Has CATL Captured All the Profits in the Auto Market?

Contemporary Amperex Technology Co. Limited (CATL) posted a net profit of RMB 30.485 billion in the first half of 2025, while GAC Group recorded a loss exceeding RMB 1.82 billion over the same period.

As early as the 2022 World Power Battery Conference, GAC Group Chairman Zeng Qinghong lamented that power battery costs had risen to account for 40 percent to 60 percent of total vehicle costs, quipping, “Am I merely working for CATL?” That remark captured widespread industry sentiment that automakers were effectively subsidizing CATL’s growth.

Three years later, that dynamic remains firmly in place. Even the combined net profits of all A-share–listed automakers pale beside CATL’s results. According to their recently published interim reports, CATL achieved revenue of RMB 178.886 billion in H1 2025—up 7.27 percent year-on-year—with net profit climbing 33.33 percent and reaching a record high of RMB 30.485 billion. During the same timeframe, GAC Group delivered 755,300 vehicles but faces an expected net loss of RMB 1.82 billion to RMB 2.6 billion.

It is common for upstream suppliers to enjoy higher margins than downstream integrators, but the gap between battery manufacturers and vehicle assemblers has grown especially stark. In the first half of 2025, China’s automotive production and sales each surpassed 15 million units—a year-on-year double-digit increase. Yet total industry revenue of RMB 5.09 trillion yielded net profit of RMB 244.4 billion, a profit margin of 4.8 percent, down 0.2 percentage points from the previous year.

By contrast, CATL sustained its exceptional profitability. The company’s net cash flow from operating activities rose 31.26 percent to RMB 58.687 billion, with power battery systems revenue of RMB 131.573 billion—up 16.8 percent and representing 73.55 percent of total sales, a 3.65 percentage-point increase from 2024.

Most listed automakers reported substantial losses. GAC Group expects a net loss of RMB 1.82 billion to RMB 2.6 billion, BAIC BluePark forecasts a loss of RMB 2.2 billion to RMB 2.45 billion, and JAC Motors anticipates a loss of about RMB 680 million. Among the few to achieve profit growth, Seres delivered net profit of RMB 2.7 billion to RMB 3.2 billion—up 66.2 percent to 96.98 percent year-on-year—and adjusted net profit of RMB 2.23 billion to RMB 2.73 billion, a 55.13 percent to 89.92 percent increase. Foton Motor also grew profit by 87.50 percent, but its net profit remained modest at RMB 776.6 million.

Within CATL’s own portfolio, only the power battery segment saw a slight decline in gross margin to 22.41 percent—a 1.07 percentage-point drop—while its energy storage systems business achieved RMB 28.4 billion in revenue, a 1.47 percent decrease offset by a 2.92 percent reduction in costs, lifting its margin to 25.52 percent.

Data from the China Automotive Power Battery Industry Innovation Alliance show that CATL led the market with 128.6 GWh of battery installations from January to June 2025, yet its market share fell 3.33 percentage points to 43.05 percent—the largest decline among the top 15 suppliers. In its Q2 2025 earnings analysis, Goldman Sachs noted that, while CATL’s results exceeded expectations, signs of slowing revenue growth and margin pressure had emerged. As a result, Goldman cut its EPS forecasts for CATL (03750.HK) by 1 percent, 5 percent, and 3 percent for 2025 through 2027, reflecting intensified competition and persistent pricing pressure.

CATL remains a critical partner for automakers, providing the battery systems that underpin the electric vehicle revolution, yet its technological edge and scale have granted it disproportionate bargaining power in profit-sharing. In response, several OEMs are diversifying their supply chains or entering the battery sector themselves.

XPeng has broadened its supplier base beyond CATL, while Li Auto expanded its partnership with Sunwoda after acquiring a stake in 2022. NIO brought China Aviation Lithium Battery Co., Ltd. (CALB) into its mix and entrusted its new Le DAO brand exclusively to BYD. In July, Farasis Energy announced it would begin supplying GAC Group with complete battery pack assemblies based on customer forecasts.

Some automakers are also investing directly in cell production. At the Shanghai Auto Show in April, Geely launched Jiyue Mobility to consolidate its battery activities, targeting 50 GWh of capacity in 2025 and 70 GWh by 2027. GAC Group established its RMB 10.9 billion “Green Engine” project—later renamed Inpai Battery—in August 2022, and by the end of 2023 it had two 12 GWh lines operating. This May, GAC unveiled plans to add 36 GWh of capacity within 18 months to support 600,000 NEVs, with a total 60 GWh project slated for completion by late 2026. The company also dissolved its joint-venture battery-systems business with CATL, signaling a commitment to independent R&D and production.

Cost pressures drive this shift. CATL’s batteries command premium pricing, and in an industry where cost control and pricing battles are paramount, automakers face mounting margin erosion. Yet building in-house battery capacity demands substantial capital, technological know-how, talent, and the ability to scale production quickly—challenges that many OEMs will struggle to surmount.

In the early years of electrification, proprietary battery technology delivered a decisive competitive advantage, and CATL’s sustained R&D investment earned high margins as a reward. As the sector matures, however, balanced profit distribution across the automotive value chain becomes increasingly vital. If battery suppliers capture the lion’s share of returns while automakers’ margins remain thin, investment in vehicle intelligence, branding, and after-sales service may suffer, undermining sustainable sector growth.

Heightened rivalry from BYD, EVE Energy, and CALB is likely to force CATL to lower prices and enhance its service offerings to maintain leadership. Meanwhile, automakers that diversify their battery partnerships can bolster their negotiating leverage, reduce procurement costs, and improve profitability.

CATL itself is extending into adjacent businesses—battery swapping, skateboard chassis platforms, energy storage systems, battery recycling, and mineral resources—to fortify its competitive position. In H1 2025, these segments all saw margin improvements: energy storage systems achieved a 25.52 percent margin, battery materials and recycling held a 26.42 percent margin on RMB 7.887 billion in revenue, and mineral resources delivered RMB 3.361 billion in sales with a 9.07 percent margin. Overseas revenue also rose to RMB 61.208 billion, representing 34.22 percent of total sales and largely driven by battery systems.

CATL’s interim report cautions that it faces escalating competitive, raw-material price, and supply risks. Recent rumors of halted production at its “Jianxiwo” lithium mine in Yichun, Jiangxi, underscore potential volatility in its supply chain. To mitigate these risks, CATL is pursuing in-house mining, strategic investments, and long-term supply agreements to ensure stable access to critical resources.

As market pressures intensify, OEMs pursue multiple partnerships, and the industry seeks more equitable profit sharing, a single company’s dominance of profits is unlikely to endure. Moving forward, the automotive sector must foster deeper collaboration across the value chain, leverage technological innovation, and refine cooperative models to achieve balanced returns and drive healthy, sustainable development.