On September 4, a standalone press conference devoted entirely to a single power battery product drew unusual attention at Xiaomi’s Beijing Science and Technology Park. At the event, Xiaomi announced a strategic cooperation with Sunwoda Power and CALB on a power battery branded the Longjia Battery, which will be installed in the company’s extended-range Pengcheng vehicle. Although the cells will be manufactured by Sunwoda and CALB, Xiaomi has embedded itself deeply across the entire chain — product definition, battery pack and cell design and development, and quality testing.
On the very same day, Sunwoda disclosed that Li Auto had injected 2.65 billion yuan of new capital into Sunwoda Power in exchange for an 8.79 percent equity stake. Combined with holdings previously held through affiliated entities, the Li Auto group now controls 11.17 percent of Sunwoda Power, making it the second-largest shareholder.
The two developments did not coincide by accident. A contest over the right to define the power battery is unfolding quietly beneath the surface of China’s new energy vehicle industry. Automakers are no longer satisfied with sourcing standardized cells and simply packaging them into modules and packs. They are moving into cell materials, processes and production lines, redefining from the source the heart that determines the fate of an electric vehicle.
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1. A Double Announcement That Signals a Structural Shift
The historical template was straightforward. In earlier rounds of industrial integration, CATL established joint ventures with the overwhelming majority of Chinese automakers, including SAIC, GAC, FAW, Dongfeng, Geely and Changan. In any link involving cell manufacturing, CATL held a controlling 51 percent stake. Automakers gained stable supply, but their say over material formulations, process standards and other core definitions remained limited.
The paths taken by Li Auto and Xiaomi are fundamentally different. The core technology definition right is migrating from the power battery maker to the vehicle manufacturer, while the battery maker’s role shifts from technology exporter to manufacturing executor.
“The purpose of these industrial integrations between automakers and power battery companies is to grasp the say over core resources,” said Yu Qingjiao, chairman of the Zhongguancun New Battery Technology Innovation Alliance.
That single sentence captures the essence of the shift. What is being contested is not the ability to produce a power battery cell — China already possesses abundant capacity in that regard — but the ability to decide what the power battery cell should be. Whoever writes the specification controls the performance envelope, the safety margin, the cost structure and, ultimately, the profit pool.
For the automakers, this is a question of whether they remain system integrators that assemble purchased components, or become technology owners that define the most valuable component inside their own products. For the power battery suppliers, it is a question of whether they remain brand-name technology companies or gradually become manufacturing platforms whose customers write the specs.
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2. Xiaomi’s Route: Standards Penetration and the “White Box”
Under the traditional model, automakers purchase mature cells from power battery manufacturers and complete the pack assembly themselves, with a clear boundary of division of labor. What the power battery manufacturer supplies is a standardized off-the-shelf product. The cell process and material formulation are, from the automaker’s perspective, something like a grey box — inputs and outputs are visible, but the core remains untouchable.
Xiaomi’s Longjia Battery breaks that tacit understanding. According to Li Xiaoshuang, vice president of Xiaomi Auto, who presented at the launch event, the Longjia Battery is a power battery system solution defined by Xiaomi from a whole-vehicle perspective.
The division of labor is specific. Xiaomi is responsible for product definition and leads the design and development of the battery pack, including mechanical structure, electronic and electrical architecture, thermal management strategy and battery management system software strategy. It is also deeply involved in the selection of cell materials, formulation design and manufacturing processes. Through what the company calls a “shadow factory” mechanism, Xiaomi applies full-process quality control to supplier production lines, which are equipped with more than 8,000 quality inspection points.
Manufacturing is split between two suppliers. CALB is responsible for the customized development of the electrochemical system and materials, while Sunwoda Power provides cell manufacturing capability. Both have built dedicated production lines for the Longjia Battery.
The most significant change compared with the traditional model is that the core technology definition right of the power battery has transferred from the battery maker to the vehicle company. It is no longer a simple purchase-and-delivery relationship. The automaker penetrates cell materials, production processes and even second- and third-tier supply chains through a form of through-cut management, attempting to lead technical standards and the quality system. The industry calls this model “white boxing.”
In practical terms, white boxing means the automaker sees and controls the recipe, not just the finished dish. The power battery supplier retains the process know-how required to manufacture at scale, but the specification, the validation criteria and the quality gates are set by the customer.
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3. Safety Standards as the Most Visible Proof of Definition Power
Safety standards offer the most intuitive evidence that definition power has moved. According to Xiaomi Auto, the Longjia Battery produced by CALB and Sunwoda Power exceeds national standards across six major dimensions, including thermal safety, bottom-impact safety and electrical safety.
In the thermal diffusion test, the trigger is applied at 55 degrees Celsius with the pack at full charge, and the requirement is that the power battery pack exhibits no thermal propagation, no fire and no explosion. The corresponding national standard test temperature is only 22 degrees Celsius. In the bottom-impact test, a 25-millimeter impact head and 500 joules of energy are used, whereas the national standard specifies a 30-millimeter head and 150 joules.
Table 1: Longjia Power Battery Safety Indicators Compared With National Standards Test item Longjia power battery National standard Thermal diffusion test Triggered at 55 degrees Celsius at full charge; no thermal propagation, no fire, no explosion 22 degrees Celsius Bottom-impact test 25-millimeter impact head, 500 joules of energy 30-millimeter impact head, 150 joules of energy Dimension coverage Six major dimensions including thermal safety, bottom safety and electrical safety Baseline requirements These are not marginal improvements. Raising the thermal diffusion trigger temperature from 22 to 55 degrees Celsius, and raising bottom-impact energy from 150 to 500 joules while narrowing the impact head, implies changes at the level of cell chemistry, separator selection, pack structural design and thermal management strategy. Such changes cannot be delivered by an off-the-shelf power battery product. They require the customer to sit inside the development process from the beginning.
This is precisely why the definition right matters. A specification that is written by the automaker forces the power battery supplier to re-engineer around the customer’s targets. A specification written by the power battery supplier forces the automaker to accept the envelope the supplier has chosen to industrialize.
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4. Li Auto’s Route: Capital Binding and Self-Developed Cells
If Xiaomi has taken the route of standards penetration, Li Auto has chosen the path of capital binding.
Li Auto’s layout in power batteries can be traced back to 2020. From independent cell research and development, to participation in Sunwoda’s Pre-A round of financing in 2022, to the establishment of a joint venture, Shandong Li Auto Battery Co., Ltd., in October 2025, the cooperation between Li Auto and Sunwoda has deepened continuously.
On August 26, at the company’s second-quarter earnings call, chairman and chief executive officer Li Xiang stated clearly that starting in the second half of this year, Li Auto’s self-developed power battery would be progressively installed across its full model lineup. Less than ten days later, the 2.65 billion yuan investment landed.
The division of labor in the Li Auto and Sunwoda joint venture is equally clear. Li Auto is responsible for product definition and leads underlying development including cell material formulation, structural system, battery pack and battery management system. Sunwoda is responsible for engineering implementation and large-scale mass production.
Liu Liguo, senior vice president of whole-vehicle electric research and development at Li Auto, put it bluntly: what Li Auto wants is “built to my standards,” while Sunwoda provides “large-scale, low-cost manufacturing.”
According to official statements from Li Auto, the Li L8, Li L6 and Li i8 already carry self-developed power batteries. The all-new Li L8 launched in June 2026 is equipped with self-developed power batteries across the entire lineup, and CATL has exited supply for that model. The new-generation MEGA and the forthcoming i9 will still offer CATL cells in their first batches, but Li Auto has said that once production preparation for self-developed cells is complete, both models will switch entirely to the company’s self-developed 5C ternary lithium power battery. The 2026 model i6, scheduled for launch in the fourth quarter, will also carry Li Auto’s self-developed power battery.
Table 2: Two Distinct Paths to Power Battery Definition Power Dimension Xiaomi Li Auto Primary route Standards penetration and white-box management Capital binding and joint venture Power battery partners CALB and Sunwoda Power Sunwoda Power, including equity participation Division of labor Xiaomi defines the product and leads pack design; CALB customizes the electrochemical system and materials; Sunwoda manufactures cells Li Auto defines the product and leads underlying cell, pack and BMS development; Sunwoda handles engineering and mass production Quality control Shadow factory mechanism with more than 8,000 inspection points Built-to-standard manufacturing with large-scale, low-cost output Equity linkage Strategic cooperation 2.65 billion yuan investment for 8.79 percent, 11.17 percent combined -
5. Why Automakers Are Collectively Chasing the Heart of the Electric Vehicle
In fact, a number of automakers had already tried to secure greater initiative in power batteries before this latest round. BYD has achieved full-stack self-development through its FinDreams Battery subsidiary and already supplies externally to a certain extent, making it the second-largest player in the power battery market after CATL. Mainstream automakers including Great Wall, Geely, SAIC, GAC, Chery and Changan have also laid out power battery operations through self-development, joint development or joint ventures, in order to seize a greater say in the industrial chain and safeguard supply chain security.
The most direct reason for contesting the definition right and product right of cells is the imbalance in profit distribution across the industrial chain. “As the new energy vehicle industry matures, under the imbalance of profit distribution, a reconstruction of say and profit is inevitable,” Yu Qingjiao said.
The numbers are stark. Eight power battery companies reported cumulative profits of 50.846 billion yuan, while 23 mainstream listed vehicle manufacturers reported cumulative profits of only 25.1 billion yuan in the first half of the year. In other words, eight power battery companies earned twice as much as 23 vehicle manufacturers. The average profitability of a single power battery company is more than six times that of a single vehicle manufacturer. CATL alone reported net profit attributable to shareholders of 43.248 billion yuan in the same period.
Table 3: The Profit Gap Between Power Battery Makers and Automakers Indicator Power battery companies Listed vehicle manufacturers Sample size 8 companies 23 companies Cumulative profit in the first half 50.846 billion yuan 25.1 billion yuan Average profitability per company More than six times that of a vehicle manufacturer Baseline Margin level Double-digit gross margin Approximately 1.5 percent average profit margin Largest single contributor CATL, 43.248 billion yuan net profit attributable to shareholders Not applicable Against the double-digit gross margins of the power battery sector, the average profit margin of the whole-vehicle industry is only about 1.5 percent. The joke that automakers are working for power battery manufacturers has turned into an industry reality.
The cost structure explains the anxiety. In a whole vehicle, the power battery accounts for 30 to 40 percent of total cost, and for high-end long-range models the power battery can account for more than half. Over the past several years, violent fluctuations in lithium prices have forced automakers to absorb battery price increases passively, making supply chain controllability a rigid requirement rather than a preference.
Li Auto’s stake in Sunwoda, for example, serves multiple purposes at once. It helps stabilize the power battery supply chain and reduce costs, and at the same time allows the automaker to profit from power battery operations rather than only paying for them.
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6. Differentiation as a Second Engine of the Definition Race
Beyond profit, a deeper motive comes from the need to build differentiated competitiveness. In its official statement, Li Auto emphasized the necessity of independent research and development of key technologies. The company described its previous decade as an entrepreneurial phase and said the next phase requires sustained research and development investment to build technological barriers.
Li Auto said it formulated an important technology strategy in 2020 under which two core technologies of intelligent electric vehicles, the power battery cell and the chip, must be fully self-developed. In what the company describes as the era of embodied intelligent vehicles, the power battery and the chip are the most core technological barriers, and electric drive technology, intelligent driving models and excellent product capability will be the company’s core competitiveness. Li Auto said it hopes to hold future-facing core technological barriers in its own hands, as leading companies such as Apple, Huawei and Tesla do, and described this as its strategic resolve.
As product homogeneity has become more severe, automakers had already launched what the industry calls a surname movement in power battery branding. GAC’s Magazine Battery, Geely’s Golden Brick Battery, BYD’s Blade Battery, Chery’s Rhino Battery, Huawei’s Giant Whale Battery and Changan’s Golden Bell Shield Battery all claim parameters and safety performance that exceed comparable competitors in the market.
These differentiated indicators are difficult to achieve through general standardized solutions. They can only be realized through dedicated customization channels. Once an automaker decides that its power battery must carry its own name and its own performance claims, the definition right inevitably moves toward the vehicle company. A branded power battery that is entirely designed and specified by the supplier is, from a marketing and engineering standpoint, difficult to claim as one’s own.
This creates a self-reinforcing loop. Differentiation demands customization. Customization demands definition power. Definition power demands deep involvement in cell materials, processes and production lines. And deep involvement, in turn, produces more differentiation.
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7. The Challenges: Control Risk, Quality Responsibility and the Contract Manufacturing Question
For power battery manufacturers, deep involvement by automakers means ceding the cell definition right and mainly contributing manufacturing capability in the cooperation. The obvious question is whether battery makers will be reduced to contract manufacturers.
The costs are already visible on the supplier side. Sunwoda’s announcement noted that after the equity transaction with Li Auto is completed, its shareholding in Sunwoda Power will fall from 26.38 percent to 24.06 percent, which may bring the risk of weakened control or even loss of control.
For automakers, the first problem brought by deep involvement is the division of quality responsibility. At its launch event, Xiaomi Auto clearly stated that it will provide free lifetime protection to the first non-commercial owner of the vehicle. If the power battery catches fire due to original factory quality problems, or catches fire after a collision or chassis scraping and meets scrapping conditions, Xiaomi will compensate respectively with a new vehicle of equivalent configuration, or the difference between the vehicle damage insurance policy amount and the amount already paid.
When definition power moves upward, responsibility and compensation risk move upward with it. An automaker that writes the specification for its power battery cannot easily point to the supplier when something goes wrong, because the specification itself was its own design decision. This is a fundamental change in the risk architecture of the vehicle industry.
Yu Qingjiao expects that the power battery industrial chain will not move toward full takeover by automakers. Instead, a three-way landscape will take shape, composed of brand-name cell manufacturers, contract manufacturing platforms and automakers’ in-house development.
Head battery companies remain irreplaceable because of their technological and process barriers and economies of scale. Second- and third-tier brands, by taking on automakers’ self-developed orders, may lose part of their definition power and premium pricing power, but deep binding helps them survive an industry reshuffle.
Dong Yang, chairman of the China Automotive Battery Industry Innovation Alliance, offered a different emphasis. “I do not think battery companies will merely become contractors, because there are many professional issues in batteries that vehicle manufacturers do not master. The two sides should each leverage their strengths and cooperate in a complementary way.”
He noted that deep cooperation between vehicle and battery companies in battery design, manufacturing and application is very good, because a battery is not only manufactured according to quality standards but also involves a long service life, and the vehicle manufacturer should participate in that process.
The argument has merit on both sides. Cell manufacturing is a discipline built on years of process accumulation, yield learning and materials know-how. Writing a specification is not the same as being able to manufacture it at scale with consistent quality and acceptable cost. Conversely, manufacturing capability without definition power leaves a supplier exposed to margin compression and customer concentration risk.
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8. A Three-Way Landscape Takes Shape
The emerging structure of the power battery industry can be described along three layers.
The first layer consists of brand-name cell manufacturers. These companies retain proprietary chemistries, process know-how and scale advantages, and they continue to supply standardized or semi-customized power battery products to automakers that do not wish to invest in cell-level definition. Their position is protected by technology and by the sheer volume of installed capacity required by the market.
The second layer consists of contract manufacturing platforms. These are suppliers, often second- and third-tier players, that provide engineering implementation and mass production for automakers that have taken control of the definition. They give up part of the definition right and premium pricing power, but gain volume visibility and long-term customer binding.
The third layer consists of automakers’ in-house development operations. These range from full-stack self-development, as practiced by BYD through FinDreams Battery, to joint ventures and deep co-development arrangements such as those pursued by Li Auto and Xiaomi.
Within this three-way landscape, the definition right of a given power battery program becomes a negotiable variable rather than a fixed attribute of the supplier. Who defines the power battery depends on who is willing to invest, who bears the risk and who owns the customer relationship.
For the automakers, the calculus is straightforward. The power battery is the single most expensive and most performance-defining component in an electric vehicle. If the specification is written elsewhere, the automaker competes on someone else’s envelope. If the specification is written in-house, the automaker competes on its own.
For the power battery makers, the calculus is equally straightforward. Volume and utilization rates protect scale advantages. Definition power protects margins. In a market where capacity is abundant and price competition is intense, the trade-off between the two is unavoidable, and different companies will make different choices.
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9. What Comes Next
Whether second-tier power battery manufacturers can rise by leveraging customized cooperation and capital binding with leading automakers, and whether automakers can use these new moves to achieve what the industry calls de-CATL-ization and thereby reshape the market landscape, remains to be seen.
Several indicators will matter. The first is the pace at which self-developed power battery programs move from flagship models to mass-market models. Li Auto’s stated plan to switch the MEGA and i9 entirely to self-developed 5C ternary lithium power batteries, and to equip the 2026 i6 with self-developed cells, offers an early test case.
The second is whether the white-box model produces measurable quality and cost advantages at scale. More than 8,000 inspection points on a supplier line represent a substantial quality assurance investment, and the question is whether that investment translates into lower warranty costs and stronger safety records over the life of the fleet.
The third is how the supplier landscape rebalances. If more automakers follow the Li Auto and Xiaomi routes, second-tier power battery makers could gain a stable role as manufacturing platforms. If the model proves difficult to replicate at scale, the current concentration of the power battery industry may persist.
The fourth is the evolution of safety and performance standards. When individual automakers set power battery safety thresholds significantly above national standards, they create competitive pressure that may eventually push the entire industry’s baseline upward. That dynamic would benefit consumers regardless of how the definition right is ultimately distributed.
What is clear is that the era in which automakers simply purchased power battery cells and packaged them is drawing to a close. The contest over who defines the power battery is now a contest over who captures the value created by electrification. And the outcome of that contest will shape not only the profitability of individual companies but the technological trajectory of China’s new energy vehicle industry as a whole.