Editor’s note: This edition of Flashpoint dissects the sharpest fault line in China’s EV boom: automakers chase volume, while CATL captures the profits. In under 700 words, we cut through the numbers to show why the battery maker looks more like Intel in the PC era than any car brand today. Flashpoint is Hello China Tech’s premium quick-strike column — concise, selective, and built to explain market-moving events before the noise takes over.
China’s carmakers are working harder, selling more, and earning less. In the first half of 2025, 14 listed auto groups shifted 11.02m vehicles, a jump of 14.7% from a year earlier. Revenues rose 12.1% to Rmb1.39tn. But profits shrank: combined net income fell 21% to just Rmb25.6bn. The joke that the industry toils for “King Ning” – battery champion CATL – is looking less like humour and more like financial reality.
The comparison is stark. The three most profitable carmakers – BYD, Geely and Great Wall – together made Rmb31.1bn in net profit. That merely matched the Rmb30.5bn that CATL earned on its own. The latter’s profit machine now runs at the equivalent of Rmb1.68bn a day, enough to build 56 battery-swap stations before dinner. Market capitalisation tells the same story: the trio of auto leaders together are valued at about Rmb1.28tn. CATL alone is worth Rmb1.75tn.
The explanation lies less in management competence than in business models. CATL sells batteries, the ultimate “shovel” in the electric-vehicle gold rush. Its moat is technology and scale. Years of research and customer lock-in have delivered it the status of world’s largest EV battery supplier. That grants bargaining power over carmakers and cushions it against commodity volatility. Margins hold up because CATL’s product is a near-indispensable input.
👉 Beyond the Joke: What Investors Should Really Learn from CATL’s Dominance.
Carmakers, by contrast, fight in a brutal commodity business. Building cars is capital-intensive and marketing-heavy. Returns depend on scale, brand and relentless cost control. When new entrants flood in – from Xiaomi to Leapmotor – the sector resembles trench warfare. Sales volumes surge, but profits are sacrificed to price cuts. The maths is unforgiving: share must be bought with thinner margins.
Investors have responded accordingly. BYD, the most integrated and arguably the most strategically astute among incumbents, still trades at less than CATL’s valuation despite selling more than 2m cars in the half year and reporting Rmb155bn in net profit. Geely’s rapid growth, with sales up 47% to 1.41m units, delivered Rmb9.3bn in profit. Great Wall managed Rmb6.3bn. Respectable, but dwarfed by the battery supplier. The market appears to agree that selling picks and shovels in a boom beats prospecting.
The new-energy start-ups illustrate both opportunity and danger. Xiaomi’s auto arm saw revenue rocket 232% to Rmb20.6bn. Leapmotor’s deliveries soared 156% to more than 220,000 units. Xpeng’s sales nearly quadrupled. Yet despite eye-catching growth rates, most still book losses, or at best narrow them. Profitability is elusive because competition remains ferocious and capital costs high. Investors tempted by revenue momentum must remember that survival depends on scale; cash burn is not optional but compulsory.
The broader risk is sectoral. China’s EV push is a policy priority, ensuring demand support. But the number of brands and the intensity of price wars imply prolonged margin pressure. Consolidation is inevitable. History shows that industries in such phases reward component suppliers with technological moats more reliably than manufacturers with brand dreams. CATL today looks closer to Intel in the PC boom than to any single carmaker.
That does not mean CATL is risk-free. Its bargaining power depends on staying ahead in chemistry and cost. Should solid-state breakthroughs or rival supply chains emerge, margins could compress quickly. Its valuation premium already prices in continued dominance. A stumble would be costly.
Still, the first-half scorecard is clear. Carmakers are winning customers but bleeding cash. The battery king is winning profits. For investors, the lesson is simple: in a gold rush, buy the shovel-seller, not the miner.
Isn‘t BYD also a shovelmaker of sorts, just following a different strategy?