CATL shares fall 5% as Li Auto shifts to in-house batteries

Li Auto's plan to put self-developed batteries in every model erodes the customer base of CATL, the world's largest battery maker, which has supplied about one million packs to the automaker since the Li ONE.

"Self-developing batteries does not change the fact that CATL is the leading battery brand," Li Auto said in a statement on its official social media accounts, framing the move as a strategy set in 2020 to hold "the core technology barriers of the future in our own hands, like Apple, Huawei and Tesla."

CATL H-shares fell more than 4.5% at one point to an intraday low not seen since March 10, while A-shares dropped nearly 5%. The selloff followed Li Auto's announcement that in-house packs, already in the L8, L6 and i8, "will be fully deployed across all of our models." The flagship Mega and the forthcoming i9 SUV will launch on CATL 5C ternary cells before switching entirely to in-house packs once production ramps, and the refreshed i6 arrives in the fourth quarter on Li Auto's own 5C battery and Mach driver-assistance chip.

The shift breaks one of China's most durable battery-supply relationships. CATL has co-developed high-power packs with Li Auto since the Li ONE, and the two signed a five-year strategic agreement in September 2025. Li Auto designs the cell chemistry, structure, pack and battery management system itself, with cells manufactured through a 50:50 joint venture with Sunwoda formed in October 2025; it is now injecting about $390 million into Sunwoda Electric Vehicle Battery for a direct 8.79% stake, making it the second-largest shareholder.

The economics explain the timing. Li Auto's vehicle margin halved to 9.4% in the second quarter from 19.4% a year earlier, and management said on an Aug. 26 earnings call it would control costs through integrated design and in-house technology rather than pass price increases to customers. Supply, not just cost, drove the decision: at the i6's launch last September, the CATL-battery version carried an 18-to-22-week wait while the Sunwoda version took two to four weeks, a gap Li Auto has described as a question of who controls battery definition and delivery.

For CATL, losing Li Auto — which delivered 37,679 vehicles in August, up 32.1% year on year, and targets about 487,600 for 2026 — sharpens the question of customer concentration as more EV makers pursue vertical integration. BYD already builds its own batteries, and Tesla has developed in-house 4680 cells. CATL's roughly one-third share of China's installed battery capacity cushions the blow, but self-supply among volume automakers narrows the pool of external buyers that underpins its revenue.

Li Auto says it sets no fixed ratio between in-house and purchased packs and will choose on performance, safety, quality, cost and delivery, with the two sources competing internally. Chief financial officer Johnny Tie Li told investors the company expects "further margin expansion for the second half of the year" as refreshed BEV models and the i9 — the two now moving onto in-house cells — lift the product mix.

CATL, listed on both the Shenzhen and Hong Kong exchanges, has yet to price in the full revenue impact of Li Auto's roughly 487,600-unit 2026 target. The fourth-quarter timetable gives investors a dated window to watch as the world's largest battery maker defends its customer base against a wave of vertical integration across China's EV supply chain.

This article is for informational purposes only and does not constitute investment advice.