Li Auto is increasing its investment in Sunwoda and switching to CATL batteries, thus strengthening its self-developed technology.

Li Auto is switching more and more of its vehicle batteries from CATL to products developed under its own leadership.

According to Wall Street News on September 7, Li Auto will gradually switch to self-developed batteries for its future products. These batteries have already been applied to the Li L8, L6 and i8, and will be used in all models in the future.

Among them, vehicles with pre-orders placed for the new generation MEGA starting at 3 PM that day will be equipped with self-developed batteries, and the Li Auto i9 will also be fully switched to self-developed batteries after production ramp-up is completed. Currently, Li Auto's self-developed batteries are already used in the L8, L6, and i8, and will be used in all models in the future.

Echoing this schedule is an investment of 2.65 billion yuan. Three days ago, Sunwoda disclosed that Li Auto plans to increase its investment in Sunwoda Power. After the transaction is completed, Li Auto-related entities will indirectly hold a total of 11.17% of its shares. The two parties had previously established a joint venture to undertake the production and manufacturing of Li Auto's self-developed batteries.

While expanding the application range of its self-developed batteries, Li Auto is also deepening its equity ties with manufacturing partners, thus more closely linking battery cell R&D and mass production. The challenge of this transition will shift from the R&D end to the delivery end: can its self-developed batteries keep pace with the launch of new vehicles and maintain stable quality in large-scale manufacturing?

01 Li Auto extends its self-developed technology to battery cells

Ideal's investment in Sunwoda occurred during a phase in which Sunwoda expanded its self-developed core technologies.

According to Li Auto's announcement on September 7, the company defined the previous ten years as the entrepreneurial stage, and the focus of the next stage is to continue investing in R&D and building technological barriers. In 2020, Li Auto established that it would develop both battery and chip technologies in its own right, and began developing battery cells that year; in 2022, the company launched the Mach chip project.

The inclusion of batteries and chips in the same strategy reflects Li Auto's desire to control the technology roadmap and iteration pace of key vehicle systems.

During the Q2 earnings call on August 26, Li Xiang, Chairman and CEO of Li Auto, stated, "Taking batteries as an example, our self-developed system includes a complete system encompassing cells, packs, BMS, and thermal management." This self-development not only involves individual components but also the integration of the battery system with the vehicle platform.

The vehicle schedule announced on September 7th signifies that this strategy has moved from research and development to mass production.

Currently, Li Auto's self-developed batteries are already used in the L8, L6, and i8. The first batch of vehicles in the new generation Li MEGA uses CATL's 5C ternary lithium batteries. Vehicles ordered from 3 PM on September 7th will be switched to Li Auto's self-developed 5C ternary lithium batteries, with deliveries expected to begin in November.

The initial batch of Li Auto i9 will also be supplied by CATL, with full production switching to CATL once the self-developed battery production capacity ramps up. The 2026 i6 is planned to be launched in the fourth quarter, and will be equipped with a self-developed battery and Mach chip.

In this system, Li Auto is primarily responsible for technology definition and system development, while cell manufacturing is still handled by specialized battery companies.

Automakers can determine cell size, material routes, charge/discharge performance, and safety standards based on vehicle platform, while battery companies are responsible for material introduction, production processes, yield control, and large-scale delivery.

Compared to building a complete battery cell factory directly, this division of labor can utilize the existing equipment, procurement and manufacturing systems of suppliers, and also requires automakers to be more deeply involved in the production process.

Sunwoda is an important partner for the industrialization of Ideal's self-developed batteries.

The two parties began business cooperation in 2017; in 2022, Li Auto's related investment entity invested 400 million yuan to participate in the financing of Sunwoda Power; in 2025, the two parties each held 50% of the shares to establish Shandong Li Auto Battery Co., Ltd., with a registered capital of 300 million yuan, whose business covers the production and sales of power batteries.

This RMB2.65 billion capital increase will further advance the cooperation to the equity level. According to Sunwoda's announcement, Beijing Ideal plans to subscribe for approximately RMB1.3995 billion of newly registered capital in Sunwoda Power, acquiring an 8.79% stake after the capital increase.

This round of transactions was priced at a pre-investment valuation of RMB 27.485 billion and a post-investment valuation of approximately RMB 30.135 billion. Sunwoda Huizhou New Energy's shareholding will decrease from 26.38% to 24.06%, while Sunwoda will retain control of Sunwoda Power.

As a result, Li Auto gained more opportunities to participate in battery cell technology, dedicated production lines, manufacturing quality, and long-term capacity building; while Sunwoda, with its mass production capabilities, entered the industrialization stage of Li Auto's core technologies.

An industry observer commented on the above cooperation to Wall Street Insights, saying that the cooperation between the two parties is no longer just about a single battery product, but covers the research and development and manufacturing system of future vehicle models.

02 Automakers vie for control over pricing, production capacity, and technology definition.

The price competition in the vehicle market continues to spread to the supply chain, and the conflict between automakers and battery manufacturers is extending from annual procurement prices to capacity allocation, technology routes, and long-term profit arrangements.

Data from the National Bureau of Statistics shows that profits in the automobile manufacturing industry fell by 20.4% year-on-year from January to July 2026. During the same period, CATL (Contemporary Amperex Technology Co., Limited) achieved a net profit attributable to shareholders of 43.284 billion yuan in the first half of the year, a year-on-year increase of 41.98%.

This data reflects, to some extent, the divergence in profitability across different segments of the industry chain. Vehicle manufacturers need to bear the costs of price adjustments, channel operations, and R&D investment in new models, while leading battery companies maintain strong profitability by relying on their vehicle installation scale, manufacturing efficiency, and customer structure.

Market concentration further reinforces this relationship.

According to data compiled by industry organizations from the China Automotive Power Battery Industry Innovation Alliance, the cumulative installed capacity of power batteries in China in the first half of 2026 was approximately 335.6 GWh. CATL accounted for 46.04% and BYD accounted for 17.14%, with the two companies together accounting for more than 60%. Sunwoda accounted for approximately 2.73%.

Leading battery manufacturers have economies of scale in areas such as raw material procurement, manufacturing yield, product certification, and capacity scheduling.

An automotive supply chain insider told Wall Street Insights that, facing cost pressures, automakers have reduced procurement costs in recent years by securing orders in advance, placing long-term contracts, and adopting platform-based designs. They have also introduced secondary and tertiary suppliers to create competition among different battery manufacturers in terms of price and project resources. Automakers such as XPeng, Leapmotor, GAC Aion, and Li Auto have all expanded their battery supplier base in recent years.

The second layer is production capacity. In the early stages of rapid growth in the new energy vehicle market, automakers invested in or established joint ventures primarily to secure battery supplies. Currently, with the increase in the number of models and the diversification of technological approaches, automakers are more concerned about whether different suppliers can complete certification, ramp-up, and delivery within the product cycle.

The value of having multiple suppliers has shifted from preventing supply disruptions to supporting the concentrated launch of new models and preserving room for future adjustments to procurement ratios. In the past few years, when battery production capacity was tight, numerous conflicts between automakers and battery suppliers have frequently surfaced in the industry.

At the end of last year, the head of a car company said that in order to alleviate the tight battery production capacity, "I have been drinking with the bosses of all the battery manufacturers that supply us in the past week or two."

The third layer is the right to define technology.

In the past, automakers mainly made demands on battery manufacturers regarding capacity, size, cost, and delivery, and suppliers provided products based on their own platforms. With the popularization of large-capacity range extenders, 800V high-voltage platforms, and 5C supercharging, the coupling between battery cells and the entire vehicle continues to deepen.

The charging rate determines the high-voltage system and thermal management scheme, the cell structure affects the chassis layout, and the degradation characteristics are related to the BMS algorithm, warranty costs, and resale value. Automakers need to be involved in cell design from the early stages of vehicle development to simultaneously advance the iteration of the vehicle and the battery.

Therefore, the aforementioned industry insiders also stated that the current industry changes are more akin to a rebalancing of supply relationships than a complete replacement of battery manufacturers by automakers. Leading battery companies still possess technological and scale advantages, second-tier manufacturers have gained more opportunities for customization and capital cooperation, while automakers are expanding their options through multiple suppliers, in-house R&D, and equity investments.

Price, production capacity, and the right to define technology have become the main fulcrum for the redistribution of interests among the three parties.

03 After self-development, how is quality responsibility transferred?

Once automakers enter the battery cell R&D and manufacturing stages, their control over the supply chain expands, and quality responsibility also concentrates on the vehicle manufacturers.

Issues with power batteries have permeated the entire lifecycle of vehicles. The State Administration for Market Regulation disclosed that in 2025, it received 31,000 reports of defects in automotive products, of which power battery issues accounted for 7.8%; 12,000 of these reports involved new energy vehicles.

Battery failures can originate from cell materials and manufacturing, or they can be related to pack structure, thermal management, BMS control, and vehicle matching. Traditional supply contracts are unlikely to cover all losses that occur several years after vehicle delivery.

The lawsuit between Geely and Sunwoda Power vividly reflects this conflict.

At the end of 2025, Weiri Electric filed a claim against Sunwoda Power for approximately RMB 2.314 billion, citing quality issues with some of the battery cells it purchased between 2021 and 2023.

The two parties reached a settlement in February 2026. Sunwoda Power was required to bear the outstanding amount of RMB 608 million in related expenses as of the end of 2025, and to share the subsequent actual costs of battery pack disposal according to the agreed proportion. Sunwoda's settlement announcement indicated that quality costs could continue for many years after the battery cell supply ended.

The recall of the Volvo EX30 further illustrates the chain of responsibility under the joint venture manufacturing model.

In early 2026, Volvo recalled some EX30 models in several overseas markets due to a risk of overheating in the high-voltage batteries. Public reports pointed to Shandong Geely Sunwoda Power Battery Co., Ltd., a company jointly established by Geely and Sunwoda.

Sunwoda stated that the battery pack in question was not directly supplied by them; the battery cells were produced by their joint venture, Shandong Geely Sunwoda, and the battery pack was designed and manufactured by Geely's subsidiary, Weiri Electric Vehicle Technology (Ningbo) Co., Ltd.

Cell manufacturing, battery pack integration, and vehicle control are handled by different entities, making it necessary to trace the cause of failures and the allocation of costs across enterprises.

The multi-supplier model also raises concerns about consumers' right to know. Even if the capacity, range, and safety standards are the same, consumers will still pay attention to the battery brand, cycle life, warranty policy, and resale value when the same car model uses battery cells from different brands.

In its previous response to the battery brand controversy, Li Auto stated that regardless of whether the battery cells come from CATL, Sunwoda, or products developed under Li Auto's leadership, Li Auto is responsible for the underlying definition, technical standards, and final quality control, while the vehicle manufacturer assumes responsibility for the user.

Regulators are extending battery management to the entire vehicle lifecycle.

GB 38031—2025, implemented in July 2026, raised the requirements for thermal runaway safety and added safety tests for bottom impact and fast charging cycles. A related investigation notice from the Ministry of Industry and Information Technology also requires automakers to review battery suppliers with whom they have ceased cooperation and their historical supporting products, and to develop after-sales service plans.

After a supplier change, automakers remain responsible for monitoring, repairing, and recalling existing vehicles, while battery manufacturers must retain production and testing data to facilitate quality traceability. With increased joint R&D, dedicated production lines, and equity investments, data sharing, fault identification, and cost-sharing for recalls will become crucial aspects of cooperation between the two parties.

Equity binding allows automakers to enter the battery manufacturer's R&D and production processes earlier, and also makes the responsibilities of both parties more specific.

Who determines the product parameters, who verifies the materials and processes, how production data is shared, and how recall and battery swap costs are allocated all need to be written into the agreement at the beginning of the cooperation.

After automakers gain control over technology definition and quality management, they need to assume more direct responsibility to users; after battery manufacturers obtain long-term orders and capital support, they also need to be responsible for manufacturing consistency and the continued production of historical products.

For Li Auto, the next test will unfold with the delivery of new vehicles: its self-developed batteries must not only complete the production ramp-up according to schedule, but also deliver on their quality and lifespan commitments during long-term use. The 2.65 billion yuan investment deepens the equity ties; whether the R&D requirements can be consistently translated into mass-production quality is the ultimate outcome of this collaboration.

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