Chinese automakers are increasingly integrating battery development and manufacturing into their operations to reduce costs, control key technologies and limit dependence on Contemporary Amperex Technology Co. Limited (CATL).

Li Auto, Xiaomi, Leapmotor and Xpeng are pursuing different approaches, from developing battery packs with external manufacturing partners to producing cells in-house. Meanwhile, CATL continues to expand its partnerships, including a long-term agreement with Seres to increase battery capacity for the Aito brand.

Automakers integrate battery development

Recently, Li Auto founder and CEO Li Xiang outlined six upgrades for the 2026 Li Auto i6, including a self-developed ultra-fast-charging battery with a capacity of 96 kWh and a CLTC-rated range of 780 km. The company delivered more than 120,000 i6 units in the first half of 2026, accounting for over 50% of its total sales. China's Ministry of Industry and Information Technology lists Shandong Li Auto Battery as the manufacturer of both battery assemblies, while Sunwoda and CALB supply the cells. The 2025 i6 used CATL and Sunwoda batteries, meaning CATL no longer supplies the latest version. Li Auto therefore manages battery development while retaining external cell manufacturers.

On September 4th, Xiaomi introduced its Longjia Battery and announced strategic cooperation with CALB and Sunwoda Power for all Pengcheng series models. Xiaomi oversees product definition, battery-pack design and development involving cell materials, formulations and manufacturing processes, while its partners provide cell technology and manufacturing capabilities.

On September 16th, Leapmotor announced that its independent battery-cell research and development had progressed to production, with its cell production line beginning operations. This extends its in-house capabilities beyond cell-to-pack (CTP) technology. Xpeng is pursuing a similar strategy. At the G9L launch, chairman He Xiaopeng said, "Starting from this year, Xpeng will develop and produce all its batteries on its own."

Reducing dependence on external suppliers

CATL has historically supplied batteries to many Chinese automakers, but manufacturers are increasingly pursuing independent development, alternative suppliers and their own production capabilities to gain control over specifications, costs and supply.

The shift dates back to the second half of 2021, when Xpeng added CALB, formerly China Aviation Lithium Battery, and EVE to its supplier system. Tesla and Nio also diversified their supply chains, while Geely and GAC began planning battery production lines.

In 2022, GAC Group's then-chairman Zeng Qinghong said batteries accounted for 40% to 60% of a vehicle's total cost, asking, "Aren't we working for CATL?" The development of other battery manufacturers and easing supply conditions have since encouraged automakers to focus more on technological control and manufacturing capacity, according to an automotive industry practitioner who spoke to a news agency.

Different manufacturing models

BYD's FinDreams Battery integrates research and development, materials, cells, battery management systems (BMS), manufacturing and recycling. GAC has developed its capabilities through ENA Battery, while Geely consolidated its battery assets to establish Jiyao Passing in 2025 and developed multiple production bases.

Li Auto and Xiaomi direct battery design and development but outsource cell manufacturing. Li Auto's 5C cell is developed by the company and manufactured by Sunwoda and CALB. Xiaomi oversees battery-pack design and participates in cell-material and process development. Leapmotor, meanwhile, has begun manufacturing cells itself. These models allow automakers to combine internal development with external production or progressively bring more manufacturing in-house.

Costs and bargaining power

Battery packs are a major electric-vehicle cost component. Song Yining, head of Leapmotor's battery product line, said internally developed cells and batteries could reduce costs by 10% compared with externally purchased alternatives. Under ideal conditions, vehicle costs could fall by 2.8% and gross profit margins rise by approximately 2.4 percentage points.

The potential savings are relevant as the China Association of Automobile Manufacturers reported that the average profit margin of automobile manufacturing enterprises fell to 1.5% in the first half of 2026, its lowest level in nearly a decade.

Rising raw-material prices also affect procurement costs. An industry practitioner told a news agency that battery suppliers can adjust prices as upstream costs rise, while automakers have limited scope to increase retail prices amid competition. Internal development and supplier diversification can therefore reduce cost exposure and strengthen negotiating positions.

A bank report dated September 17th estimated Li Auto's annual battery demand at 30-40 GWh, equivalent to around 3%-4% of CATL's annual shipment target. This could give Sunwoda and CALB greater access to Li Auto's supply chain while reducing CATL's orders for certain models. Other changes include the pure-electric Aito M6, confirmed in June 2026 to use an LFP battery from Gotion High-Tech, and two new Xiaomi Pengcheng models using Longjia Battery systems with cells supplied by CALB and Sunwoda Power.

Consumer preferences and CATL's market position

Despite supplier diversification, CATL remains a consideration for some buyers. In mid-September, Li Auto stopped accepting online orders for the i6 through its official website and app. A dealership salesperson told a news agency that available deliveries largely involved Sunwoda-equipped versions. During the National Day holiday, another salesperson said the CATL-equipped version was generally unavailable, although customers continued asking whether the updated model used CATL batteries.

CATL's brand recognition has been supported by advertising across television, stadiums, lifts and mobile-phone screens. A report by a market research firm, released on September 17th, found that 40% of Chinese respondents would not choose a vehicle without CATL batteries, while 37.1% would abandon their preferred model if it did not use them. One prospective buyer said battery safety required long-term verification by owners and that he did not want to be a "guinea pig". Others were willing to consider alternatives if pricing was competitive.

CATL's installed power-battery capacity reached 464.7 GWh in 2025, representing approximately 39% of the global market. CALB recorded around 44.4 GWh and a 5.3% market share. Another market research firm reported that CATL's global power-battery usage increased by 26.6% year on year in the first seven months of 2026, raising its market share from 38% to 39.9%.

CATL reported first-half 2026 net profit of CNY 43.3 billion (US$ 6.4 billion), exceeding the combined net profit of 15 major domestically listed vehicle manufacturers. However, its share price fell from CNY 468.7 in May 2026 to around CNY 300, while its combined A-share and Hong Kong market capitalisation declined by approximately CNY 700 billion. Its energy-storage and power-battery inventory reached CNY 130.8 billion at the end of the second quarter, up CNY 21.9 billion from the end of the first quarter, amid declines in passenger-vehicle and NEV markets.

Automakers become direct competitors

An individual formerly employed by an automotive intelligent-solutions supplier told a news agency that Li Auto had gradually brought collaborative activities in-house as it pursued full-stack independent research and development. "The substitution of automakers is carried out step by step," the industry insider said.

Intelligent cockpits have been among the earlier areas affected. Battery manufacturing presents greater challenges because materials, cell formulations, processes, production yields and economies of scale require accumulated expertise. Nevertheless, automakers are developing their own formulations, structures and production capabilities, potentially competing directly with former suppliers.

CATL and Seres expand their Aito partnership

CATL and Seres have signed a long-term agreement to expand battery capacity for Aito vehicles. Their Chongqing project targets combined annual capacity exceeding 20 GWh. The first phase began producing battery packs in 2025 using CATL's cell-to-pack technology, while the second phase is expected to add 10-12 GWh. No start date has been announced, so the overall target remains planned capacity. According to a news agency, the facility is CATL's first production base in Chongqing and its first project using this integrated manufacturing format.

Locating battery and vehicle production at the same site can reduce transportation requirements and improve coordination. The partners also plan to cooperate on supercharging networks and battery services, although no timetable or technical details have been announced.

The partnership includes plans to pursue markets in Europe, the Middle East and Central Asia. Charging infrastructure, after-sales services, pricing and regulations will affect Aito's expansion. Seres has also renewed its cooperation agreement with Huawei for five years, including plans for a dedicated Aito team and continued collaboration in brand operations and customer service.

A market research firm figures reported by a news agency show that CATL's global electric-vehicle battery installations reached 333 GWh in the first eight months of 2026, representing a 39.4% market share.

Changing battery supply chains

Chinese automakers are combining internal development, alternative suppliers and direct manufacturing to reduce costs, secure supply and gain control over battery technology. BYD has a vertically integrated battery business, Leapmotor operates its own cell production line, and Xpeng plans to manufacture batteries independently. Li Auto and Xiaomi continue to work with external cell manufacturers.

CATL remains an important supplier and partner, including for Seres, but its customers are increasingly developing alternatives. Competition now extends beyond battery supply to technology, manufacturing processes, costs and production capacity, changing the structure of China's electric-vehicle supply chain.