. Car companies are worried: if their lifeline (the batteries) is completely in CATL’s hands, and CATL could even poach their customers, how can they survive?
Today, we’ll break down this situation into five key points to understand the nature of this “supply chain war.”
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1. Why Did Li Auto Suddenly Change Its Approach? From “Buying Batteries” to “Making Batteries”
First, let’s clarify what Li Auto has done. Previously, when Li Auto bought cars, it mainly sourced batteries from CATL. For the 2026 i6 model, the battery strategy has changed:
- Cells (the core of the battery): Li Auto has designed and developed them, then outsourced production to Xinnengda and Zhongxin Innovation Aviation.
- Battery packs: These are produced by Li Auto’s own subsidiary, Shandong Li Auto Battery Co., Ltd.
- Financial Investment: Li Auto also invested 2.65 billion yuan to become the second-largest shareholder in Xinnengda Power.
What does this indicate? Li Auto is no longer content with just being a buyer. It’s no longer the case where Li Auto provides the money and CATL supplies the products; now, Li Auto provides the design, funding, and shares, while the other companies manufacture the batteries.
It’s like going to a restaurant before: you simply ordered food, and the chef prepared it for you. But now you realize the chef is too dominant—not only are the dishes expensive, but the chef is also trying to tell you how to eat. So you decide to learn how to cook yourself (by developing your own battery technology), hire two chefs (Xinnengda and Zhongxin Innovation Aviation), and even buy a stake in the restaurant (by becoming a shareholder of Xinnengda). This way, the chef has to listen to you.
The core logic: Li Auto wants to regain control over the definition of batteries. Batteries are the most expensive component of electric vehicles. If CATL controls the definition, Li Auto can only passively accept the prices and specifications. By developing its own batteries, Li Auto can better control costs, optimize performance, and even use batteries as a unique selling point for its vehicles, rather than just relying on the CATL brand.
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2. The Critical Issue for Car Companies: Expensive Batteries and Thin Profits
Why are car companies so sensitive to battery suppliers? Because they’re making less money.
Here’s some stark data:
- CATL: In the first half of 2026, it had a net profit of 43.2 billion yuan with a gross margin of nearly 24%. It’s truly making a fortune.
- Li Auto: In the same period, its vehicle gross margin dropped from 19.8% last year to 7.8%, resulting in a net loss of nearly 4 billion yuan.
There’s a huge gap: Battery manufacturers are getting richer, while car companies are getting poorer. Batteries account for 30%-40% of the total vehicle cost. For a car priced at 200,000 yuan, the battery cost can be 60,000-80,000 yuan.
- If you save 1,000 yuan on seats, consumers can immediately notice and criticize the reduction in quality.
- But if you can reduce the battery procurement cost by 5%, the overall vehicle cost can be lowered by 1.5%-2%. For Li Auto, with a gross margin of only 7.8%, this 1.5% difference could mean the difference between survival and failure.
Therefore, the direct motivation for car companies to introduce second and third suppliers (like Xinnengda and Zhongxin Innovation Aviation) is to negotiate lower prices. There’s an unwritten rule in the industry: second-tier battery manufacturers (such as Zhongxin Innovation Aviation and Guoxuan High-Tech) often offer prices 10%-20% lower than CATL to secure orders.
- If there’s only one supplier, you have no choice but to accept their prices.
- With multiple suppliers, you can use their prices to negotiate with others. This is the so-called “catfish effect.”
In simple terms: Car companies don’t want to stop using CATL’s batteries, but they can’t afford the exclusive prices. By introducing competitors, they hope to drive down prices and keep more of the profit for themselves.
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3. CATL’s Overreach: From Selling Parts to Competing for Customers
If price negotiation is the economic aspect, another reason car companies are wary of CATL is the political aspect (power dynamics).
Previously, CATL was a pure B2B supplier, dealing only with car companies. Now, it’s aggressively engaging in B2C marketing, directly targeting consumers.
What are some of its overreaching actions?
- Giving batteries names: It has named its battery products “Kirin,” “Shenxing,” and “Xiaoyao.” Batteries used to be anonymous boxes; now they have brands and stories.
- Holding tech conferences: Like smartphone manufacturers, CATL talks about range, fast charging, and safety.
- Providing after-sales services: It has launched “Ningjia Service” and set up direct experience centers worldwide for battery testing, extended warranties, and recycling.
- Entering the battery swapping business: It has introduced “Chocolate Battery Swapping” and built its own battery swapping stations.
What does this mean for car companies? Consumers used to buy cars based on the brand (Li Auto, NIO, Xiaomi). Now, they ask, “Does this car use CATL batteries?”
If consumers think only CATL batteries are safe, it puts car companies in a difficult position:
- If they don’t use CATL batteries: Consumers may reject the car, thinking it’s unsafe.
- If they do use CATL batteries: Consumers may think the car is good because of the batteries, not because of the car itself. This dilutes the car company’s brand value.
Even more troubling is that CATL is entering the battery swapping and after-sales services sectors. NIO spent 10 years building its battery swapping network to keep customers within its ecosystem. Now, CATL is also building its own network. If customers buy Li Auto cars, they can use CATL’s services for battery swapping and maintenance. This means car companies, after all the effort to attract customers, end up with less customer loyalty to themselves and more to the supplier.
In simple terms: CATL doesn’t want to just be the “幕后 player”; it wants to be in the forefront, directly competing with car companies. This is like cutting off their financial foundation—CATL not only sells parts but also competes for customers and takes a share of their after-sales revenue.
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4. Market Panic: Has the CATL “Myth” Crumbled?
Interestingly, despite CATL’s strong performance, its stock price has dropped significantly recently, falling by more than 30% in the A-share market.
Why is the market panicked? Because investors are not buying into current profits but future prospects.
Previously, the high valuation of CATL was based on two assumptions:
1. Technological leadership: Only CATL could produce these batteries.
2. Irreplaceability: Car companies were dependent on CATL, giving it significant power.
But these assumptions are now in doubt:
1. Car companies are moving away from CATL: Li Auto, Xiaomi, and WM Motor are all supporting multiple suppliers or developing their own battery technology, which weakens CATL’s monopoly.
2. Negotiation power is shifting: With multiple suppliers, CATL can no longer set prices at will. Its gross margin may gradually decrease.
The market is re-evaluating three key questions:
1. Can CATL maintain its 46% market share? (If other suppliers gain 10%, its scale advantage will be reduced.)
2. Can it keep its current pricing power? (If car companies collectively negotiate lower prices, its profit margins will be compressed.)
3. Are car companies’ self-developed batteries really competitive? (If they perform similarly, car companies may switch to them on a large scale.)
In simple terms: People used to think of CATL as a “money-making machine” because no one else could produce batteries like it. Now, car companies are trying to find alternatives. Although the alternative paths are not yet fully established, the existence of these options makes CATL’s competitive advantage seem less solid. The stock price drop reflects market uncertainty.
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5. The Future Landscape: Not a “Two-Choice” Situation, but a Multi-Polar Contest
Finally, let’s look at the long-term outcome of this competition.
Will car companies like Li Auto, Xiaomi, and WM Motor completely abandon CATL?
No.
Reasons include:
1. CATL remains the strongest: Its technology, production capacity, and cost control are still industry-leading. High-end car companies still need CATL’s brand to ensure quality.
2. Switching costs are high: The battery supply chain is complex, and it takes years to develop new capabilities. In the short term, CATL will still be a major player.
However, the landscape has changed:
- Previously: CATL was the “dominant player,” and car companies were its “vassals.”
- Now: CATL is the “strongest supplier” but no longer the “only supplier.” Car companies have backup options (Xinnengda, Zhongxin Innovation Aviation) and the ability to develop their own batteries.
What does this mean for consumers?
- Cars may become cheaper: Car companies can lower battery costs through competition, which may translate into lower prices for consumers.
- More choices: Cars may come with different battery options from various suppliers, with varying performance, prices, and warranty policies.
- Brand complexity: Consumers will have to consider both the car brand and the battery brand. Car companies will also try to strengthen their own brands to reduce reliance on battery suppliers.
In summary: CATL hasn’t lost; it’s still the most profitable and powerful battery manufacturer. But it has lost its absolute control. By developing their own batteries and using multiple suppliers, car companies have turned the battery from a critical component into a controllable cost. This is a silent battle where the winner isn’t the one that eliminates the others but the one that gains more control over the supply chain.
For consumers, this means a more competitive and transparent electric vehicle market, with ongoing tensions between car companies and battery manufacturers.