Li Auto unbundles Mach M100 as automotive margins shrink

Li Auto and NIO built proprietary silicon and charging infrastructure on the premise that captive hardware would protect vehicle margins. That vertical model has broken under acute capital strain. According to woshipm, Li Auto's Hong Kong market capitalization stood at HK$349.56 billion on February 27, 2024, but has collapsed to approximately HK$93.4 billion. NIO sits at approximately HK$67.9 billion, down from January 2021 when its market capitalization surpassed $100 billion.

The cash drain forced radical compromises. As reported, NIO accumulated approximately 100 billion yuan in publicly disclosed losses over the past 10 years, eventually settling tooling debts with an interior supplier by transferring dozens of Firefly vehicles alongside Onvo L60 and NIO ES6 units.

Captive moats are turning into merchant supply lines. By spinning off proprietary silicon and charging assets into standalone B2B businesses, automakers are opening an unexpected pipeline of automotive-grade compute for robotics and physical AI.

Balance sheet strain dismantles the captive hardware lab

Paper liquidity masks operational strain. Li Auto held 87.5 billion yuan in cash reserves at the end of the second quarter of 2026. Yet its gross margin dropped from 19.4% to 9.4% across the first half of that year, swinging the business from a net profit of 1.743 billion yuan in the first half of 2025 to a net loss of 3.994 billion yuan. Maintaining quarterly R&D expenditure at around 3 billion yuan for six consecutive quarters proved untenable under those degraded vehicle margins.

Captive research labs cannot survive on static bank balances. When vehicle margins collapse, internal engineering programs turn into cost drains that vehicle retail volumes cannot support.

NIO faced similar balance sheet pressures. Over the past 10 years, NIO accumulated approximately 100 billion yuan in publicly disclosed losses. Although geekpark noted Nio Group held cash reserves of 56.7 billion yuan at the end of the second quarter, austerity reshaped its operations. NIO trimmed its workforce from 46,000 employees to more than 30,000. Projects at the 700,000-yuan level required vice-president approval, while million-yuan projects demanded Li Bin's personal approval. NIO even settled tooling debts with an interior supplier by transferring dozens of Firefly vehicles as well as Onvo L60 and NIO ES6 units.

Valuation contractions ended the era of subsidizing internal component development through equity markets. As woshipm detailed, Li Auto's Hong Kong market capitalization reached HK$349.56 billion on February 27, 2024, but later settled near HK$93.4 billion. NIO's valuation drifted to approximately HK$67.9 billion, far below its January 2021 capitalization above $100 billion. Converting captive hardware divisions into standalone merchant suppliers offers a way out. It monetizes proprietary architectures externally.

Silicon spin-offs open automotive computing to robotics

In July 2026, Li Auto established an independent corporate entity for its semiconductor unit by registering Xinchuang Zhihe (Shanghai) Technology Co., Ltd. (芯创智核（上海）科技有限公司), with joint company secretary Wang Yang serving as legal representative. Starting in the second quarter of 2026, Li Auto deployed its Mach M100 assisted driving chip in the updated L9, L8, MEGA, and new i9 vehicles. It carries 1,280 TOPS of computing power alongside 273 GB/s of memory bandwidth.

NIO executed an identical structural separation.

Independence allows automotive chip units to pursue merchant revenue beyond parent assembly lines. Shenji also partnered with Axera to establish a joint venture named Chongqing Zhiyuan (重庆智元), generating hundreds of millions of yuan in technology licensing fees for NIO. Broad autonomous deployment remains critical to justify tape-outs: geekpark noted that Geely operates 140 Robotaxi vehicles in trials, aiming for 100,000 cumulative units by 2030.

These automotive architectures are migrating directly to embodied AI. Former Li Auto personnel have founded or co-founded five robotics ventures: Xieyue Intelligence (斜跃智能), Zhijian Dongli (至简动力), Kunlunhang (昆仑行), Wujie Dongli (无界动力), and Vita Power (维他动力).

Battery cell decoupling turns Tier-1 suppliers into foundries

Automakers are turning cell manufacturers into contract foundries rather than buying packaged packs. Li Auto initiated its self-developed battery strategy in 2020, investing more than 200 million yuan annually over the past six years, totaling over 1 billion yuan excluding fixed assets. Its in-house team of more than 300 people designs the cells while suppliers like Sunwoda and CALB handle cell manufacturing. Li Auto independently develops and manufactures its battery management systems alongside thermal management systems. It also produces proprietary pack insulation materials. Consequently, Li Auto dropped out of CATL's top five customer list in August.

Strict fabrication rules make foundry manufacturing viable. Li Auto established more than 8,000 control standards at the cell level and over 1,000 at the pack level, totaling over 9,400 control standards.

Production remains narrow. Li Auto restricts choices to 5C ternary lithium and 5C lithium iron phosphate solutions, with at most two cell models in each category. These power the new-generation L8, the MEGA, and the i9. Deliveries using cells co-developed and contract-manufactured by Sunwoda reached 420,000 units since 2022, when Li Auto invested in Sunwoda and became its second-largest shareholder. Li Auto currently has no plans to supply its in-house battery technology externally due to high customization requirements. Telemetry stays in-house while suppliers act as foundries.

Procurement and Integration Framework for Chinese Automotive Merchant Tech

• Architecting autonomous machines, embodied AI robotics, or edge inference hardware requiring high compute density Evaluate merchant automotive-grade silicon such as Li Auto's Mach M100-supplied via its wholly owned chip subsidiary Xinchuang Zhihe (Shanghai) Technology Co., Ltd. with 1,280 TOPS of computing power, 273 GB/s memory bandwidth, and claimed usable computing power three times Nvidia's Thor-U-or engage Nio's spun-off chip unit Anhui Shenji Technology, which develops municipal edge inference systems and joint venture IP via Chongqing Zhiyuan.
• Sourcing high-voltage power electronics and silicon carbide (SiC) modules for commercial powertrains Engage Sike Semiconductor directly rather than sourcing captive automotive sub-assemblies; following its February 2026 spin-off into an independent company from Li Auto (which retains 70% equity alongside Hunan Sanan Semiconductor), Sike is pursuing external financing, an IPO, and external merchant supply contracts alongside Li Auto's third-generation range extenders (6.3 L/100 km, 94.8% generator efficiency).
• Seeking merchant procurement of proprietary 5C lithium iron phosphate or ternary lithium battery packs Do not attempt to procure captive battery technology from Li Auto. Although Li Auto maintains an internal R&D team of over 300 engineers, has established over 9,400 control standards, and contract-manufactures through Sunwoda and CALB, it has explicitly confirmed it has no plans to externally supply its proprietary battery technology due to high customization requirements.
• Evaluating high-uptime commercial fleet charging and battery-swap infrastructure Integrate with the unified Nio Power network (valued at 16 billion yuan post-investment, with 4,126 stations as of September 26). The network achieves unit breakeven at 40 to 50 swaps per station per day (with integrated Yiyi Interconnect stations averaging 60 to 70 swaps daily), saves commercial vehicles up to 90 minutes per day, and deploys fifth-generation stations costing approximately 1.4 million yuan in equipment.

Swap networks shift from private perks to multi-tenant utilities

A single fifth-generation Nio battery swap station costs approximately 1.4 million yuan in equipment. To pay down that capital outlay, fourth-generation stations require 40 to 50 battery swaps per day to break even, according to geekpark. Captive consumer fleets rarely sustain that pace. Cao Cao Mobility operates over 42,000 customized vehicles. Nio estimates that switching taxi fleets to swap stations saves an operating vehicle up to 90 minutes each day, expanding vehicle revenue by 15% to 20%. Commercial routing delivers the steady throughput that private ownership cannot match.

Nio Power operates 4,126 battery swap stations across China. Sustaining that infrastructure requires shared commercial volume rather than exclusive brand prestige.

That economic arithmetic prompted Nio to open its proprietary grid. On September 28, Geely agreed to take a 30% equity stake in Nio Power by contributing 640 million yuan in cash and 100% equity in its fleet subsidiary Yiyi Interconnect (易易互联). The transaction establishes a 16 billion yuan valuation for Nio Power, where Nio retains 63.6%, ifanr reported. The partners plan to build a cumulative total of 10,000 battery swap stations by 2030. Shared amortization converts captive liabilities into recurring utility revenue.

Upstream power electronics are following the same merchant trajectory. Li Auto holds a 70% stake in Sike Semiconductor, a joint venture set up in 2022 with Hunan Sanan Semiconductor. Li Auto is now unbundling its silicon carbide modules to external buyers. Non-recurring engineering expenses in power hardware cannot be recouped on captive vehicle sales alone.

B2B Technology Spin-Offs and Merchant Supply Strategies: NIO vs. Li Auto

Systems architects can mirror Li Auto's battery decoupling playbook. Instead of constructing cell factories, Li Auto invested in Sunwoda in 2022 and became its second-largest shareholder after an additional capital injection. Cumulative deliveries of vehicles equipped with batteries co-developed with Li Auto and contract-manufactured by Sunwoda reached 420,000 units since 2022.

The model relies on strict product constraints. Li Auto limits its battery cell portfolio to 5C ternary lithium and 5C lithium iron phosphate solutions, with at most two cell models in each category.

Li Auto invested more than 200 million yuan annually in battery R&D over the past six years, totaling over 1 billion yuan excluding fixed assets such as laboratories. It established more than 8,000 control standards at the battery cell level and over 1,000 at the pack level, totaling over 9,400 control standards. Battery R&D head Liu Zhimin stated that the defect outflow rate reached the parts-per-billion level. Senior Vice President Liu Liguo acknowledged a significant gap compared to CATL in frontier technologies like solid-state batteries, but maintained that after-sales quality equals dedicated battery suppliers.

For readers outside China

• Availability: Direct commercial availability outside China is not disclosed in sources. Spun-off entities such as Li Auto's Xinchuang Zhihe (Shanghai) Technology Co., Ltd., Sike Semiconductor, and Nio's Anhui Shenji Technology have established domestic operations, municipal deployments (such as Shenji's edge inference project in Hefei), and infrastructure stretching across China (such as Nio Power's 4,126-station network along routes like Xi'an to Khorgos), but international export channels and global developer programs are not covered in the source material.
• Pricing: Component-level merchant unit pricing (such as individual unit costs for Mach M100 silicon or Sike SiC modules) is not disclosed in sources. Disclosed transaction benchmarks show that Nio's fifth-generation battery swap station equipment costs approximately 1.4 million yuan per station, while technology licensing via Chongqing Zhiyuan generated hundreds of millions of yuan. At the entity level, Nio Power was valued at 16 billion yuan following Geely's 640 million yuan cash injection, and Anhui Shenji Technology completed an initial round of 2.257 billion yuan at a 10 billion yuan post-investment valuation.
• Closest Western equivalents: Nvidia Thor-U
• Data residency: Data residency, cross-border compliance, and remote telemetry transmission rules are not disclosed in sources. Practitioners should note that documented edge inference projects and network assets-such as Shenji Technology's municipal edge computing contract with the Hefei municipal government and Nio Power's infrastructure-are integrated directly into domestic mainland Chinese municipal and energy infrastructure.

Sources

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