Li Auto & Sunwoda Launch 50:50 Battery JV, Self-Developed 5C Cells to Debut Next Year

Li Auto and battery manufacturer Sunwoda will establish a joint venture with a 50:50 investment ratio. Currently, the joint venture has been filed and publicly announced by the Shanghai Market Supervision Administration. According to the public information, the two joint venture parties are Beijing Li Auto Co., Ltd. (“Beijing Li Auto”) and Sunwoda Power Technology Co., Ltd. (“Sunwoda Power”). The joint venture will mainly engage in the production, manufacturing, and sales of lithium-ion power batteries for electric vehicles.

The registered name of the joint venture is Shandong Li Auto Battery Co., Ltd., which will be used to produce the power battery products independently developed by Li Auto. “The power products independently developed by Li Auto will be installed in vehicles next year.” In the battery project jointly created by Li Auto and CATL, Li Auto internally refers to it as a joint development; while in the cooperation with Sunwoda, Li Auto has carried out leading design in aspects such as battery products, processes, and materials, which is internally called self-developed batteries by Li Auto. At present, the scale of Li Auto’s battery R & D team is about 200 people. Industry insiders who have contacted the senior management of Li Auto reveal that Ma Donghui, the president of Li Auto, pays great attention to the progress of the self-developed battery project and basically reviews the project progress every two weeks.

There are also industry insiders who reveal that Li Auto fully focuses on 5C super-fast charging batteries in battery R & D, and has deeply self-developed and invested decisively from the chemical system, structural design, and BMS core algorithm. “Li Auto and Sunwoda have a large number of battery R & D projects in progress. For almost every R & D project, after calculating the required costs with Sunwoda, they will decisively invest.”

Industry insiders analyze that after establishing a battery joint venture with Sunwoda, it is more legitimate for Li Auto’s self-developed batteries to be called “Li Auto Batteries”, and even “the battery nameplate can be Li Auto Batteries”.

Li Xiang, the chairman and CEO of Li Auto, has publicly divided the supply chain collaborative innovation model into three categories:

• Self-research and self-production: It conforms to the value proposition and strategy of Li Auto, and there are no mature suppliers in the industry who can produce it, such as range extenders, electric drives, intelligent-related components, etc.
• Self-research and OEM: It conforms to the value proposition and strategy of Li Auto, and there are mature suppliers in the industry who can produce it, and even the quality is better than that of Li Auto’s self-production.
• External procurement: It does not conform to the value proposition and strategic needs of Li Auto, but the market and suppliers are mature enough, such as bumpers, rear – view mirrors and other components.

Li Auto Batteries belong to the product of Li Auto’s self-research and self-production model. Previously, in the core components such as electric drives and silicon carbide, Li Auto has also established similar corporate entities, such as Huixiang, Sike, etc.

Although power batteries have been widely mature and popularized, they still account for 30% – 35% of the cost of the whole vehicle, which is a key part that any car company must focus on in the supply chain layout.

Just today, Li Auto announced that it has signed a five-year strategic cooperation agreement with CATL. The establishment of a battery joint venture with Sunwoda is also a mainstream choice for car companies to lay out batteries from multiple points after reaching a certain scale, so as to ensure cost control and supply security.

Li Auto: Eager for Pricing Power and Customization Rights

For Li Auto, managing the supply chain through the establishment of joint ventures is a method that traditional car companies have long tried and verified to be effective, and Li Auto has already used this strategy quite maturely.

For example, the Huixiang joint venture established with Inovance United Power and the Sike joint venture established with Hunan Sanan Semiconductor have played a key role in the customized development of key components such as electric drives and silicon carbide chips.

Now, the establishment of Shandong Li Auto Battery Co., Ltd. with Sunwoda generally follows the same logic: by establishing a joint venture, Li Auto can obtain customized and stable – supply core components, while reducing the investment risk of suppliers.

Car companies often need some customized components to pursue product differentiation, and Li Auto is no exception. For example, Hesai Technology has customized an ATL lidar for the Li Auto i8.

And Li Auto always regards super-fast charging as one of the core product points of pure electric vehicles. Therefore, it can be imagined that Li Auto’s demand for customized power batteries is even greater than that for lidar.

However, giant enterprises like CATL seem to be difficult to be impressed by Li Auto’s customized development fees. Applying the technology to the models of more customers to spread the R & D costs can ensure the maximization of the input-output ratio. Therefore, Li Auto’s demand for obtaining differentiated technology through customized development can only be achieved through Sunwoda.

The establishment of a joint venture between Li Auto and Sunwoda to reduce procurement costs is necessary whether it is to obtain technological product differentiation or to obtain battery supply stability through multi-point layout.

Sunwoda: Binding Key Customers with the ODM Model

Sunwoda, the joint venture partner selected by Li Auto, is an enterprise that has entered the power battery field from consumer batteries. According to the prospectus submitted by Sunwoda to the Hong Kong Stock Exchange, the consumer battery business still accounts for more than 50% of the enterprise’s revenue.

It officially established a cooperative relationship with Li Auto in 2017.

In 2022, Li Auto further invested 400 million yuan in Sunwoda Automobile Battery, a subsidiary of Sunwoda’s power battery business, with a subscribed capital contribution of 204 million yuan. Since then, Li Auto has become a customer and shareholder of Sunwoda Automobile Battery, holding a 3.22% stake.

According to Chen Hui, the general manager of Sunwoda’s Li Auto division, Li Auto originally only planned to invest 200 million yuan in Sunwoda. It was Li Xiang, the CEO of Li Auto himself, who proposed at the investment decision – making meeting to increase the investment amount to 400 million yuan.

In 2023, Sunwoda specifically established a division for Li Auto, with a scale of about 1300 people. Chen Hui told 36Kr Auto that by the end of June this year, the scale of this division had expanded to about 1700 people.

This year, Li Auto has also increased its procurement share of power batteries from Sunwoda to 30%.

In terms of data, Chen Hui, the general manager of Sunwoda’s Li Auto division, once told 36Kr Auto that as early as the establishment of the Li Auto division, Sunwoda planned to connect its own data to Li Auto’s system;

By the end of 2023, Sunwoda had completely connected to Li Auto’s Lianshan system at the original data level, and Sunwoda’s manufacturing data and warehouse management inventory data were all real – time connected to Li Auto;

In 2024, Li Auto’s vehicle – level data was connected to Sunwoda’s system, and the two began to jointly establish a power battery early – warning model.

Looking at the cooperation history between Sunwoda and Li Auto, the degree of cooperation between the two has been continuously deepened, which has laid a business foundation for the establishment of a joint venture between the two today.

For Sunwoda, establishing a solid strategic alliance with a leading car company like Li Auto means that there is a certain guarantee for its future power battery shipments. In addition, the 50:50 share ratio will also upgrade Sunwoda from a pure supplier to a community of interests that can share profits with Li Auto.

According to Sunwoda’s Hong Kong Stock Exchange prospectus, as of the end of March this year, Li Auto contributed 5.8% of Sunwoda’s revenue and was one of Sunwoda’s top five customers.

At present, models such as the Li Auto L6, Li Auto L7 Air, and Li Auto L8 Air are all equipped with Sunwoda power batteries, and the power batteries of the Li Auto i6 will also be supplied by both Sunwoda and CATL. After the establishment of the joint venture, Li Auto may tilt more procurement shares towards Sunwoda, and the expansion of the shipment scale will undoubtedly improve the gross profit margin of Sunwoda’s power battery business.

One of Sunwoda’s strategies to 撬动 the power battery market share is cost – effectiveness.

In addition to exchanging price for quantity, as a second – tier battery factory seizing market share in the gap between giants, Sunwoda also needs to adopt an ODM – like method to bind key customers.

Before cooperating with Li Auto, Sunwoda had also established joint ventures with car companies such as Dongfeng and Geely. In addition, 36Kr Auto also learned that Sunwoda is trying to bind more car companies with which it has cooperative relationships by establishing joint ventures. In the future, Sunwoda may obtain a larger share in the new energy vehicle market through this path.