Chinese battery manufacturers, especially CATL and BYD, are asserting significant dominance in the global electric vehicle (EV) battery market. In the first half of 2026, the combined net profit of China's seven largest battery makers surged by 49% year-on-year to over $7.4 billion, while 11 major EV manufacturers saw their collective interim profit shrink by 19% to $4.29 billion. This marks a significant shift, with battery suppliers' combined profit now 75% higher than carmakers' total, a stark contrast to a year prior when suppliers trailed by 4.56%.
CATL, the industry leader, reported a first-half net profit of approximately $6.39 billion, a 42% increase, contributing over 85% of the top seven battery makers' combined profit. Its revenue also rose by nearly 55% to $40.8 billion, with grid-scale energy storage accounting for almost a fifth of this. While CATL maintains a significant lead with a 42.33% share of China's EV battery market in July, followed by BYD at 19.23%, challengers like EVE Energy, CALB Group, and Gotion High-Tech are experiencing even faster, triple-digit growth in net profit.
The profitability divergence is largely attributed to a domestic EV market slowdown, with retail EV sales declining about 14% year-on-year in the first half of 2026. This has created a price war that is squeezing carmakers' margins, which fell to roughly 3.4% for the first five months of the year. In contrast, battery suppliers benefit from high technical barriers, strong export demand, and the cost advantage of lithium iron phosphate (LFP) batteries. Chinese battery packs are approximately 30% cheaper than North American packs and 35% cheaper than European packs, with LFP packs being over 40% cheaper per kWh than NMC alternatives in 2025. This cost efficiency allows Chinese battery makers to maintain pricing power.
To counter the dominance of companies like CATL, EV makers are developing in-house battery capabilities and forging alliances with tier-two suppliers. Meanwhile, leading battery manufacturers are diversifying into areas like grid storage and robotics, and exploring licensing models for overseas production, such as CATL's planned $4.4 billion LFP battery plant in Spain. The industry's reliance on exports, which are projected to jump 95% in 2026 to 4.88 million units, is crucial for battery suppliers to sustain their pricing power amidst a contracting domestic market.
