Earning Profits from Car Sales Is Extremely Challenging: 4 New Energy Vehicle Brands NIO, XPeng, Li Auto & Leapmotor ("Wei Xiao Li Ling") Transform Into Suppliers to Seize Business from Bosch and Huaw
Chinese EV makers NIO, XPeng, Li Auto, and Leapmotor are supplying self-developed components and technical services externally to diversify revenue. Li Auto confirmed supplying chips and modules. Xpeng's partnership with Volkswagen has boosted its financials, with 4.73B yuan in revenue and 71.4% gross margin from the deal in H1 2026. Li Auto faces sales declines and losses, while NIO has spun off its chip business.
How this was made
The 30-second read
Why it matters
The disclosed supplier initiatives provide new revenue streams but are unlikely to reverse overall loss trends in the short term.
Market read
First reports of component‑supply strategies could reshape revenue expectations for leading Chinese EV firms.
What to watch
Regulatory approvals for chip and SiC module sales and the ability to scale external contracts are uncertain.
Background
Chinese EV manufacturers are struggling with profitability from vehicle sales and are turning to external component supply to monetize R&D.
Ticker impact
Li Auto announced it will externally supply small chips and SiC modules, marking its entry as a component supplier.
Modest upside if supply contracts materialize; limited immediate price move.
First disclosure of external supply; scale is modest relative to Li Auto's losses.
Xpeng's partnership with Volkswagen generated 4.73 bn CNY of service revenue in H1 2026 with 71.4% gross margin.
Potential upside as investors price in high‑margin service income.
New financial detail on service revenue is fresh and material for valuation.
NIO spun off its chip business (Anhui Shenji Technology) and raised 2.257 bn CNY in Feb 2026, targeting external chip sales.
Likely modest upside as market assesses chip business potential.
First report of financing and external sales plan for NIO's chip unit.
Market effects
Shows a shift among Chinese EV makers toward component supply, potentially increasing competition for traditional auto parts suppliers.
May boost Chinese EV supply‑chain ecosystem and attract foreign OEM interest.
Highlights emerging competition to Bosch and Huawei in EV components worldwide.
Counterpoint
Component sales may be insufficient to offset deep automotive losses; focus on core vehicle business remains critical.
Key entities
- CompanyLi Auto
Chinese EV maker launching external chip and SiC module supply.
- CompanyXpeng
EV maker generating high‑margin service revenue from Volkswagen partnership.
- CompanyNIO
EV maker spinning off chip business with fresh financing.
