CATL's A-share stock plunged over 10% intraday. What are the triggers behind this sharp decline? Is the growth logic of the power battery industry changing?

In my previous response, I noted that CATL’s continuous stock price decline in the second half of this year stems from falling gross margins—and that the newly introduced consumption tax will continue eroding profits going forward. CATL’s net profit for the first three quarters stood at RMB 64.53 billion, up 31.6% year-on-year. How should we interpret its latest quarterly report? — Answer by vector on Zhihu So what has changed—and what remains unchanged—in the power battery industry’s underlying logic? What remains unchanged is the medium- to long-term demand drivers: electric vehicle (EV) penetration rates and energy storage installations continue rising; global battery shipments are still expected to grow at double-digit rates over the next few years. New growth avenues—including overseas markets, long-duration energy storage, sodium-ion batteries, and large-format cells—still offer incremental opportunities. However, the industry’s competitive landscape has shifted dramatically. First, automakers are actively moving away from ‘single-supplier’ dependence—a trend driven by competition that has effectively become ‘de-CATL-ization.’ Although the impact of ‘de-CATL-ization’ is not yet clearly visible in CATL’s third-quarter report, CATL’s pricing power and premium pricing capability have irreversibly weakened—exerting sustained downward pressure on its valuation over the medium to long term. Leading new-energy automakers—including Li Auto, Xiaomi, XPeng, and Huawei’s Harmony Intelligent Mobility Alliance—are either developing batteries in-house or bringing on secondary or tertiary suppliers such as CALB and Sunwoda. As second-tier battery makers continuously push down bidding floor prices in tenders, industry leaders like CATL must passively match those lower prices to defend market share—further compressing profit margins over time.

‘The King of Batteries’ plunged over 10%, halving its share price! Is the era of battery manufacturers ‘earning profits effortlessly’ over?

However, the growth rate of net profit attributable to shareholders has slowed—and even declined by 5.8% quarter-on-quarter. More notably, gross margin fell from 23.15% in Q2 to 20.69% in Q3—the lowest since Q4 2022—and net profit per Wh dropped from approximately RMB 0.097 in Q2 to about RMB 0.082, a roughly 15% sequential decline. This is the classic phenomenon described in five Chinese characters: ‘revenue growth without profit growth.’ Consequently, capital voted with its feet—triggering an accelerating, stampede-style exodus. Why has CATL’s profitability suddenly deteriorated? From a financial perspective, three main factors are at play: First, low-priced, long-term energy storage supply contracts signed over the past two years were concentrated in Q3 deliveries; second, the 2% battery consumption tax—reinstated in September—caused Q3 taxes and surcharges to surge by RMB 1.6 billion year-on-year; third, fluctuations in lithium carbonate prices led to RMB 1.2 billion more in inventory impairment provisions than in the prior quarter. Yet deeper concerns stem from structural shifts across the industrial chain. First, major automakers are aggressively pursuing in-house battery development or introducing secondary suppliers—to break CATL’s dominant position and better control battery costs, thereby safeguarding their own margins. Second, production data also look lackluster: output from the top five battery makers rose only 1% month-on-month in October—far below the expected 7%. The ‘peak season’ was not robust, signaling that the EV industry’s growth rate has significantly moderated compared to previous years. These signs collectively suggest to the market that CATL’s era of ‘high growth and high margins’ may already be over. That said, CATL remains confident. According to Securities Times, some investors recently expressed concerns about demand for the new-energy sector next year. In response, CATL stated that industry demand remains promising through 2027. Domestically, although overall passenger vehicle sales have declined this year, electrification rates are rising rapidly—and average battery capacity per vehicle is also increasing quickly. As a result, demand for动力电池 in domestic new-energy passenger vehicles continues growing year-on-year. CATL added that electrification rates for domestic new-energy commercial vehicles are also rising swiftly; Europe’s electrification trend remains steady, with competitively priced new models continually entering the market; and the electrification potential in other markets may be underestimated by the broader market.

CATL’s Slow Profit Growth Fans Fears for China Battery Rivals

23 hours ago

CATL's slower-than-expected profit growth triggered a stock drop as analysts warn new consumption taxes and reduced export rebates will compress margins. These fiscal changes pose risks to CATL and smaller battery rivals facing intensified price competition.

bloomberg

2026-10-20

CATL’s Slow Profit Growth Fans Fears for China Battery Rivals

CATL’s Slow Profit Growth Fans Fears for China Battery Rivals

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