Focusing on the power battery, which is considered the "heart" of new energy vehicles, the "tug-of-war" between vehicle manufacturers and power battery companies has never ceased. Recently, with companies such as Li Auto, Xiaomi, Leapmotor, and Xpeng further advocating for "in-house battery development," discussions about the future direction of power battery technology in the industry have been reignited.
These new entrants in the power battery industry have not ventured into the core aspect of cell manufacturing; they have only jointly established cell production lines with battery companies. As a result, many believe that current automakers' "in-house battery development" is merely a marketing gimmick that does not touch on the core. However, automakers argue that "in-house battery development" does not necessarily mean they have to manufacture their own cells.
Automobile manufacturers are keen on "in-house battery development" primarily due to the significant weight of power batteries in the industrial chain. The procurement cost of power batteries can typically account for 30% to 40% of the total vehicle cost, making them an undisputed core and high-value component. At the same time, the stability of power battery supply is crucial for automobile companies. Furthermore, in the event of battery safety incidents, how to handle the responsibility for such incidents also drives automobile manufacturers to increasingly prefer to have control over their own batteries.
What car companies need to "develop in-house" is not the entire process from ore to battery cells, but rather the right to define batteries, the right to system integration, the responsibility for quality assurance, and the right to iterate data. The true test of in-house development does not lie in whether they build their own battery cell factories, but in their ability to clearly articulate the design logic, to assume quality responsibility, and to use each batch of data to improve the next generation of products. Dong Peng, a senior corporate management expert and senior consultant, told the Economic Observer.
Difficult self-developed battery cells
If the sole criterion for considering a battery as self-developed is whether it is self-manufactured and supplied in large quantities, then currently, only BYD meets this standard. BYD entered the new energy vehicle industry starting with batteries; its FD Battery currently supplies most of the batteries for BYD's own new energy vehicles. BYD followed the approach of "first having batteries, then new energy vehicles," and began this journey in the 1990s, whereas other vehicle manufacturers did not adopt this strategy.
The entire technology chain, from lithium mine processing, positive and negative electrode materials, separator electrolytes to battery cell development and battery pack production and recycling, has long been in the hands of power battery companies. Power battery manufacturers such as CATL, Zhongxin Innovation Aviation, EVE Energy, Guoxuan High-Tech, and Xinwangda, all saw development opportunities due to the "Ten Cities, Thousand Vehicles Energy-Saving and New Energy Vehicle Demonstration and Promotion Project" launched in 2009, and began to specialize in the production of new energy vehicle power batteries. At that time and for a considerable period thereafter, the main focus of vehicle manufacturers was on vehicle development, and the importance of power batteries was not given due attention by them from the very beginning.
As the production and sales scale of new energy vehicles expands, the importance of power batteries has become increasingly prominent, which has gradually led to vehicle manufacturers starting their own battery research and development. In the early stages, these manufacturers began with the research and development of individual battery cells.
GAC New Energy (with the main brands Aion and Haopu) is one of the earlier emerging new energy vehicle companies in China. Since 2017, the company has been engaged in the independent research and development of battery cells as well as the construction of testing lines. Currently, GAC's Yinpai Battery is responsible for the self-research and production of batteries, forming a full-stack self-developed asset chain from materials and battery cells to PACK. According to public information, the total investment in the Yinpai project is 10.9 billion yuan, with a planned total production capacity of over 60GWh, of which 18GWh has already been built. As of October 2026, Yinpai Battery has produced over 300,000 sets of batteries. However, considering the production and sales scale of GAC Aion, in addition to its own self-developed batteries, a large portion of its power battery supply still relies on third-party manufacturers.
NIO is another company that develops its own battery cells. Starting from 2021, in order to adapt to its charging and battery swapping system, NIO decided to develop and manufacture its own battery cells. Initially, it planned to build a battery factory with an annual production capacity of 100 GWh. In 2022, the company set a goal of having self-developed battery cells in its vehicles by 2024, but this progress was halted due to fluctuations in business conditions. Currently, NIO has shifted to a model where it designs the batteries itself and outsources the manufacturing to third parties, with EVE Energy and Guoxuan High-Tech being selected as the manufacturers. However, its battery cells are not yet ready for mass production on a large scale. Similar to other vehicle manufacturers, NIO currently relies mainly on other battery manufacturers for its battery supply.
In addition, vehicle manufacturers such as Geely and BAIC also possess a certain capacity for self-research and production of battery cells, as well as the ability to supply them. However, they also rely heavily on external battery cell suppliers. Within the entire new energy vehicle industry, BYD remains the only manufacturer that has achieved self-production of battery cells and large-scale mass production for supply.
The high technical difficulty and substantial capital investment required for cell development have become the main reasons why the vast majority of vehicle manufacturers have not made in-depth investments in this area. Mo Ke, founder and president of Zhenli Research Institute, believes that cell production demands a very high level of process consistency and stability, which is beyond the capabilities of non-specialized automakers.
In addition, with the rapid expansion of battery production capacity and the trend of "involution" in the industry, policies have imposed strong constraints on battery production. According to Economic Observer, since the second half of 2026, relevant departments have conducted systematic assessments of production capacity in the power and energy storage battery industries. Localities have basically stopped accepting new applications for power and energy storage battery production capacity, and new filings have been suspended. Projects that are already registered or under construction are not affected.
"The path to establishing new battery cell production capacity is essentially blocked, which means that vehicle manufacturers no longer have the capability to develop and produce their own battery cells. In fact, given the current industry situation, there is also no necessity for vehicle manufacturers to do so," said a person in charge of a domestic power battery company to the Economic Observer.
New self-developed model
Since June of this year, Li Auto, Xiaomi Auto, Xpeng Motors, and Leapmotor have successively announced their participation in the ranks of companies developing their own batteries. Although these companies do not engage in the production of battery cells themselves, they all emphasize cooperation with power battery manufacturers for joint innovation.
In October, Li Auto officially released its self-developed "Lianshan" electric technology system at " Power Day ", with the Lianshan battery being fully disclosed as a core component. Li Auto told the Economic Observer: "Our battery packs are manufactured using a self-developed and self-produced model, while the battery cells are produced through a contract manufacturing approach. For the battery cells, we have developed our own chemical systems and designed the cell structures, but we entrust the production process to outstanding domestic battery manufacturers. They have long-term experience in manufacturing management and technological capabilities, which we highly value. This complementarity between both parties is conducive to optimizing costs and efficiency."
At the capital level, in September of this year, Li Auto increased its investment in Xingwangda Power by 2.65 billion yuan, holding approximately 11.17% of the shares, thus becoming the second-largest shareholder and using capital ties to secure the stability of their outsourcing relationship.
Xiaomi's in-house development of the Longjia battery shares similarities with Li Auto's Lianshan battery, as both do not produce their own battery cells. The difference lies in Xiaomi's more proactive involvement in the manufacturing process of the battery cells. Within the Longjia battery system, Xiaomi Automobile is responsible for defining the electrochemical system, voltage platform, battery capacity, and cell specifications from the perspective of the entire vehicle; it takes the lead in the mechanical structure of the battery pack, the electronic and electrical architecture, thermal management, and the related software strategies; it also deeply participates in the selection of battery cell materials, formula design, and manufacturing processes. Additionally, Xiaomi implements full-process control over suppliers' production lines through a "shadow factory" mechanism, extending this control to secondary suppliers and the level of raw materials.
Zhongchuang Innovation Aviation and Xingwangda have customized and developed electrochemical systems and materials according to Xiaomi's specifications, and provided battery cell manufacturing capabilities. Both parties have established dedicated production lines for Longjia batteries. Xiaomi Automobile has also invested 1.7 billion yuan in Xingwangda Power, forming a combination of "capital linkage + customized production lines."
ZeroRun Automobile only participates in the research and development of battery cells and outsources the manufacturing process to joint-venture factories with battery manufacturers. On September 16th, during ZeroRun's Technology Day, the company launched three standardized battery cell models: L148, L208, and L300. Its joint venture with CATL, Zhongling New Energy, has already put its first battery cell production line into operation, which uses lithium iron phosphate and winding technology, with a production capacity sufficient to supply 500,000 to 600,000 vehicles. However, ZeroRun does not rely on just one source; it also purchases battery cells from manufacturers such as CATL and EVE Power.
In contrast, the so-called "in-house development" mentioned by Xpeng Motors seems to be more of a marketing strategy. On September 17th, after the Xpeng G9L listing event, He Xiaopeng, the chairman of Xpeng Motors, stated that "from this year on, Xpeng will handle its own battery production," but he also clarified that Xpeng Motors does not produce battery cells themselves; these cells are still supplied by partners such as CATL, SVOLT, and Honeycomb Energy. Xpeng's role is to oversee the entire process from the basic design to mass production of battery packs, focusing on Pack, BMS, thermal management, and structural design.
In fact, in addition to the above four companies, most mainstream vehicle manufacturers are currently emphasizing the independent research and development of batteries, and each has also launched their own battery technology brands. The model of vehicle manufacturers conducting independent battery research and development has shifted from fully developing both battery cells and battery packs at an early stage to focusing on the development of battery packs while participating in the research and development of battery cells themselves, with the production of battery cells being outsourced to power battery manufacturers. The difference among them lies in the depth of cooperation with these power battery manufacturers.
It should also be noted that for new types of batteries such as sodium batteries, solid-state batteries, and fast-charging batteries, the development cooperation between vehicle manufacturers and power battery companies is more in-depth. Since these technologies are still in the experimental stage or small-scale trial production phase, vehicle manufacturers have more room to get involved.
"The core of in-house development by automakers lies in enhancing their understanding of battery technology, so as to more accurately set performance requirements and calculate cost structures, thereby avoiding being deceived during procurement," said Mo Ke. Automakers should focus on battery pack technology, the matching of the three-electric system, and the definition and research and development of cell characteristics, while leaving cell manufacturing to professional battery manufacturers.
Battling for the Definition of Batteries
Looking at the development history of the new energy vehicle industry, the impulse for automakers to develop their own batteries has always existed. The efforts of companies like Li Auto, Xiaomi, Leapmotor, and Xpeng to develop their own batteries are just another wave in this long trend of self-developed batteries. This time, however, the model of automakers developing their own batteries has changed, and their demands are also different from before. Nevertheless, the underlying driving force remains the same: power batteries, as core components of new energy vehicles, continuously affect automakers' profits, the stability of their supply chains, and their responsibility for handling safety incidents.
Two major battery safety incidents that occurred within the industry have brought the issue of responsibility for battery safety to the public eye. One case involved Geely's subsidiary, WR Electric, suing its cell supplier, Xinchuangda Power, on the grounds that the cells delivered by Xinchuangda had quality defects such as inconsistent voltage levels and excessive internal resistance differences. Xinchuangda, on the other hand, emphasized that the battery pack is a complex system integration product, and the cells are merely one component of it. Both parties held their own views. In the end, they reached a settlement, with Xinchuangda compensating 608 million yuan.
Secondly, the GAC Aion AION S series models, which are equipped with Zhongxin Chuanghang's 177Ah lithium iron phosphate battery cells, have collectively experienced battery pack bulging issues. As of now, there is no clear determination of responsibility for this incident. Zhongxin Chuanghang has stated to the Economic Observer that they will fully cooperate with the automakers to carry out the next steps of resolution.
The latest measure from the Ministry of Industry and Information Technology is to require vehicle manufacturers to strengthen their supply chain management. This is a definition of responsibility, meaning that any issues that arise are the responsibility of the vehicle manufacturers. From the perspective of vehicle manufacturers, it is indeed necessary to enhance their understanding of batteries as well. Mo Ke told the Economic Observer.
Automobile companies developing their own batteries face an urgent pressure of rising costs and declining profits. On July 16, the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration issued Announcement No. 20 of 2026: Starting from September 1, 2026, a consumption tax of 2% will be levied on lithium-ion batteries, primary lithium batteries, mercury-free primary batteries, nickel-metal hydride batteries, and all-vanadium flow batteries; starting from September 1, 2027, the tax rate will be reinstated to the statutory rate of 4%.
Although the tax-paying entities are battery manufacturing companies, consumption tax is an included tax (a type of tax that is already included in the price of goods or services), and it is passed along through the supply chain by being added to the ex-factory price. As a result of this, EVE Energy and Lishen Battery issued price adjustment notices before the policy was implemented, deciding to directly add a 2% consumption tax cost to their original tax-exclusive supply prices starting from September 1st. Most smaller and medium-sized battery companies, on the other hand, are negotiating one-on-one with car manufacturers to share the cost.
Mo Ke's judgment on this is that 'under normal circumstances, vehicle manufacturers and battery manufacturers each bear about 1%' of the cost, but leading battery companies may not even be willing to bear 1% for customers with small purchase volumes. At the 4% stage, it is more likely that the cost will be shared among battery manufacturers, vehicle manufacturers, and consumers, but the proportion that reaches the end-users is very small. On the side of car companies, facing the current market competition, most will likely absorb this cost on their own.
"Currently, car manufacturers themselves are not making a profit, and with the introduction of a 2% consumption tax, it's as if the cost has increased again," said a person from the battery industry. Dissatisfied with being reduced to 'workers,' car companies are putting pressure on leading manufacturers by prominently announcing their own research and development efforts or by introducing second suppliers. These announcements are aimed at securing a more equal negotiating position and forcing leading battery manufacturers to make concessions in terms of price and benefits.
Dong Peng stated: "In essence, self-developed batteries represent car manufacturers' bid to assert control over the definition of batteries after their sales volume crosses a certain threshold, marking a shift from 'single-source dependence' to 'managing the product development pace.' On a macro level, with high battery costs and rapid technological iteration, whoever sets the standards determines the overall vehicle experience. At a meso level, second-tier battery manufacturers have excess production capacity and are willing to undertake contract manufacturing, providing car manufacturers with an opportunity to bypass dominant suppliers. At a micro level, car manufacturers need to integrate safety, range, fast charging, and vehicle data to form their own iterative loop. Cost reduction is merely a result; supply chain security, bargaining power, and differentiation are the real driving forces, and the narrative in the capital market is further fueling this trend."
There is a consensus in the industry that in the future, more automakers will join the ranks of developing their own batteries, but not all will engage in full-scale in-house development. "Leading automakers with stable sales volumes are likely to gradually adopt a strategy of combining in-house battery development with contract manufacturing. There are clear thresholds for in-house battery development: research and development investment, production line debugging, and verification costs are all fixed expenses. Only when vehicle sales volumes are large enough can these costs be spread out, ultimately resulting in more cost-effective outcomes than purchasing batteries from external suppliers. Automakers with annual sales of hundreds of thousands of vehicles can fully cover their R&D costs through savings from in-house battery development. However, smaller and medium-sized automakers with limited sales volumes will not rush into this endeavor. For them, the investment required for in-house development is far less cost-effective than directly purchasing mature solutions; attempting in-house development could instead increase costs and amplify risks," said Chen Rongrong, a marketing expert.
(Author: Wang Shuiguo)
