This article is written based on public information and is for informational exchange purposes only, and does not constitute any investment advice.
In 2026, the power battery industry is witnessing a subtle shift in power dynamics.
In early September, automakers successively released their performance reports. Against the backdrop of subsidy phase-outs and slowing market clearance, the days are not easy for OEMs. CATL, which released its report first, was pushed to the forefront of public attention, with the remark, "CATL alone, a single company, earns more than 15 listed OEMs on the A-share market combined." Four years ago, Zeng Qinghong, Chairman of GAC Group, proposed the "working for others" theory, which now seems to have truly materialized.
The public discourse on "de-CATLization" is growing increasingly fierce. But this time, Tier-2 battery manufacturers seem to have found a way to break the deadlock, sounding the rallying horn for a counterattack through the direct supply model of battery cells.
01. CATL Eats the Meat, Tier-2 Manufacturers Get the Broth
At the 2026 China Power Battery Conference, a speech by Yin Tongyue, Chairman of Chery, caused a huge stir: "The industry agreed on sharing risks and sharing achievements, but now battery manufacturers still enjoy a larger share of the achievements."
Looking at the interim reports, this statement is not wrong. It is not just CATL, which is at the center of the storm; among the top ten battery manufacturers globally in terms of market share, Chinese companies occupy half. However, from a fundamental perspective, we believe that it is obviously biased to blame Tier-2 battery manufacturers along with CATL.
(1) Industry Beta Drives Incremental Growth, but the Combined Increment of Four Battery Manufacturers is Only 40% of CATL's
Excluding CATL, the four leading Tier-2 battery manufacturers—CALB, Gotion High-Tech, EVE Energy, and Sunwoda (within the top ten in industry market share)—saw their cumulative revenue increase by CNY 47.8 billion in the first half of this year compared to last year, approaching about half of CATL's increment.
It appears that the cyclical dividend of the battery industry as a whole has indeed captured market profits. However, if we carefully break down this CNY 47.8 billion increment, we will find that in the field of power batteries for passenger vehicles, the dividends captured by Tier-2 battery manufacturers are not that significant:
· Of CALB's CNY 10.67 billion increment, CNY 4.82 billion came from the increment in the energy storage business, accounting for nearly 50% of the overall increment. The increment in power batteries was only CNY 5.84 billion, which also included the increment from commercial vehicles.
· Of EVE Energy's CNY 17.5 billion increment, energy storage batteries grew by CNY 4.8 billion, consumer batteries grew by CNY 1.33 billion, and the increment in power battery products was only CNY 4.53 billion.
· Of Sunwoda's CNY 11.1 billion increment, energy storage batteries grew by CNY 3.34 billion, and electric vehicle batteries grew by CNY 6.53 billion.
Only Gotion High-Tech, which had the smallest increment, saw almost all of its first-half increment come from power batteries. In total, out of the CNY 47.8 billion net increment, the increment in power battery products was CNY 25.36 billion, accounting for 53%, which is only about half.
The cheers of jubilation clearly contain some exaggeration. In fact, CATL disclosed a power battery increment of CNY 60.52 billion in the first half based on financial report standards. The combined net increment of the four leading Tier-2 battery manufacturers was only about 41.9% of CATL's.
At the end of last year, this figure was still 46.7%. Although Tier-2 battery manufacturers performed remarkably in the first half in terms of numbers, this is more due to the industry beta rather than snatching more meat from CATL.
(2) Locking Down Prices, Taking Market Share—CATL Wants It All, Broth and All
From CATL's perspective, it certainly wants to seize more market share through this upward cycle of industry beta, rather than just profit-level returns. Previously, in our article analyzing CATL's second-quarter financial report ("CATL's Anxiety is Exactly the Same as NVIDIA's"), we mentioned: seizing market share is CATL's top priority.
The core reason lies in the fact that, at this stage, CATL possesses two core advantages during this window period that cannot be shaken in the short term:
First: The cost advantage brought by controlling more upstream mining rights will be amplified during a price upswing.
Since the domestic average price of battery-grade lithium carbonate bottomed out in June 2025, up to the peak in April-May this year, the cumulative maximum increase has reached over 300%. If the price system transmits normally, downstream demand will inevitably shrink.
CATL has been steadily deploying upstream resources in recent years. Actions such as those in Indonesia, Yichun (Jiangxi), or taking stakes in China Molybdenum will certainly alleviate much of CATL's cost-side pressure. According to previous reports by China.com, CATL's self-sufficiency rate for key metal resources has reached 35%, far exceeding the industry average of 10%-15%. Soochow Securities estimates that its own lithium mine layout alone can reduce its costs by 10%-15%.
Second: In the current consumer market, brand perception is simply divided into CATL and others.
Since 2022, CATL has been steadily strengthening its brand building. In the first half of this year alone, CATL's selling expenses increased by 33.4%, with intensive advertising coverage. In the Brand Finance 2025 Top 500 Chinese Brands, CATL's brand value reached USD 19.64 billion, a year-on-year increase of 3.2%, ranking 20th.
Except for BYD's FinDreams, which is produced and used internally, for the other battery brands, in terms of car sales and from a cognitive perspective, there are actually only CATL and others.
Based on the above two points, if CATL wants to translate its advantages into solid profits, it is actually a piece of cake. But the reality is that in the first half of 2026, CATL's actual gross profit margin for its power battery business instead decreased by 321 bp, narrowing the gap with Tier-2 battery manufacturers such as Sunwoda and CALB.
The only plausible explanation is that CATL is deliberately lowering its shipment prices in exchange for more market share, which also easily explains why CATL was able to capture more new increments in the first half of this year.
02. Leave an Outlet When Surrounding the Enemy: Demand Spillover Leaves Opportunities
In the industry life cycle theory, economists Michael Gort and Steven Klepper, a professor of economics at Carnegie Mellon University, conducted empirical research tracking the market evolution of 46 products and reached a classic statement on the expansion phase: during the dividend period of industry development, the degree of concentration is actually more likely to decline.
For CATL, although it is unwilling to easily share its market share, given that the industry is currently in the dividend period of expansion, there are still opportunities for CATL's capacity spillover for Tier-2 battery manufacturers. There are two main reasons:
(1) CATL Intentionally Builds Up Inventory, with Inventory Growth Far Exceeding That of Tier-2 Battery Manufacturers
Although we have always emphasized that seizing market share is CATL's top priority at this stage, CATL is obviously concerned about the pace of seizing market share. Whether it is anti-monopoly concerns or relationships upstream and downstream in the supply chain, CATL clearly does not want to maximize public opinion pressure.
In its statements during the interim report period, CATL disclosed that its battery system capacity in the first half was 525 GWh, and production was 498 GWh. The calculated capacity utilization rate was as high as 94.86%, close to full production. In contrast, the capacity utilization rates of the four Tier-2 battery manufacturers ranged between 65% and 86%.
From the disclosed capacity, Gotion High-Tech's total capacity is about 130 GWh, and EVE Energy's capacity will be about 200 GWh by the end of 2026. Sunwoda and CALB have not disclosed their figures, but judging from their capacity layout, their currently put-into-production capacity is likely around 120 GWh each. The combined total of the four is not much different from CATL's.
Looking at the inventory balance, at this stage, CATL's inventory level and net growth are significantly higher than the combined total of the four Tier-2 battery manufacturers.
Even though the capacity utilization rates vary, CATL's net increment in inventory level is still significantly greater than the reasonable combined level of Tier-2 battery manufacturers. It is highly likely that CATL is proactively building up inventory to keep its market share growth rate from being too fast.
(2) Sales Growth Slows, but Average Battery Capacity per Vehicle Surges
Since the beginning of this year, the overall growth rate of NEVs (New Energy Vehicles) has significantly slowed down. Data from the China Association of Automobile Manufacturers (CAAM) shows that in the first half of 2026, the production and sales of NEVs in China grew by 6.7% and 7.3% year-on-year, respectively, which is notably lower than the same period last year.
The most obvious perception in the automotive circle is also affected by the phase-out of subsidies, with the increment slowing down.
At the same time, in the current context of increasingly fierce competition in vehicle configurations, driving range has basically become the core quantifiable competitiveness of various products. In the absence of large-scale technological iterations, the only way to compete in driving range is to increase battery capacity.
From 2022 to 2024, the average battery capacity per vehicle was in the range of 46 kWh to 47 kWh, with very flat growth. However, by 2025, the trend began to reverse, with the average capacity increasing to 53.1 kWh. From January to April 2026, the average battery capacity per vehicle has reached 67.8 kWh, a year-on-year increase of 33.8%.
This is equivalent to saying that the total battery value of two new cars in 2026 could build three cars in 2024. Therefore, although the downstream sales growth rate has slowed down, the increment for battery manufacturers still remains.
On one hand, whether it is intentional inventory buildup or actual capacity constraints, on the other hand, the increment in battery shipments is still there. In short, for Tier-2 battery manufacturers, even though CATL seems invincible, at least the spillover demand still has a strong industry beta in the short term. No matter what, the current stage is a window period for the counterattack of Tier-2 battery manufacturers.
And now, automakers have also handed the sword to Tier-2 battery manufacturers.
03. Counterattacking CATL: The Direct Cell Supply Model Becomes a Heavy Weapon
During this year's interim report period, EVE Energy separately disclosed the operating revenue of battery materials in its segment revenue disclosure in the financial report. Although it did not specifically disclose the meaning of battery materials, judging from the expression, part of it may come from the trade of precious metals in the upstream industry chain, and part may come from downstream non-product direct supply.
In fact, since the beginning of this year, automakers have found a new "in-house R&D" model to hedge against the risks of limited battery supply and potentially high costs. The most core method is—the direct supply of battery cells.
In November last year, the Unified Cell standard battery cell, tailor-made by Gotion High-Tech for Volkswagen, has entered the stage of scaled mass production and delivery.
In April this year, Tesla announced the adoption of a "cell procurement + in-house assembly" model, purchasing power battery cells from Sunwoda and completing the assembly process of modules and battery packs (PACK) on its own.
In September, after completing its stake in Sunwoda, Li Auto announced that the new-generation L8 has fully switched to Sunwoda battery cells, while the battery packs are produced by a joint venture between Li Auto and Sunwoda.
Also in September, Xiaomi's Pengcheng series of four extended-range SUVs was officially launched, all equipped with Xiaomi's Longjia batteries. Among them, the 76 kWh ternary system Longjia batteries for the three high-end models are supplied by CALB.
Undoubtedly, leading automakers have almost all completed their adaptation with Tier-2 battery manufacturers within this year. The vast majority have adopted the model of direct cell supply + automaker assembly. This direct cell supply model has indeed hit CATL's core vulnerability at this stage:
First, Pack costs and profits are transferred to automakers. Battery manufacturers earn a bit less, but CATL's brand competitors will shift from Tier-2 battery manufacturers to automakers, while automakers can reduce the cost of brand premiums.
The cost of a power battery system consists of comprehensive costs such as battery cells, structural parts, BMS (Battery Management System), boxes, auxiliary materials, and manufacturing expenses. According to previous relevant reports by Autohome, the general cost of Pack for passenger vehicles is about CNY 0.25/Wh, and for buses, it is about CNY 0.23/Wh. Battery cells account for about 80% of the cost, and Pack costs account for about 20% of the entire battery pack cost.
Figure: Breakdown of battery cost structure. Source: Autohome, compiled by CaiBaoJi
At the same time, the Pack stage is also the stage where the relative gross profit margin is most concentrated, including battery brand premium and adaptation costs. As mentioned earlier, even though CATL has proactively lowered its gross profit margin, CATL's brand premium (relatively higher gross profit margin) is still around 3%-4%.
If we assume that the gross profit margin of the Pack stage is 15%, and the battery cost accounts for 40% of the entire vehicle, then under the model of direct cell supply + automaker assembly, the overall gross profit margin for automakers can be revised upward by 1.2%. With the brand premium added, it can reach about 4%-5%.
For the current NEV automakers facing hyper-competition, direct cell supply is obviously a more economical approach.
Second, in terms of market promotion, the chronic issue of battery brand perception can also be resolved at once. At this stage, the most core demand factor for batteries in the consumer market is safety.
Previously, as long as automakers used finished products from Tier-2 battery manufacturers, it would often dilute their brand value, because Tier-2 battery manufacturers do not have the ability to spend heavily on marketing safety. If the finished product comes from the automaker, the situation will be significantly different. This is actually the most common practice in the mobile phone and digital circle before, such as the once highly popular Corning Gorilla Glass. Later, various mobile phone manufacturers had their own in-house glass, but more or less they all utilized the Corning industry chain.
If batteries can also change their brand promotion narrative, the resistance from the consumer market will also be greatly improved.
Third, for automakers, the necessity of breaking away from a single supply system goes without saying. Especially since CATL's capacity is relatively constrained at present, it is also highly likely to become the core reason restricting OEM deliveries during the critical period of stock competition.
The delivery cycle for the pure electric version of XPeng MONA L03 is over 13 weeks, and the extended-range version also takes 7-8 weeks. In February, media reported that if the Li Auto i6 chooses CATL batteries, the delivery cycle is close to 17 weeks. Including Zeekr 9X, Xiaomi YU7 Max, and even some models from Great Wall H10 and SAIC Volkswagen, delivery congestion has occurred to varying degrees. From market terminal feedback, waiting for vehicle delivery has become the norm for car purchases in 2026.
Therefore, automakers are also unwilling to have their sales held back by battery manufacturers' capacity in the long term.
Of course, everyone still needs to save face. Automakers have almost unified their narrative regarding the direct cell supply model—they need batteries with lower standardization and higher customization to adapt to product requirements.
From the perspective of the industry cycle, this round of counterattack by Tier-2 battery manufacturers is more like a battle of "using the opponent's force against them." The superposition of three factors—industry beta + capacity spillover + automakers broadening supply channels—has created a rare window of opportunity.
Of course, in 2021, when lithium battery prices just entered an upward cycle, many voices believed that Tier-2 battery manufacturers had extremely strong opportunities. However, through downstream product iteration and upstream mining rights and industry chain layout, CATL has almost achieved an invincible position.
But the industry issue this time is that no matter how the promotion narrative changes, battery technology has actually made no progress before the true realization of solid-state batteries. For automakers, against the backdrop of no technological changes, there is not much difference in whose batteries to use or whether to build them themselves.
We made a judgment during the previous upward cycle of lithium batteries: CATL is not afraid of strong competition from peers, but fears automakers building batteries. Isn't direct cell supply just another way for automakers to build batteries?
And once there is a significant change in technological generations, such as solid-state batteries being installed in vehicles, it is often CATL that gets hurt. No matter what, the horn of the counterattack has been sounded, and the real challenge for "King Ning" has just begun. (Author: Yaohua)