Summary of Key Points
With the launch of its new L8 model, Li Auto has for the first time incorporated batteries that are both domestically developed and packaged by itself (Xinwangda cells combined with Li Auto's own assembly), officially adopting a dual strategy that includes both self-developed batteries and those from CATL. This marks a shift for Li Auto from being heavily dependent on CATL as a supplier to becoming an independent player that seeks to define the standards for battery technology. Behind this move are Li Auto’s desire to avoid being constrained by suppliers, reduce costs, and enhance efficiency, as well as its own technological needs. However, Li Auto also faces challenges such as potential counteractions from CATL, concerns about user trust, and difficulties in manufacturing capabilities. This development reflects a broader trend in the new energy industry: the end of the era of sole supplier dependence and the importance for automakers to master core technologies.
Why Did Li Auto Decide to Develop Its Own Batteries Instead of Using Those from CATL?
It’s not that Li Auto is ungrateful; rather, it was forced to take this step due to several reasons:
1. Avoiding Delivery Delays: Previously, the delivery time for the CATL-powered version of the Li Auto i6 took 4-5 months, while the Xinwangda-powered version only took 2-4 weeks. Relying on a single supplier meant that production plans were fixed, causing customer frustration and lost orders for Li Auto. With self-developed batteries, Li Auto can switch between production lines seamlessly without needing to change equipment, allowing it to use CATL batteries when available and its own when necessary, thus controlling its own production pace.
2. Cost Reduction: The new L8 is priced 80,000-90,000 yuan cheaper than the L9, and self-developed batteries play a key role in this cost reduction. By developing its own range extenders and electric drives, as well as collaborating on battery production, Li Auto aims to pass on the savings to consumers or use them for its own profits.
3. Meeting Special Requirements: Li Auto wants to achieve “5C fast charging” (80% battery charge in 10 minutes), but CATL’s standard batteries do not meet the requirements for high capacity, fast charging, safety, and long lifespan. Li Auto has developed its own algorithms to address these issues, which necessitates controlling the battery design to match its vehicle architecture.
4. Staying Independent: Batteries are the “heart” of electric vehicles, and if someone else determines how they are made, Li Auto lacks confidence in claiming to be a genuine car manufacturer. With production volumes reaching millions of units, it is essential to own core technologies—just as smartphone manufacturers need to develop their own chips.
How Has the Relationship Between Li Auto and CATL Changed from a Strong Partnership to Competition?
A year ago, the two companies were partners on a joint mission. Now, they have become competitors with different interests:
- Past Harmony: CATL has been closely associated with Li Auto since its inception, customizing batteries for the Li Auto ONE and developing the 5C Kirin battery for the MEGA model. It invested over 1,000 R&D personnel, and no safety incidents have occurred with the 1 million batteries produced, earning CATL a reputation as a quality guarantor in the eyes of Li Auto’s customers. They also signed a five-year comprehensive cooperation agreement.
- Current Strains: By adopting a dual-battery strategy, Li Auto has turned CATL from a sole supplier into one of several options. This is concerning for CATL, as Li Auto is one of its top five customers (accounting for 12.6%). Losing orders from Li Auto would not only reduce profits but also diminish its control over the automaker.
- CATL’s Countermeasures:
- Price War: CATL controls upstream resources such as lithium and nickel mines (which account for more than 60% of battery costs) and can make self-developed batteries by Li Auto less attractive through price cuts.
- Technological Barriers: CATL holds leading technologies like 10C charging and 350Wh/kg solid-state batteries, making it difficult for Li Auto to catch up in the short term.
However, CATL cannot completely stop Li Auto from developing its own batteries. This is a natural outcome of the industry’s development: once automakers reach a certain scale, they must reclaim control over core technologies.
Challenges Faced by Li Auto in Developing Its Own Batteries
The challenges for Li Auto in developing its own batteries are just beginning:
1. User Acceptance: CATL is perceived by consumers as synonymous with safety and reliability. When Li Auto quietly switched some models to Xinwangda batteries, customers were upset. With self-developed batteries, more than half of the prospective buyers still prefer the CATL version. Although Li Auto promises no difference in experience and offers an additional two-year warranty for users of Xinwangda batteries, user habits are hard to change.
2. Manufacturing Capacity: Battery R&D is a costly and technology-intensive process. Li Auto previously only focused on battery integration (assembling CATL cells into packs) but now needs to manage the entire supply chain, including cell design, materials, and equipment. For example, the L9 Livis did not use self-developed batteries when it was launched because the testing was incomplete, fearing that issues could damage its reputation.
3. Withstanding CATL’s Pressure: If CATL uses price strategies or controls upstream resources, Li Auto’s cost advantage with self-developed batteries may be eliminated. However, Li Auto has significant advantages, such as production volumes in the millions, substantial cash reserves, and a large customer base, while CATL has a stronger position (52.7% market share, complete industrial chain, and technological leadership).
This Is More Than Just About Li Auto; It Represents a Major Shift in the Industry
Li Auto’s move towards self-developed batteries is not an isolated event; it signifies the end of the first half of the new energy industry phase, characterized by rapid vehicle production through supply chain integration. The second half will focus on competing on core technologies such as batteries, motors, and electronic control systems. Companies like Hongmeng Zhihang are using batteries from three different manufacturers (Guoxuan, Zhongxin Xinhang, and Xinwangda), and others like BYD and NIO are also developing their own batteries. The era of a single supplier dominating the market is coming to an end.
In the future, competition will no longer revolve around the number of seats in vehicles but around the overall user experience (for example, Li Auto’s L8 has fewer seats but more interior space). Automakers will compete based on their control over core technologies.
Conclusion: Li Auto’s Journey Aims for Long-Term Success
Li Auto has entered a challenging new phase, with no easy way back. The outcome is not a simple elimination of one company by another; both Li Auto and CATL depend on each other. For Li Auto to make self-developed batteries the preferred choice for customers, it must undergo extensive testing, gain user acceptance, and withstand the pressure from CATL. This battle has just begun.