People's sorrows and joys are not shared.

This statement also applies to the automotive industry this year.

Chip price hikes, memory price hikes, precious metal price hikes...The three heavy mountains press the car manufacturers until they can't catch their breath.

The profit margin of complete vehicle manufacturing has dropped toa historical low of 1.5%,even lower than bank fixed deposits.

In contrast, neighbors CATL are experiencing an unprecedented performance explosion.

In the first half of this year, CATLreported revenue of 276.9 billion yuan,a year-on-year increase of 54.8%.What makes people even more envious isa net profit of over 43 billion yuananda profit margin of 15.6%.

After comparison, an old topic is brought up again:

Are car manufacturers working for battery factories? Why does CATL make money?

Actually, the answer lies in a very Chinese business logic - "Win hearts and minds through virtue". This is not empty emotion, but hard core strength in every link of the industry chain.

Today, we will discuss CATL using the semi-annual financial report.

01. Supply Chain System Must Withstand Pressure

In 2022, new energy vehicle sales exploded, but lithium mining couldn't keep up, leading to severe shortage. Battery-grade lithium carbonate reached a historical high of 550,000 yuan/ton;procurement prices shot up like rockets.

At that time, some owners complained:"If the car breaks, changing a battery might be more expensive than the residual value!"

This year, the rapidly rising AI industry not only boosted chips and memory, but also made energy storage batteries, which provide stable power, become a rigid standard for computing power systems.

Consequently, car manufacturers in the manufacturing sector had to fight directly with high-profit tech companies,using high prices to snatch battery capacity.

Combined with the levy of battery consumption tax on Sept 1 this year, battery factories producing in advance, and continuous growth in NEV production and sales, battery-grade lithium carbonate once soared from a low of 58,000 yuan/ton last year to nearly 200,000 yuan/ton,more than 3 times the price!

The new round of battery price hikes,made CATL the target of public criticism once again.

But CATL really shouldn't carry this burden.

According to financial report data, in the first half of this year, CATL battery unit price was about 0.56 yuan/Wh,basically flat with last year.However, the gross profit margin of power battery businesswas 20.6%,down 1.7 percentage points year-on-year, a new low since 2024.

This means,CATL did not raise prices opportunistically, instead yielding part of the profit,actively "blocking bullets" for car manufacturers.

The reason CATL can withstand pressure is partly because since 2021, it has participated in the operation of raw materials like lithium, nickel, cobalt, phosphorus and related industries through self-construction, equity participation, joint ventures, acquisitions, and other methods,

Apart from a few domestic mines and salt lakes, CATL has also made industrial layouts in North America, Congo, Indonesia, Bolivia and other countries and regions,and useslong-term supply agreementsto hedge against the impact of raw material fluctuations on costs.

Taking the cooperation between CATL and Australia's Pilbara Minerals and Indonesian nickel giant ANTAM,supply prices and real-time market prices are decoupled,determined half a year or even a year in advance.

On the other hand, the effectiveness of this strategy of backward pressure on upstream is inseparable from a key factor:

Shipment volume.

In the first half of this year, CATL's total battery capacity was 498GWh,capacity utilization rate 94.86%,leading other battery manufacturers by a landslide.

Global market share of 40.2%, up 2.2 percentage points compared to last year,ranking first globally for 9 consecutive years.

For upstream, this means stable high-value orders and large-scale shipments;

For thecapital-intensivebattery industry, this means fixed costs of production, equipment, and labor can be fully amortized, and no impairment for idle production lines needs to be accrued.

For the same battery selling price of 0.56 yuan/Wh,CATL's cost might be only 0.44 yuan;for battery manufacturers with 60% capacity utilization, the cost might be 0.52 yuan.

Thisflexible profit margin,not only became the confidence for CATL to withstand pressure, but also "saved the day" for car manufacturers who urgently need supply chain support and cost control.

In the first half of this year, CATL's domestic market share has approached the high of 50%.

For every 2 cars sold, 1 uses CATL!

Taking the initiative to withstand upstream cost pressure during industry cyclical fluctuations and not transferring risks to downstream car manufacturers,this responsibility to bear pressure is the first layer of confidence for "winning hearts and minds through virtue"."Winning hearts and minds through virtue" is not enough.

So, why do car manufacturers choose CATL? Is it really just because prices and capacity are stable?

02. Battery Safety Relies on Strength

Only 7 months into this year, there have already been 3 recall-related events triggered by batch quality issues in power batteries.

In users' eyes, the primary responsible party is not the battery manufacturer, but thecar manufacturer they directly interact with.

For car manufacturers, this will quickly causea crisis of trust.The blow to sales and even the brand is devastating.

To reduce power battery failures, we cannot rely solely onvehicle-end softwaremonitoring, temperature control, and early warning, nor can we rely on post-event tracing and accountability, but need battery manufacturers inR&D and production phases,to build a solid foundation.

In plain terms, price stability is just the basic foundation.When car manufacturers choose battery suppliers,the real weakness lies in quality and safety.

In the electrochemical system, micrometer-level defects, one-in-a-million impurities, millivolt-level voltage fluctuations... These process deviations imperceptible to ordinary people can ultimately lead to internal resistance differentiation, temperature rise differences, and self-discharge imbalance constantly accumulating, eventually triggering the butterfly effect, causing irreversible huge losses.

What truly determines the safety and reliability of new energy vehicles over a lifecycle of hundreds of thousands of kilometers is not paper parameters like energy density and charging speed, butthe production consistency of hundreds of cells within the battery pack.

AndSafety brought by quality is exactly where CATL's greatest value lies.

Before leaving the factory, CATL's cells have a very strict hard indicator, known in the industry asPPB— for every 1 billion cells produced, less than 1 is allowed to have defects, 3 orders of magnitude lower than the industry average.

Even large-scale energy storage stations composed of millions of series-parallel connected cells will not trigger system-level safety accidents due to battery quality issues.

But putting effort only at the production end is not enough.

What many people don't know is that CATL has an independent department dedicated to battery safety, led personally by Zeng Yuqun, with over 500 R&D staff, internally called"the Adversarial Team".

Looking at the literal meaning, many would think this is a technical task force of CATL targeting competitor companies.

But in reality,what they fight is not others, but themselves:

"Will CATL's new technology or new products have problems under certain conditions? How big is the problem? Will it affect user life safety? Will it cause a trust crisis for car manufacturers?"

Using this kind of self-doubt, self-evidence, and self-analysis to ensure that even after the battery goes on the market, it can withstand extreme working conditions.

Here, there is also a little-known detail.

Even for niche models likePolestar 2,after a scrape, bottoming out, or replacing the entire battery pack, CATL will still take the damaged battery pack back fordisassembly and research.

On one hand, it is to self-check design defects and be responsible for other users of the same car model;on the other hand, it is to provide practical cases for subsequent R&D in the field ofbattery safety.

Thisattitude of wanting to do a little more on top of the safety bottom lineis something other battery manufacturers do not possess and is a unique competitiveness of CATL.

For this reason, the popular high-end large 6-seaters domestically, NIO ES8, AITO M9, Zeekr 9X, Li Auto L9, are all CATL series;

Including a list of global luxury brands such as Porsche, Maserati, Mercedes-Benz, BMW, Lotus, Volvo, are also using CATL.

Good cars use CATL, which has become an industry consensus.

But in the commercial world of batteries,quality and safety should not be divided by price segments; it should be a basic guarantee.

So even on pure electric cars worth tens of thousands of yuan, CATL's presence can be seen in large quantities.

Even Geely Xingyuan worth tens of thousands of yuan, adoptsCATL cells across the entire series.Relying on advantages in design, space, intelligence, and safety, it delivered over 800,000 units in 664 days since launch, and won the single-car sales champion for the past two years.

This once again verifies that only by earnestly making cars and ensuring safety and quality can one gain the joint recognition of the industry and users.

Carving safety into every detail of the production process, backing up user travel safety and car manufacturer brand reputation, this persistence in integrity is the second layer core of "winning hearts and minds through virtue".

03. The Automotive Industry Lacks Steadfastness

In an era where price cuts are almost instinctive,the steadfastness to resist the temptation of "bleeding involution" has instead become a scarce ability. Holding 372 billion yuan in cash and not starting a price war is much harder than starting one."Winning hearts and minds through virtue" is not enough.

In the past two years, the two terms frequently mentioned in the industry are "Anti-Involution" and "High-Quality Development".

Perhaps these two words are too formal, let's change the wording—"

There is no true "good goods at a low price" in the automotive industry; ultimately, it must return to the business logic of "you get what you pay for".

Unrestrained price wars will only fill the entire market with low-quality products, engulfing everyone involved, pushing the fast-moving train of new energy towards the abyss.

At this time, responsible leading enterprises need to stand up more,provide value through technology and service,rather than taking the whole industry to compete on price to the death.

In the first half of this year, CATLR&D investmentwas 11.4 billion yuan,a year-on-year increase of 12.7%;R&D personnel exceeded 20,000.

What does this concept mean?

CATL's R&D spending over half a year is not only more than the profits of some battery manufacturers, but also exceeds the full-year R&D investment of "Wei Xiao Li" (NIO, XPeng, Li Auto) from last year,on the same level as car manufacturers selling millions annually like SAIC and Geely.

Even looking globally, the automotive groups that can stabilize CATL are no more than a dozen.

It is worth noting that car manufacturers need to self-develop and pre-research new technologies, covering multiple fields such as three-electric systems, engines/transmissions, chassis, electronic/electrical architecture, cockpits, bodies, and assisted driving;batteries are just one of them.

From this perspective, CATL is more like "concentrating resources to do big things",helping car manufacturers take over the heavy responsibility of battery R&D with the strongest professionalism and most complex system,avoiding car manufacturers' repeated investments and resource waste at the frontend.

In this process, CATL also naturally becamea price anchor for high quality.

First, the big brother stands at the front with a 20% high gross margin, only then do the second-tier battery manufacturers behind have room to survive with 15-18% gross margins.

If CATL were to take out over 300 billion yuan in cash reserves to fight a price war, all industry profits would be wiped out instantly.

In the short term, indeed car manufacturer procurement prices were lower and users bought cars cheaper; everyone got a benefit, but it was actually exchanged by breaking industry bottom lines and abandoning safety redundancy.

Long-term low profit margins will further discourage the enthusiasm for R&D.As innovative small and medium enterprises go bankrupt one after another,the industry will become a pool of stagnant water,welcoming an absolute monopoly lacking competition.

Nowadays, the reason why the complete vehicle manufacturing industry in China and Europe has been rolled into a situation with no winners is precisely becauseno car manufacturer has the absolute charismato lead everyone to resist the industry's spontaneous bottomless competition;

It is precisely because competition is too fierce that no car manufacturer can maintain its market share while stabilizing prices.

This led everyone to struggle with costs, efficiency, services, and industry chain relationships in the mud, trying to survive in the cracks.The most important design, tuning, quality control, and brand concepts intended to be expressed, instead became secondary.

This situation against the wind requires one or a few star enterprises to rush to the front, not to snatch the cake, butto make the cake bigger.

Holding hundreds of billions in cash but not initiating vicious price wars, using continuous technology investments to support the entire industry upward; this steadfastness in leading the way is the third layer of "winning hearts and minds through virtue".

04. Final Words

In the current Chinese automotive market,we never lack players who can fight price wars, nor lack "king of cost-performance" with stacked configurations.

What is truly scarce is exactly this steadfastness — some are willing to withstand the temptation of short-term profits, sticking to the basic foundation of safety and quality; some are willing to be the industry's value anchor, leading upstream and downstream to make the cake bigger, rather than fighting until everyone loses in the stock market.

In the final analysis, "winning hearts and minds through virtue" in the new energy industry has never been a floating slogan.

It is the responsibility to stabilize prices when raw materials soar, the persistence to fight for safety among billions of cells, and more so, the generosity of staying at the top while leaving enough room for the industry to survive.

A company's true influence has never come from the monopoly status gained by squeezing peers, but from its own shoulders,shouldering risks, holding the bottom line, and leading the entire industry to higher ground.

I sincerely hope that more such enterprises will emerge in the Chinese automotive industry; I also hope that meaningless involution and price wars will come to an end sooner.