China’s leading EV battery makers’ profits nearly double that of industry’s carmakers

China’s top electric vehicle (EV) battery producers posted significantly higher profits in the first half of the year compared to the country’s leading car manufacturers. Seven major battery firms, led by Contemporary Amperex Technology Limited (CATL), generated a combined net profit of over 50 billion yuan (US$7.4 billion) in the January-June period, marking a 49% year-on-year increase.

Meanwhile, China’s 11 main EV makers, ranging from BYD to Great Wall Motor, saw their combined interim net profit decline by 19% to 28.8 billion yuan. The seven battery manufacturers reported profits 75% higher than their EV counterparts, a stark contrast to a mere 4.56% lag for the same period a year earlier.

The surge in battery makers' profits comes amid a 14% year-on-year drop in retail EV sales to around 4.7 million units during the first half, primarily due to budget vehicle shortages and subsidy cuts, according to the China Passenger Car Association (CPCA). "Profit disparities between upstream and downstream sectors have widened considerably," CPCA secretary general Cui Dongshu commented on social media.

"Price wars are severely constraining downstream operations, while upstream companies are experiencing highly concentrated profitability."

Three smaller EV battery players – EVE Energy, CALB Group, and Gotion High-Tech – reported triple-digit profit growth in their first-half net profit, outpacing CATL’s 42% increase. However, CATL contributed over 85% of the combined net profits. High battery technology barriers and robust EV exports have solidified the pricing power of leading battery makers like CATL, according to Yale Zhang, managing director at Automotive Foresight in Shanghai.

"Chinese carmakers must prioritize battery pack safety, as any quality issues could damage their global reputation," Zhang noted. "This could further weaken the bargaining power of carmakers."

Morgan Stanley projected China’s EV exports to surge 95% year-on-year to 4.88 million units in 2026 and 55% to 7.57 million units in 2027. CATL currently holds a 42.33% market share in the China EV battery market, followed by BYD at 19.23%, CALB at 6.95%, Gotion High-Tech at 6.29%, and EVE Energy at 6.05%. However, CATL’s dominance has prompted EV makers to explore cost-saving measures, such as building internal battery capabilities and strengthening ties with tier-two players.

Enhanced product quality from smaller battery makers could create a more competitive EV battery market and narrow the profitability gap, according to Zhang. Meanwhile, battery makers like CATL are diversifying into new industries, including power and robotics, to bolster their revenue streams. WaterRock Energy Economics' director, Lucas Zhang Liutong, stated that the few major battery producers can likely maintain their position and technological edge, ensuring sustained pricing power.