Why did CATL's stock price plunge sharply? Why do some people attribute it to Xiaomi Auto’s launch of the Longjia battery? Will 'de-CATL-ization' become a trend among automakers in the future?

Technological innovation in the power battery and energy storage industries has effectively stagnated for a long time. Meanwhile, battery costs account for over 30% of a vehicle’s total cost (and together with chips, up to 50%). With automakers earning only about RMB 3,000 per vehicle, they simply lack the capacity to invest in technological innovation, process improvements, or management model upgrades. Monopolistic and coercive factors are the core reason—without exception—for the persistently low profit margins across most domestic industries. Secondarily, there are issues related to commercial values—but strictly speaking, such value-related problems at the micro-level of socioeconomic and production activities are themselves shaped by broader macro-level forces. Similarly, upstream giants continue promoting claims like “memory prices will rise through 2027.” Although substitution here is relatively difficult, it remains inevitable—otherwise, downstream and midstream industries would collapse entirely. Profitability comparisons speak volumes: 1. The average net profit margin of eight major domestic automakers stands at just 1.5%, whereas CATL’s net profit margin reaches as high as 17%. 2. For identically specified LFP battery packs, Guoxuan High-Tech and Sunwoda quote Huawei’s Harmony Intelligent Driving platform roughly 10% lower than CATL; for a 53-kWh NMC battery pack, the price difference approaches RMB 2,000. Beyond automakers’ growing in-house battery development efforts, other negative catalysts contributed to CATL’s stock decline: 1) Despite approval of its RMB 40 billion share buyback plan, CATL has purchased not a single share to date—potentially signaling to the market that it lacks intent to support its stock price. 2) Starting September 1, a 2% consumption tax on lithium batteries was officially imposed—and will rise to 4% by September 1, 2027. Given CATL’s dominant market position, such costs would normally be passed down the chain. Yet domestic NEV makers can no longer absorb any further cost pass-throughs, as noted earlier: average domestic automaker profit margins have already fallen below 2%.

Two heavily declining blue-chip stocks

Last night, I remarked in the comment section that this round of correction hadn’t yet reached 30%. Not sure if quant funds picked up on that remark (just kidding)—but today, the stock plunged over 6% intraday, hitting a low of RMB 326, precisely a 30.2% drop from its peak of RMB 467. Why the decline? Market concerns center on two main points: first, Li Auto’s announcement of in-house battery development for all future models; second, rumors of downward revisions to September production plans. These two pieces of news colliding amplified volatility. Let’s calmly assess whether these concerns reflect sound logic—or merely sentiment. First, Li Auto’s battery initiative. In fact, this was disclosed during its late-August earnings call: battery self-development begins this second half, with some models already equipped, and new models launching this Q4—including MEGA, i8, and i6—will follow suit. So this isn’t a sudden negative surprise but rather information long present on the table. What impact does this have on battery suppliers? Let’s run the numbers: Li Auto expects to sell 400,000–450,000 vehicles this year, split roughly 60% BEV / 40% extended-range. Accounting for average battery capacity per vehicle, total battery demand amounts to ~25 GWh. CATL doesn’t supply exclusively (Sunwoda also supplies), mainly covering premium models like MEGA. Assuming an 80% supply share, that’s ~20 GWh—roughly 20–30 GWh overall. CATL’s projected annual shipments exceed 1,000 GWh—so the impact is merely 2%–3%, essentially representing routine supplier diversification. Of course, some investors asked: Last night’s Xiaomi Pengcheng launch event was lively—but its battery suppliers are Sunwoda and CALB. How should we interpret that? Simple: Pengcheng targets the mid-to-lower end segment, so component selection prioritizes cost-efficiency. Sunwoda’s batteries cost ~30% less than CATL’s. CATL refuses to concede that 30% discount, while Sunwoda cannot afford to lose the order—hence, a tacit understanding emerges. Whether Tesla or Xiaomi, having secondary or tertiary suppliers is standard practice for automakers. What truly matters is whether CATL’s market share is shrinking. Looking at installation data: In the first seven months of this year, CATL’s share of passenger-vehicle battery installations in China reached 45.9%, up 4.9 percentage points year-on-year; globally, its installed share rose from 38.0% to 39.9%. Third-party analysts forecast that, excluding BYD, CATL’s domestic EV battery market share will reach 47.2% this year—a 2.5-percentage-point increase over last year. In other words, amid widespread anxiety about “market share erosion,” CATL’s actual share is rising substantially. Why? Technology and other factors are secondary—the fundamental driver is brand recognition. For vehicles priced above RMB 200,000, consumers overwhelmingly opt for CATL batteries—even if it means waiting months longer for delivery. Automakers fully understand this reality. Their current push toward in-house development and multi-supplier strategies stems primarily from intense profitability pressure—aiming to cut costs, strengthen bargaining power, and secure supply chains—not a genuine intention to “de-CATL-ize.” I love this line: “Business cooperation between enterprises always centers on complementary resource endowments and co-creation of value-added outcomes—where mutual benefit exists, collaboration endures; where endowments misalign, parties naturally move on to their next agreement.” As for production planning: Many see only the “downward revision” but overlook what follows it—September’s production plan still shows ~5% month-on-month growth.

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