Contemporary Amperex Technology (CATL), one of the world’s leading battery makers for electric vehicles, recently reported its third-quarter financial results, revealing a 10.7% increase in profits. While the company’s financials are positive, concerns about CATL’s growth trajectory have emerged.
CATL’s third-quarter profit reached RMB 10.4 billion (USD 1.43 billion), reflecting a 10.7% year-on-year increase. However, according to Morningstar, this fell short of analyst expectations, who had projected a net profit of RMB 11.04 billion (USD 1.5 billion). This slower profit growth in Q3 is a noteworthy departure from CATL’s earlier performance. The company had previously experienced rapid profit growth, with nearly a sixfold year-on-year increase in the first quarter of 2023, followed by a 63% profit rise in the second quarter compared to the previous year.
The deceleration in CATL’s profit growth has raised questions about the factors influencing its earnings. Chief among them is the intensifying competition in the EV battery market. CATL is facing increased competition from tier-two battery makers that typically price their products at a discount, which may be impacting its profit margins.
Nonetheless, CATL’s Q3 performance needs to be contextualized within the broader EV and battery market. The industry has undergone significant growth, driven by changing manufacturing demands and consumer preferences as well as an evolving regulatory environment. This shifting landscape could influence the dynamics of the market and, in turn, CATL’s earnings.
CATL has encountered some challenges with its overseas ventures in the US, including a partnership with Ford Motor. The company was meant to provide its lithium phosphate (LFP) battery technology for the latter to operate a USD 3.5 billion EV battery plant in Michigan, but the plan has been halted over potential implications about tax subsidies.
However, it has made significant progress in other areas. According to CATL founder Robin Zeng, the company has committed to helping Indonesia become a “green” battery industry and has signed a memorandum of understanding with several regional entities to establish a green fund that will develop an end-to-end EV value chain in the country. CATL has also recently signed memorandums of understanding with Japanese automobile manufacturer Daihatsu Motor and Singapore-based automotive company VinFast, respectively, to explore collaborations related to battery technology.
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CATL is also actively pursuing strategic partnerships with vehicle companies, focusing on the implementation of its recently released Shenxing “super fast-charging LFP battery.”
On October 16, Chinese state-owned automobile manufacturer Chery announced that it will be the first to utilize CATL’s Shenxing batteries, with plans to integrate them into its Exeed vehicles. BAIC Motor-owned brand Arcfox has also announced similar plans to equip its EVs with the new battery technology.