Over 600 million in settlement funds, did Xinwangda incur a loss or a profit?

Second-tier brands struggle to be backups.

Author | Jingxing

Editor | Gucun

“In the automotive industry back then, Geely was one of the earliest to cooperate with Xinwanda, mainly because Xinwanda was relatively cheaper. Now that something has happened, it’s affecting both brands significantly,” an investor said.

On February 6, Xinwanda’s subsidiary Xinwanda Power and Geely’s subsidiary WeRui Electric issued a joint statement, announcing a settlement in the lawsuit over the power batteries. Xinwanda will pay 608 million yuan in compensation, paid in five installments over five years. The expected impact on Xinwanda’s net profit attributable to parent in 2025 is 500 million to 800 million yuan, while WeRui will withdraw the lawsuit.

At the end of last year, the claim from WeRui against Xinwanda was still 2.314 billion yuan. In less than half a year, the settlement was completed at nearly 25% of that amount. Judging by the reduced compensation amount, Xinwanda clearly gained. This was once interpreted by the market as beneficial for Xinwanda to clear obstacles for a Hong Kong IPO.

The dispute’s focus was that the former questioned the safety risks of the high-voltage 86kWh batteries supplied by Geely and Xinwanda’s joint venture Shandong Geely Xinwanda for the Zeekr 001 WE86 version. Long-term use could cause abnormal increases in internal resistance, potentially leading to performance degradation, reduced range, slower charging, and in extreme cases, thermal runaway, posing safety hazards.

As a result, Zeekr had to replace the batteries for related owners for free during the winter care campaign at the end of 2024. On February 9, Zeekr announced to the State Administration for Market Regulation that it was voluntarily recalling some Zeekr 001 WE86 vehicles produced from July 2021 to March 2024, totaling 38,277 units.

Beyond the battery dispute with Geely, Xinwanda was also involved in another controversy. A collision and fire incident involving Dongfeng Yipai eπ007 in 2025 circulated on social media. Videos showed the vehicle catching fire shortly after the accident, causing casualties. The vehicle used Xinwanda’s lithium iron phosphate batteries, which had previously been promoted as safe through extreme tests like gunfire, needle pricks, and fire.

The secondary market reacted more directly. After WeRui’s lawsuit was disclosed, Xinwanda’s stock price dropped 11.39% in one day, and its market value once retreated over 23%, evaporating more than 10 billion yuan. Although the settlement eliminated legal uncertainty, the company’s market value has not yet recovered to pre-controversy levels.

For a company in the second echelon of power batteries, legal risks have been temporarily cleared, but the costs of operational and trust issues caused by product disputes are still ongoing.

How much did Xinwanda actually pay?

It can be said that, by settling at 608 million yuan and withdrawing the lawsuit, Zeekr still showed mercy to this old partner.

First, how much has Zeekr actually lost in this round?

During the winter care campaign in December 2024, Zeekr proactively replaced batteries for 001 WE86 owners for free. Media estimates suggest over 40,000 vehicles involved, with total replacement costs exceeding 2 billion yuan.

This corresponds to WeRui’s claim of 2.314 billion yuan. In fact, the claimed amount is likely the sum of Zeekr’s direct and indirect losses, including brand reputation damage. The 2.314 billion yuan claim is close to the combined net profit of Xinwanda in 2023 and 2024.

However, as a supplier, Xinwanda should not bear all of Zeekr’s losses. The decline in battery performance could be due to multiple factors, possibly related to battery packaging or the vehicle’s battery management system. Xinwanda also responded that Zeekr’s overly aggressive BMS was the core reason for the product issues.

This may be one reason for the settlement—neither side benefits from prolonged litigation, which harms brand reputation. Ending the dispute quickly aligns with everyone’s interests. From the settlement, the uncertain costs related to brand reputation damage are likely to have been somewhat eased, with Zeekr probably making concessions.

According to the settlement agreement, both parties will settle costs incurred before December 31, 2025. After deducting Xinwanda Power’s already borne expenses, Xinwanda will pay the remaining 608 million yuan in five installments. The event-related battery packs will remain Xinwanda’s property, used to recover some losses. Future costs will be shared proportionally, and both sides will cooperate with the automaker’s potential recall obligations.

In other words, the 608 million yuan is not Xinwanda’s total cost for this incident. It must be added to previous battery replacement costs and potential future expenses. Even if the settlement amount is compressed to 608 million yuan, it is roughly 40% of Xinwanda’s net profit for 2024. Zeekr allows Xinwanda to pay in installments over five years, with only 60% of the compensation due in 2026, increasing by 10% annually until fully paid by 2030. This arrangement maximizes Xinwanda’s cash flow flexibility.

Guosheng Securities stated in a research report that, since the actual compensation is much lower than expected and paid in installments, and the stock price has already reflected pessimistic expectations, Xinwanda now has clear room for valuation recovery.

Three days after the settlement, on February 9, Zeekr announced to the State Administration for Market Regulation that it was voluntarily recalling some Zeekr 001 WE86 vehicles produced from July 2021 to March 2024, totaling 38,277 units.

Based on disclosed data, the cost of each Zeekr 001 WE86 with Xinwanda’s 86kWh battery pack, including parts and labor, is about 150,000 yuan. Multiplied by 38,277 vehicles, the paper loss from this incident is approximately 5.7 billion yuan.

Meanwhile, Xinwanda’s real losses go beyond the book value.

Xinwanda first submitted a Hong Kong IPO prospectus in July 2025, updated and resubmitted in January 2026. The latest prospectus shows that Geely is no longer the main customer for Xinwanda’s power batteries. For Xinwanda’s pursuit of a Hong Kong listing, although the settlement clears legal hurdles, the market remains cautious about the company.

Some Zeekr 001 owners revealed that after the incident, Zeekr replaced many Xinwanda batteries with CATL versions. This “vote with their feet” trust shift is more damaging to the brand than claims.

Li Auto has also been caught in the crossfire.

“Both Zeekr and Xinwanda made the biggest mistake by making the conflict public, which affects subsequent product sales. Private negotiations might have avoided more losses,” a car owner told “Market Elephant.”

Perhaps in product quality issues, low-profile handling could minimize losses. As a buyer of Xinwanda batteries, Geely’s brands and Li Auto’s actions stand in stark contrast.

In November last year, a Volvo EX30 with Xinwanda’s 69KWH battery caught fire while waiting for repairs at a 4S shop in Brazil. Volvo then announced an emergency recall of the EX30 in multiple countries and advised users to limit charging to reduce safety risks.

Meanwhile, Li Auto has remained silent on Xinwanda batteries.

In fact, similar to Geely’s positioning, Li Auto has been a key partner for Xinwanda’s entry into the power battery market. As early as 2017, Li Auto collaborated with Xinwanda on battery R&D. On February 8, 2023, Li Auto announced cooperation with Xinwanda and Hoshine Energy to develop dedicated production lines for self-developed battery packs, which will be used in Li Auto L7 Air and L8 Air models.

By September 2025, Li Auto announced a joint venture with Xinwanda, each holding 50%. In October 2025, Zhejiang Li Auto Battery Co., Ltd. was registered, with Xinwanda indirectly holding shares, responsible for supplying batteries to Li Auto. Compared to the CATL partnership, this joint development model gives Li Auto more control over battery technology and supply chain, with a higher proportion of self-research.

However, consumer recognition of Xinwanda batteries remains low. Because Li Auto’s L series uses multiple versions of Xinwanda and CATL batteries, some users have posted instructions on how to request sales to specify CATL versions when purchasing.

After the claims dispute intensified, the reputation of Li Auto’s Xinwanda version further declined. A car owner told “Market Elephant”: “Now, Li Auto i6 can choose between CATL and Xinwanda batteries, with the same price, but CATL takes half a year to deliver, while Xinwanda can be delivered in half a month to a month. Sales say the two batteries are not much different, just that CATL’s production is slower. Now, nobody wants to buy either.”

“Li Auto’s previous MEGA used CATL’s original Kirin batteries, but that caused cost imbalance and gave Ningde a dominant voice. Later, they supported Xinwanda to improve gross margins and regain influence,” a car owner said. But as Xinwanda’s reputation crisis worsened, Li Auto found itself on the defensive.

Xinwanda Chairman Wang Wei explained why automakers choose Xinwanda as a secondary supplier: “Any automaker selling over 100,000 vehicles a year needs to increase suppliers because the development and validation cycle for automotive-grade batteries is long. Insufficient supply makes it difficult. Xinwanda’s core reason for being able to produce is respect for batteries.”

The fate of second-tier battery manufacturers?

“Huatai will never achieve the effect of Nanfan, but you can’t see it at first,” said an industry analyst. Xinwanda’s power batteries face endurance pressure over long-term use, related to cell manufacturing processes.

This correlates with the recall incidents involving Volvo and Zeekr. Both cases pointed out issues like voltage platform inconsistency and excessive internal resistance differences among Xinwanda’s different cells. In a battery pack composed of many cells, these differences inevitably lead to performance degradation.

This reflects the entire power battery market. When consumers prefer to delay delivery to choose top brands, second-tier manufacturers struggle to break through with brand advantage, often resorting to low prices and increased capacity. Because battery production lines are costly, insufficient shipment volume results in self-inflicted losses. Under the “winner-takes-all” effect, both technology and scale, second-tier companies lag behind top-tier ones.

For power battery manufacturers, the market has entered a fierce competition stage. Dominant players monopolize market share, and second-tier suppliers mainly serve as “automaker’s supply partners” or “second suppliers.” According to GAC’s data, by 2025, CATL will hold 41.6% of the domestic new energy passenger vehicle power battery market share, Fudi Battery 25.6%, with the top two accounting for nearly 70%. Xinwanda’s share is only 2.5%, ranking seventh.

“From 2021 to 2023, except for CATL, most second-tier products have flaws, such as false indicators. Otherwise, Ningde’s dominance wouldn’t be so strong. Cheap usually means poor quality,” an investor said. Some industry insiders also told “Market Elephant” that Xinwanda’s product issues are not unfounded; their supplier audits have historically been not very strict.

Compared to top-tier suppliers, Xinwanda is relatively conservative.

Xinwanda’s advantage lies in more distinctive features. At market entry, it focused on HEV cell technology to improve charging and discharging efficiency. Its capacity expansion has been cautious. Wang Wei once said in an interview that Xinwanda is very cautious about expanding production because investing in 1GWh capacity costs more than producing a similar volume of vehicles, and if automaker orders are insufficient, it faces great risks. Although some early customers were willing to co-invest in production lines, most only made verbal commitments. If automakers’ demand is not large enough, the lines will sit idle.

Nevertheless, Xinwanda has made some missteps, and its price-to-volume strategy continues to be evident. The 2025 semi-annual report shows that in the first half of 2024, Xinwanda’s power battery shipments totaled 16.08 GWh, up 93.04% year-on-year, but revenue only increased by 22.63%. From a gross margin perspective, Xinwanda’s power battery gross margin in the first half of 2025 was 9.77%, compared to 22.41% for CATL and 19.63% for consumer batteries.

In this crisis of battery quality, automakers are deeply realizing that supporting secondary suppliers to control prices has cost them the right to control brand reputation. As the entire new energy vehicle market turns into a red ocean, quality and quantity have become the main contradictions. BYD’s resilience in multiple market cycles owes much to its self-developed batteries. Currently, Geely, Great Wall, GAC, Changan, Chery, Dongfeng, and others are entering the self-developed battery camp, leaving little room for second-tier suppliers to turn the tide.