The Auto Industry’s Path Toward ‘De-CATL-ization’

In practice, only automakers with substantial financial resources and high sales volumes—such as GAC and Geely—have successfully brought self-developed batteries to mass production; however, their initial production capacity remains limited. CATL continues to hold the top market position. Since the start of 2025, the ‘de-CATL-ization’ trend has entered its third phase. Automakers are now engaging with battery definition and supply at varying levels of depth, and have begun substantively replacing CATL-supplied batteries in their flagship models. Automakers’ ambition to develop batteries in-house ultimately confronts a fundamental challenge: the barriers to battery manufacturing are far higher than anticipated—both technologically and in terms of manufacturing. Technologically, CATL invested RMB 22.1 billion in R&D in 2025 alone, over RMB 90 billion cumulatively over the past decade, and employs more than 20,000 R&D personnel. By contrast, Sunwoda and CALB combined spent only around RMB 6.5 billion on R&D last year. From a manufacturing perspective, battery production resembles semiconductor fabrication: while the process flow is widely understood, achieving >99% yield across every single step remains exceptionally difficult. ‘There are entry barriers to battery production—otherwise why can Europe and the U.S. not produce them, while only China, Japan, and Korea can?’ said Zhang Feng. Mo Ke noted that, in terms of battery stability and consistency, second-tier battery makers clearly lag behind CATL and BYD. In this ‘in-house development’ race, automakers must also shoulder uncertainty. GAC Aion once strongly promoted CALB batteries, but after quality issues emerged in certain vehicle models, it shifted the battery supply focus for its new flagship models back toward CATL. Geely was among Sunwoda Power’s earliest customers, but later became embroiled in disputes over battery quality problems in some models. Sunwoda’s latest Hong Kong IPO prospectus no longer lists Geely as a major customer. Li Auto assumes full responsibility for product definition, standards, and end-user accountability—but relies on Sunwoda and CALB for cell quality. Should issues arise, Li Auto bears full liability. In-house battery development by automakers also entails sustained R&D investment; cost advantages only materialize at scale. McKinsey estimated that automakers can achieve cost competitiveness in cell production only when annual vehicle output exceeds 500,000 units—or battery production capacity surpasses 15 GWh. To date, only BYD and Tesla have fully realized viable in-house battery development strategies. Qiu Kaijun believes that, in the long term, CATL will face significant pressure from automakers’ ‘de-CATL-ization’, especially regarding market share. He points out that second-tier battery makers have markedly improved their technology, and automakers can compensate for cell-level gaps through system-level integration—making CATL no longer indispensable, and broadening supplier options. Yet multiple interviewees told Jiemian News that while the ‘de-CATL-ization’ trend will persist, CATL’s market dominance remains unshaken in the short term. In Zhang Feng’s view, CATL’s market share may decline over the next two years—but not rapidly, given its continued heavy R&D investment and aggressive marketing. CATL’s core power battery business remains solid. In the first half of the year, its share of battery installations in domestic passenger vehicles reached 46.7%, with capacity utilization hovering around 95%. Among these, ternary lithium batteries accounted for 75.2%. In other words, automakers are introducing secondary or tertiary suppliers primarily for mid-to-low-end models to cut costs—but CATL remains the preferred choice for premium models and high-end consumers. Recently, institutions including UBS, CLSA, and JPMorgan have maintained ‘Buy’ or ‘Add’ ratings on CATL. Beyond the power battery domain, CATL’s true ace in the hole lies in its strategic transformation—simultaneously advancing across multiple fronts.

[A Decade in the Making] UBS’s Latest Research Report Analyzed: Can Towering Giants Emerge from the Auto Industry’s Hyper-Competitive Landscape?

On November 5, Seres Group officially listed on the Hong Kong Stock Exchange’s Main Board, becoming China’s first luxury new-energy vehicle (NEV) manufacturer to achieve dual listing on both A-share and H-share markets. Despite being hailed as ‘the largest automotive OEM IPO in the Hong Kong market since 2022,’ Seres experienced an opening-day share price decline below its offering price. Its IPO price was HK$131.5 per share, but the opening price stood at only HK$128.9, dipping further to HK$118 intraday—a drop of over 10% from the offering price. Subsequently, its share price remained sluggish: as of November 7, Seres’ H-share price had fallen 13.23% relative to its IPO price. Over these two days, several international institutions—including Citigroup and UBS—issued analyses on Seres. On November 7, UBS released a report downgrading Seres’ rating from ‘Buy’ to ‘Neutral’ and lowering its target price from RMB 170 to RMB 150. Let’s examine what UBS highlighted: 1. UBS’s Concerns: Profit Forecasts Cut by 30–40%; Surging Expenditures Squeeze Margins UBS reduced its net profit forecasts for Seres for 2025–2027 by 30–40%, revising them downward to RMB 8.2 billion, RMB 11.7 billion, and RMB 15.2 billion, respectively. These revised projections imply annual net profit growth rates of 37%, 43%, and 30% over the three-year period—approximately 0–16% lower than consensus market expectations. UBS acknowledges Seres’ leading position in China’s mid-to-high-end automotive market, yet now estimates its net profit margin at just 5–6%, down from its prior forecast of 8–10%, reflecting the company’s ongoing heavy investment phase. UBS identifies rapid growth in sales, marketing, and R&D expenses as the primary driver behind the downward revision to net profit margin forecasts. Shoufengren Commentary: After this research report was issued, even novices should realize that achieving high-profit growth for Seres over the next two or three years is nearly impossible—akin to scaling Mount Everest. Short-term traders hoping to profit quickly from Seres will likely be disappointed: Seres is building for a future three to five years out—not for today or tomorrow. Following this episode, short-term speculators will inevitably part ways with Seres. 2. The Awkwardness of the H-Share Listing: High Discount Pricing and Collective Foreign Investor Skepticism and Selling Seres’ H-share IPO presented a starkly contradictory picture. On one hand, investor enthusiasm ran high during the subscription phase: the Hong Kong public offering portion was oversubscribed 133 times, attracting over 200,000 applications and freezing over HK$170 billion in funds. On the other hand, following its listing, foreign investors collectively expressed skepticism and sold off shares—essentially casting a vote of no confidence in Seres’ Huawei collaboration assets. Trading data shows net selling by foreign investment banks including Morgan Stanley, UBS, and Goldman Sachs. Citigroup assigned a ‘Neutral’ rating to Seres’ H-shares and downgraded its A-share rating from ‘Neutral’ to ‘Sell’. Shoufengren Commentary: Foreign investors maintain heightened caution toward China’s NEV sector. Recently, H-share auto stocks have broadly underperformed. BYD’s share price has plunged from a peak of HK$157 to below HK$100, while Li Auto fell from HK$128 to around HK$78—a roughly 40% decline for both. Seres’ current dynamic P/E ratio stands at just 25x—comparable to industry leader BYD. At this valuation level, Seres is neither overvalued nor undervalued. Yet the broader auto industry still faces notable near-term headwinds in reversing its downturn.

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