Source: CATL
It has been nearly a month since the U.S. and Israel began military operations against Iran. The conflict is a stark reminder of how fragile the fossil fuel system is and why the future of energy lies in disruptive technologies, not petrochemicals.
Electrification is scaling rapidly – led by autos today, but increasingly extending into energy for homes, data centres and industrial systems. China sits at the centre of this transition.
China flipped the script and reset a $4 trillion industry
For decades, global autos were dominated by incumbents in Japan, Germany, the U.S. and Korea. Barriers to entry were formidable; built on decades of expertise in engines, supply chains and global distribution. China lagged, producing lower-quality vehicles via joint ventures and competing mainly in emerging markets. But then electric vehicles (EVs) reset the board.
China moved early, investing heavily in R&D, subsidies, infrastructure and battery technology from 2009, unburdened by legacy Internal Combustion Engine (ICE) assets. Tesla played a critical – and underappreciated – role. Its entry into China acted as a “catfish”, forcing the domestic ecosystem to accelerate innovation, driving down costs, exposing weaker players and forcing rapid consolidation.
As a result, a once-follower industry is now the leader, setting the global pace. The markers tell the story:
- ~50% of cars sold in China are now EVs
- China accounts for ~60% of global EV sales
- China became the world’s largest auto exporter in 2024
- BYD has overtaken Tesla in total EV volumes
China makes the EV batteries for the world
In EVs, the battery is the most important component; representing ~30-40% of total cost. This is where China’s advantage is most pronounced. Global EV battery installations reached 1,187 GWh in 2025 (+32% YoY). Chinese (and now global) battery leader CATL (which we visited in China in December) alone installed 464.7 GWh (~39% share), with BYD at ~16%. Together, they control more than half the world market. The shift has been dramatic:
EV battery market share by battery maker origin
Source: SNE Research, Bernstein analysis
CATL supplies its batteries to the world’s car companies including Tesla, BMW, Mercedes, Toyota, Hyundai and Ford. China also dominates vital battery components, accounting for up to 90% of global production for the highest cost battery inputs like cathodes and anodes.
This vertical integration creates structural, cost and technological advantages that are effectively a very wide moat.
Technology leadership, not just scale
China’s edge is no longer just about scale, it is embedded across the system, from research to production. Chinese leaders dominate the research ecosystems in material sciences and use this position to push the frontier in a way that western competitors do not match:
- CATL CEO Robin Zeng (quoted in the WSJ) said that in the US the focus is on “chips, software, AI. Batteries are considered “a very stupid industry.”
- CATL’s latest fast-charging battery delivers ~520km of range from a 5-minute charge, significantly reducing range anxiety.
- The latest “blade battery” from Chinese car maker BYD similarly improves charging speeds and safety.
Both the CATL and BYD batteries are also more reliable than competitors with lower rates of warranty claims. These companies also lead in developing the next generation of technology. Sodium-ion batteries are emerging as the next frontier. Lithium investors beware: these batteries are approaching its performance (~175 Wh/kg). CATL expects commercial rollout from 2026 across vehicles and energy storage.
Source: Bernstein analysis
CATL dominates industry profits
This advantage is translating directly into profitability. CATL is capturing a disproportionate share of battery industry profits – driven by scale, technology leadership, vertical integration and cost leadership. Like Apple in smartphones, CATL has become the dominant profit pool owner in batteries.
Source: Bloomberg, Bernstein analysis
China’s EVs are gaining share globally
Chinese EVs are typically ~20-30% cheaper than Western equivalents. But it is no longer just about price. They are increasingly leading in technology, product quality and speed of innovation. Even Western executives now acknowledge this.
“I drive a Xiaomi (SU7). We flew it from Shanghai to Chicago. I’ve been driving it for 6 months now, and I don’t want to give it up”
~Ford CEO, Jim Farley (quote taken from the Fully Charged Podcast)
This is translating into global share gains:
- BYD became the world’s largest EV producer in 2025, overtaking Tesla
- Overseas sales grew from ~400k vehicles in 2024 to >1m in 2025 (20% of sales)
- Longer term, BYD is targeting ~50% of sales outside China
Tesla vs BYD EV quarterly unit deliveries
Source: Company data
Beyond autos: batteries as infrastructure
Batteries are no longer just an automotive component, they are becoming core infrastructure. Electricity demand is rising, driven in part by AI data centres, while countries seek energy security and decarbonisation. This is driving demand for:
- Grid-scale energy storage
- Backup power for data centres
- Renewable integration
Batteries now sit at the centre of multiple future applications – from EV to aviation/shipping to energy systems to robotics. CATL and BYD are already scaling their energy storage businesses alongside EVs.
Source: Bloomberg, Bernstein analysis
The bottom line
At Loftus Peak, we invest with a 3 – 5 year time horizon.
China dominates EV and battery technology and is exporting that advantage globally.
This leadership is extending beyond autos. In an increasingly uncertain world, batteries are becoming critical infrastructure. They underpin energy security, enabling renewable grids and powering AI-driven data centres.
We are positioned in this shift through our investments in CATL and BYD – companies at the centre of this structural transition.
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