Profit is leaving the car and landing in the battery
China’s auto industry stands at a crossroads in how its value chain is carved up. In the space of a fortnight, Seres briefly left Huawei’s Harmony Intelligent Mobility ecosystem, then returned to sign a fresh five year cooperation. Around the same time, carmakers grew visibly uneasy with Contemporary Amperex Technology and began drafting Plan B supply strategies. The talk of de-X-ification and X is taking all the profit is no longer background noise.
The real question is why the anxiety is flaring now. Only three Chinese automakers still earn more than 5,000 yuan of profit per vehicle. The China Passenger Car Association reports domestic monthly retail sales have fallen year on year for twelve straight months, with the September drop widening to roughly 28 per cent, the steepest year-on-year decline of 2026.
Nio founder William Li Bin puts it bluntly: price wars have run out of road, specifications no longer move buyers, and the industry is deep in the most brutal stretch of a marathon. Sales and manufacturing margins sit at historic lows.
Batteries take half the money
Battery packs are the single largest cost centre. In the first half of 2026, eight listed battery companies posted combined net profit of about 50.8 billion yuan. Twenty three mainstream listed automakers combined for just 25.1 billion yuan. Carmakers work twice as hard for half the profit.
CATL alone booked first-half revenue of 276.9 billion yuan, up 54.8 per cent year on year, and net profit of 43.3 billion yuan, up 42.0 per cent. Its dominance makes it the natural target of resentment.
Smart driving is the second cost centre. Seres spends roughly 10 per cent of a vehicle’s price on Harmony Intelligent Mobility services including autonomous driving and brand licensing, a burden that pushed it into the red in the first half. Xpeng’s service and other revenue rose 67.1 per cent year on year, largely from selling ADAS know-how to Volkswagen, whose net profit fell 35.7 per cent over the same period.
Who owns the buyer’s mind
The 2026 Global New Energy Vehicle Consumer Research report ranks battery and ADAS as the first and second factors in purchase decisions, at 13.8 per cent and 8.7 per cent weight. Some 37.1 per cent of Chinese consumers say they would walk away from a model that does not carry a CATL cell.
Through the first three quarters of 2026, mainstream automakers hit between 28 per cent and 96 per cent of their annual sales targets, most landing in the 50 to 70 per cent band. Zeekr, with a 300,000 unit goal and 288,400 units already sold, needs barely 4,000 a month in the fourth quarter. Leapmotor, chasing one million units with 666,500 sold, must move 111,200 a month to scrape through.
The zero-sum framing is the wrong one. Carmakers cannot simply abandon the suppliers they depend on. The real task is moving from a fight over who keeps the profit to a model where the profit is shared.
Editor’s note: This is an adapted translation of the original Sohu IT report. It has been trimmed and restructured for readability for an international business audience. The full original (in Chinese) is at https://www.sohu.com/a/1087281695_100271081?scm=10001.344_14-200000.0.0-0-0-0-0..