Litigation itself is not the primary concern; the real danger lies in the potential inadequacy of warranty provisions.
On November 26, 2025, Sunwoda (300207.SZ) announced a major event.
On December 25, 2025, Sunwoda's power battery subsidiary, Sunwoda Power, received a statement of claim and a notice to respond to the lawsuit from the Ningbo Intermediate People's Court in Zhejiang Province, demanding compensation of 2.314 billion RMB. The plaintiff is WeRui Electric Vehicle Technology (Ningbo) Co., Ltd.
According to Tianyancha, WeRui Electric Vehicle Technology (Ningbo) Co., Ltd. (简称”威睿电动“) is a new energy technology enterprise under Geely Holding Group, with shareholders being Zeekr (holding 51%) and Geely Auto (holding 49%).
The reason for WeRui's lawsuit is that the battery cells delivered by Sunwoda Power between June 2021 and December 2023 allegedly had quality issues, leading to significant losses, prompting the legal action to compel Sunwoda Power to fulfill its obligation to pay compensation, among other payments. Therefore, the event is straightforward: the Geely group (Zeekr) purchased power batteries from Sunwoda, but quality problems emerged, likely necessitating recalls and repairs by the latter, which impacted brand sales and reputation. Sunwoda's stock opened sharply lower this morning due to this event, falling over 10%, and was down 11.87% by the morning market close. So, what are the chances of the Geely group winning the lawsuit? And what level of risk does Sunwoda face? Analysis suggests it can be viewed from two perspectives. First, from a legal standpoint, this constitutes a (sales) contract dispute, with the specific compensation amount stipulated in the contract between the parties. Although the exact terms are unknown, it is believed that the Geely group's lawsuit likely has a factual basis—quality standards are easily quantifiable, so the probability of them winning is relatively high. According to industry norms for power batteries, there is generally a long-term warranty of 8 to 10 years, and listed power battery companies commonly set aside warranty provisions to handle such situations. This leads to the second point: Has Sunwoda set aside sufficient warranty provisions? If the provision is adequate, this compensation represents an expected, reasonable expense with little impact on the company; if the provision is insufficient, then this compensation would require an additional provision, inevitably significantly affecting net profit. A review of the financial reports indicates that Sunwoda's warranty provisioning falls far short of that of first-tier manufacturers like CATL. Theoretically, second-tier lithium battery companies should have a higher provisioning ratio for two main reasons. Firstly, as market followers, their product stability, technological maturity, production process standards, and accumulated data for predicting long-term performance degradation are generally weaker than those of industry leaders. For instance, in energy storage batteries, according to Soochow Securities data, first-tier player CATL has achieved a cell failure rate at the ppb level (parts per billion), while second-tier battery manufacturers are only at the ppm level (parts per million).
Secondly, to compete for market share from the leaders, second-tier manufacturers often need to make more concessions on commercial terms, including warranty promises. However, according to Sunwoda's disclosure in its 2025 interim report, the warranty provision stood at 936 million RMB.
In 2023, the warranty expense was 239 million RMB, calculating Sunwoda's warranty provision ratio at approximately 2% (239 million / (10.79 billion + 1.11 billion)).
In contrast, CATL's provisioning ratio is as high as 3.8%. Sunwoda's is significantly lower; the absolute value of 239 million RMB in 2023, or even the cumulative amount from 2021-2023, is far less than the 2.314 billion RMB now being claimed in the lawsuit. Furthermore, this is just the demand from one client; while it might be an inflated claim, even a lower actual payout could pose a significant challenge for the company. Therefore, if a battery manufacturer has under-provisioned for warranties, the actual warranty costs incurred from systemic product defects or higher-than-expected batch failure rates could far exceed the reserved provisions. However, when quality issues arise, the greater impact is not the one-time hit to net profit from a single lawsuit, but the loss of customers and the further erosion of purchasing confidence, affecting both existing and potential clients. For example, Geely has likely shifted its orders to first-tier manufacturers like CATL. The loss of consumer confidence is an even more difficult-to-quantify consequence. In the second half of this year, Li Auto launched its pure electric model i6, offering battery options from both CATL and Sunwoda. Faced with user skepticism about Sunwoda's battery quality and Li Auto's "blind box" approach, Li Auto was compelled to introduce an extended warranty policy for Sunwoda batteries, along with incentives for quicker vehicle delivery.
Clearly, from the perspective of downstream automakers, both battery types can pass rigorous testing and perform nearly identically, making differentiation difficult, yet this still cannot overcome consumers' inherent perceptions of battery brands. This perception is an objective reality, not something that can be dismissed simply by labeling it "prejudice." As the saying goes, "Prejudice is a mountain in people's hearts; no matter how hard you try, you can't move it." This resonates as a factual reality. As one of the prominent battery manufacturers and a representative of the second-tier "non-CATL, non-BYD" power battery players, how will Sunwoda respond to this lawsuit, rebuild client confidence, and reshape the external stereotype of its products? We shall wait and see. Disclaimer: This report (article) is independent third-party research based on the public company attributes of listed companies, with core reliance on information publicly disclosed by listed companies pursuant to their legal obligations (including but not limited to interim announcements, periodic reports, and official interactive platforms). It strives for objectivity and fairness in the content and viewpoints presented but does not guarantee their accuracy, completeness, or timeliness. The information or opinions expressed in this report (article) do not constitute any investment advice. No liability is accepted for any actions taken based on this report.