A media outlet under China's Ministry of Industry and Information Technology has pushed back against what it calls the "de-CATLization" narrative, arguing that supply chain diversification by automakers should not be framed as a confrontation with battery producers.

The commentary, published Tuesday by CNII, said adding suppliers and pursuing in-house development are normal business practices. It warned that portraying supply chain adjustments as efforts by automakers to break free of leading suppliers could undermine industry collaboration.

The intervention comes as several Chinese automakers diversify their battery sourcing, a trend that has fueled market concerns over the competitive position of CATL (HKEX: 3750).

Price pressure spreading upstream

The commentary warned that low-price competition in the new energy vehicle industry is spreading upstream. Battery procurement driven excessively by short-term cost considerations could reduce emphasis on technology, quality and long-term reliability.

"Companies can compete on price and efficiency, but safety and quality must not come at the expense of competition," the commentary said, stressing that low prices do not necessarily mean low costs.

China's auto industry has worked hard to build global competitiveness in certain core components, the commentary said, and encouraging more companies to grow should not come at the expense of established leaders.

In-house claims under scrutiny

On automakers' in-house battery development, the commentary acknowledged that expanding upstream can help differentiate products and strengthen supply chain resilience. But it said marketing claims should reflect actual technical capabilities.

Some companies' in-house development work focuses mainly on battery pack design, system integration, battery management systems or product definition, the article said. These activities are distinct from cell development and consistent manufacturing at scale.

The commentary criticized presenting joint development as entirely in-house research and supplier manufacturing as proprietary production, saying such claims can mislead consumers and hinder technological innovation.

The article did not single out any automaker's in-house development claims.

Li Auto, Xiaomi expand sourcing

The debate comes as companies including Li Auto (NASDAQ: LI) expand the use of their own battery designs and deepen ties with other battery suppliers.

Li Auto said on September 7 that its in-house-developed batteries were already used in the Li L8, Li L6 and Li i8, with plans to gradually extend them across its entire lineup. The company said its in-house cell development began in 2020, with work spanning 5C cells, battery packs and battery management systems. A joint venture it established with Sunwoda (SZSE: 300207) in 2025 manufactures the batteries.

Xiaomi (HKEX: 1810) has also expanded its battery supplier lineup to include CATL, FinDreams, CALB and Sunwoda, reflecting Chinese automakers' efforts to broaden their sourcing.

These changes have yet to dislodge CATL from its leading position in China's power battery market. Its share of battery installations was 41.45% in August, slightly below July's 42.33%, according to the China Automotive Battery Innovation Alliance (CABIA).

Redundant capacity warning

The CNII commentary also warned that automakers seeking to bring every capability in-house and duplicate investment across the supply chain could create redundant capacity and misallocate resources.

It stressed that CATL, BYD (HKEX: 1211) and other battery producers should all face open market competition and consumer choice, while diversified supply chains can strengthen industry resilience.

"Diversification" is not the same as "removing industry leaders," and "independent innovation" is not the same as "doing everything yourself," the commentary said.