CATL locked in cheap lithium to win 80% of automakers' battery orders

By early 2023, CATL's dominance of China's EV battery market was eroding fast: its market share fell to about 44 percent in January, down nearly 6 percentage points year over year, while rival BYD's share surged to roughly 34 percent, up more than 13 points. China's EV market itself had just cratered — sales fell nearly half month over month in January 2023 after Beijing's purchase subsidy expired on 31 December 2022 — and rival automakers and battery makers were already cutting prices by tens of thousands of yuan per vehicle to move inventory.

The obvious response to a price war is to cut prices too, but an across-the-board battery price cut would have been matched within weeks by BYD and other rivals, permanently eroding CATL's margins for a temporary competitive reset. CATL's real advantage wasn't its battery technology alone — it also held upstream stakes in lithium mining, meaning it could access lithium carbonate, the dominant cost in a battery, more cheaply than rivals without their own mines could.

Locked lithium at half the spot price for automakers committing 80% of purchases for three years, a deal rivals couldn't copy without owning mines.

A simple price cut is instantly matched, eroding margin for all.

CATL's upstream lithium stake gave a cost edge rivals lacked.

Locking the price for 3 years made the offer hard to replicate.

The 80% volume commitment secured durable demand, not a one-off sale.

Locked demand gave CATL leverage to cut its own supplier costs.

Convert a hard-to-copy cost advantage into a multi-year volume lock-in, not a discount rivals can match instantly.

The plan, reported in February 2023 and set to begin execution in the third quarter of that year, converted CATL's raw-material cost advantage into multi-year demand lock-in rather than giving it away as a one-time price cut — competitors without equivalent upstream lithium positions could not simply match the offer. Industry analysts characterized it as a bet that lithium carbonate prices would keep falling toward or below CATL's ¥200,000 locked rate, a bet that shaped pricing expectations across the battery supply chain through 2023.