China’s electric vehicle (EV) battery makers saw their combined net profit in the first half of the year nearly double that of the country’s major carmakers, widening the profitability gap amid weakening domestic demand for EVs.
Seven major battery manufacturers, including Contemporary Amperex Technology Limited (CATL), recorded a net profit of over 50 billion yuan (US$7.4 billion) during the January-June period, up 49 per cent year on year, according to the companies’ exchange filings.
However, China’s 11 major EV makers, from BYD to Great Wall Motor, saw their combined interim net profit shrink by 19 per cent over the same period to 28.8 billion yuan.
The combined net profit of the seven battery makers was 75 per cent higher than that of the 11 listed EV makers in the first half, compared to a minor lag of 4.56 per cent for the same period one year ago.
The increase in battery makers’ profits comes as China’s retail EV sales declined 14 per cent year on year to about 4.7 million units in the first half of the year, dragged down by the sharp decrease in budget vehicles amid a subsidy pullback, according to the China Passenger Car Association (CPCA).
“Profits have diverged sharply between upstream and downstream sectors,” said Cui Dongshu, secretary general of the CPCA, in his social media post on Friday. “This reflects how price wars are severely squeezing downstream’s room to operate, while profits along the supply chain are highly concentrated among leading upstream companies.”
Notably, three out of six smaller EV battery players, EVE Energy, CALB Group and Gotion High-Tech, reported three-digit profit growth in their first-half net profit. This is faster than CATL’s 42 per cent profit increase, though the Fujian-based giant contributed over 85 per cent of the combined net profits.
High battery technology barriers and robust EV exports helped cement the pricing power of the leading EV battery makers like CATL, said Yale Zhang, managing director at the consultancy Automotive Foresight in Shanghai.
“[Chinese] carmakers need to pay more attention to the safety of battery packs, as any quality issue would affect their global reputation,” said Zhang. “It could weaken the bargaining power of carmakers a bit further.”
Morgan Stanley estimated that China’s EV exports in 2026 would jump 95 per cent year on year to 4.88 million units and 55 per cent to 7.57 million units in 2027, according to a report published on August 24.
In July, CATL dominated the China EV battery market with a share of 42.33 per cent, followed by BYD at 19.23 per cent, CALB at 6.95 per cent, Gotion High-Tech at 6.29 per cent and EVE Energy at 6.05 per cent, data from the China Automotive Battery Innovation Alliance showed.
But CATL’s dominance also triggered EV makers’ efforts to seek cheaper alternatives, including building in-house battery capabilities and strengthening partnerships with tier-two players.
Improvement of product quality by smaller battery makers might create a more competitive EV battery market and narrow the profitability gap for EV makers, said Zhang.
On the other hand, battery makers like CATL are expanding into new businesses, including the power sector and energy industries like robotics, diversifying their revenue streams, said Lucas Zhang Liutong, director of Hong Kong-based consultancy WaterRock Energy Economics.
“The few big battery makers can probably maintain their position and technological lead,” said Zhang of WaterRock. “So they should continue to have good pricing power.”
