Electric Vehicles

How the chain fits together

The chain on this map runs from raw materials to the finished car:

• Lithium is refined into chemicals that cathode makers turn into cathode powder.
• Cathode, anode, electrolyte and a separator go into battery cells.
• Rare-earth magnets go into the motors of electric drive systems.
• Power semiconductors switch the current in the same drive systems.
• Thermal management parts keep the battery, motor and cabin at temperature.
• The finished electric vehicle combines them.
• Charging and battery swapping refuels the car, and battery recycling returns its metals to the chain.

China's new-energy vehicle output and sales were 7.438 million and 7.446 million in the first half of 2026, up 6.7% and 7.3%, while domestic passenger vehicle sales fell 24.3% by Geely's industry data and exports rose sharply (BYD 2026 interim report, p. 12; Geely 2026 interim results, pp. 48, 49).

Where China is strong

• Batteries. CATL says it had 40.2% of global power battery use in January to May 2026, with 525 GWh of capacity running at 94.86% utilisation and 764 GWh more under construction (2026 interim report, pp. 10, 17).
• Cathode. Hunan Yuneng sold 667,200 tonnes of phosphate cathode in the half, about a quarter of China's phosphate cathode shipments (our calculation) (2026 interim report, pp. 11, 16).
• Separators. SEMCORP says it is the world's largest separator supplier by shipments (2026 interim report, p. 11).
• Lithium. Ganfeng and Tianqi both made about ¥4.2bn in the half, though their best resources are abroad (Ganfeng 2026 interim report, p. 21; Tianqi 2026 interim report, p. 14).
• Exports. BYD's overseas revenue was 52.6% of the total in the half, against 36.5% a year earlier (BYD p. 26).

Where the weak points are

• The home market shrank. Domestic passenger vehicle sales fell, and exports carried the growth at BYD, Geely and Leapmotor.
• Upstream is a price business. Lithium prices moved by more than 70% within the half, and cathode makers earned a 14.8% margin as price takers.
• Independent drive suppliers are squeezed. Inovance's EV drive margin fell 4 points to 12.82% and Jing-Jin Electric lost ¥179m after one customer cut orders (Inovance 2026 interim report, p. 28).
• Passenger car margins are thin. Thermal parts for passenger cars earned 12.66% at Yinlun, against 25.31% in data-centre cooling.
• Some carmakers lost money. Li Auto lost ¥1.71bn in the second quarter on a 9.4% vehicle margin.

Margins along the chain

The chart below sets reported gross margins side by side, from 74.2% at Tianqi's lithium mining to 11.7% at Leapmotor's cars. The bases differ, so it shows where margin sits rather than a like-for-like ranking.

Our view: margin tracks how scarce or specialised a part is. The highest figures are for lithium resources, separators and thermal valves, and the lowest for commodity-like stages and weaker carmakers: cathode, drive systems, passenger car thermal parts and Leapmotor's cars all earn between 12% and 15%. Lithium is also the most volatile: Ganfeng went from a ¥531m loss to a ¥4.26bn profit in a year.