Carmakers Diversify Battery Suppliers As China Backs CATL

A publication under China’s industry ministry has pushed back against market chatter of “de-CATLisation” as a growing number of the battery giant’s automotive partners diversify their suppliers, with the company’s shares falling recently.

The commentary, published by the news centre of the Ministry of Industry and Information Technology (MIIT), said supplier diversification and in-house battery projects are standard commercial practices. Such moves should not be portrayed as deliberate attempts to weaken leading battery makers like Contemporary Amperex Technol­ogy Limited (CATL) or drive a wedge between carmakers and suppliers, it said.

The publication followed several Chinese carmakers, including Xiaomi, Li Auto and Xpeng, expanding partnerships with battery suppliers other than CATL or announcing plans to develop batteries in-house.

The moves this month have fuelled talk of a shift away from the industry giant and speculation about its market position.

By Wednesday, CATL’s Shenzhen-listed shares had fallen about 25 per cent from their mid-August level and nearly 35 per cent from a record high reached in early May. The shares were down 1.19 per cent on the day.

CATL remains the dominant player in China’s battery market.

In August, it accounted for more than 41 per cent of the power-battery market by installed capacity, about double the share of its nearest rival, BYD, according to the China Automotive Battery Innovation Alliance.

Supplier diversification is not a new trend. CATL’s scale has made its batteries difficult to replace entirely, but many carmakers have adopted multi-supplier strategies or invested in in-house battery production in recent years to reduce their reliance on the company.

The MIIT-linked commentary, published on Tuesday, said China’s automotive supply chain had developed strengths in certain areas but still had considerable room to improve.

“What a mature industry truly needs is not to level out differences or weaken whoever is leading, but to foster the growth of stronger companies while allowing those that have already built global competitiveness to continue moving forward,” it added.

The commentary cautioned that debates over “de-CATLisation” risked distracting attention from a more systemic problem: cutthroat price competition in China’s electric vehicle industry, which is now spreading upstream through the supply chain.

As battery cells directly influence vehicle safety, reliability, lifespan and driving experience, it warned that efforts to reduce costs should focus on improving technological efficiency rather than simply forcing down procurement prices.

The commentary also noted that “in-house battery development” by carmakers typically referred to less central areas such as pack design and battery management systems, rather than the complex manufacturing and mass production of core battery cells.

Power batteries require heavy investment, sustained manufacturing expertise and quality control to produce at scale, the commentary said, warning that fragmented efforts by carmakers risked duplicating investments and misallocating resources.