Batteries have become a 'commodity.' The beginning of the end of the EV race, as signaled by Huawei.

In my previous note, I wrote about the 'infrastructure domination' scenario being orchestrated by CATL.
An extraordinary ultra-fast charging time of '6 minutes and 27 seconds.' The nationwide rollout of battery swapping stations. A platform strategy that seeks to control energy distribution itself. That was the future vision drawn by CATL.

However, this week, news broke that shakes that composition to its core.
The Huawei-led EV brand alliance 'HIMA (Harmony Intelligent Mobility Alliance)' is beginning to dismantle its dependence on CATL.

■ AITO and CATL: Five years of honeymoon

In August 2022, the Seres Group, which co-operates the AITO brand, signed a five-year strategic partnership with CATL. It was a rock-solid relationship where CATL batteries were adopted for all vehicle models.

By 2025, they had even realized a deep-seated structure—a 'factory within a factory'—where CATL set up production lines inside AITO's super factory.

That relationship is now beginning to crumble.

■ The deep-seated structure of a 'factory within a factory'

According to multiple industry sources, HIMA is bringing in Gotion High-Tech and CALB as new suppliers for the AITO brand, and is expected to add Gotion High-Tech and Sunwoda to LUXEED as well. The adoption of an 81kWh LFP battery pack manufactured by Gotion High-Tech has been decided for the AITO M6. Huawei has already dispatched a dedicated team to Gotion High-Tech's factory to proceed with mass production inspections.

■ Why did they make the move? The answer is simple

Entering this year, the prices of raw materials such as semiconductor memory and lithium carbonate have soared. Zhang Xinghai, Chairman of the Seres Group, which co-operates AITO, revealed that the cost increase has reached 15,000 to 20,000 yuan (approximately 360,000 to 500,000 yen) per vehicle.

Batteries account for about 30% of vehicle costs. Cutting costs here is a natural decision.

Battery packs from mid-tier manufacturers are about 10% cheaper than CATL's. Calculating based on a 50kWh class, this results in a difference of about 2,000 yuan (about 50,000 yen) per vehicle. In the fiercely competitive 200,000 to 300,000 yuan market segment, this difference is by no means small.

There is further background. Xpeng and Xiaomi Auto are on the offensive in the mid-to-low price range, and HIMA is under pressure to achieve its sales plan. The annual delivery target for 2026 is over 1 million units. However, the cumulative total from January to May this year has not reached 200,000 units. That is a pace of about 500,000 units annually. It can be called an ambitious goal that requires nearly double the growth in two years.

Cost reduction is an urgent task.

■ It is not a 'complete departure from CATL.' It is a transformation of the power structure

I will add one important caveat. This is not a 'complete departure from CATL.' CATL will continue to be used for the ultra-luxury brand 'MAEXTRO.' It is merely the 'addition of a second supplier,' and CATL is also preparing to counterattack by reviewing its pricing strategy. It is not a change of the lead actor, but a transformation of the power structure.

■ Crossing the threshold of 'sufficient for practical use'

Let's pause here and think.
Why can they judge that batteries from mid-tier manufacturers are 'no problem'?
It is because the performance of LFP batteries has already exceeded the practical level for general users.

Think back to the smartphone market. At one time, CPU clock speeds and camera pixel counts determined purchases. How many people check processor specs when buying the latest iPhone now?

Once technology crosses a certain threshold, the market loses interest in specifications. It hits the wall of 'it's good enough for normal use.'

EV batteries are also approaching that wall.

CATL's '6 minutes and 27 seconds' and BYD's '9-minute charging.' Technically, these are overwhelming differences. But for the average driver who buys a coffee at a service area and returns, will that difference of just over 3 minutes change their purchasing decision? Will the difference between a 700km and 800km range change their daily driving habits?

Huawei's 'departure from CATL' is the market's answer to that question.

■ Why CATL is betting on 'infrastructure'

So, why is CATL accelerating its investment in ultra-fast charging infrastructure and battery swapping stations?

It is because they foresee, faster than anyone else, a future where differentiation through battery performance alone is no longer possible.

If batteries become a 'commodity,' they will be swallowed by price competition. The move to secure 'irreplaceable platforms' like charging infrastructure in advance is a strategic step to avoid that.

Even if automakers decide that 'cheap batteries are fine,' as long as the charging network standards are run by CATL, they will continue to receive energy distribution fees indefinitely.

Abandoning the hardware battlefield for the infrastructure battlefield. CATL's move is also a rational retreat in anticipation of its own 'commoditization.'

■ The axis of competition has already shifted

Just as smartphones ended their hardware spec race and converged into a cost-performance competition between the iOS ecosystem and Android, EVs are reaching the same turning point.

The fact that HIMA is diverting the costs saved from mid-range batteries into strengthening software experiences like HarmonyOS and autonomous driving (ADAS), as well as price competitiveness, is proof of this.

The era where the one who makes a '0.1-second faster battery' wins is coming to an end.

The winners from here on out will be those who either control the software ecosystem that wraps around the user's life or those who control the energy infrastructure that powers society. It will be one or the other.

Batteries have ceased to be a 'source of differentiation' and have become a 'variable in procurement costs.'

When you choose your next car, will you care about the battery manufacturer's name? Will the difference between a 700km or 800km range, or a 6-minute or 9-minute charge, really change your life?

If the answer is 'it won't change,' then it could be said that batteries have ceased to be a 'source of differentiation' and have become a 'variable in procurement costs.'

The era of caring about whose battery is in your car may already be over.

■ [Part 2 Preview] Japan has provided a completely different answer

When China decided that 'batteries are a commodity' and shifted its focus to software and infrastructure, Japanese manufacturing had also arrived at the same conclusion.

However, their strategies are polar opposites.

'If you can't win with battery cells, you should sell the battery factories themselves.'

The 'Swiftfab (modular factory)' initiative, which brings together nine domestic companies including Hitachi and Ricoh, aims to reduce the cost of EV battery production equipment by 70%.

In an era where batteries are becoming a commodity, Japan is attempting to survive through the 'export of manufacturing infrastructure.'

The full picture will be revealed in the second part.

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