For stock market investors, professional and timely analyst research reports are essential tools for uncovering promising thematic opportunities.
It is not that CATL is not good enough; rather, the broader market conditions have shifted.
In the first three quarters of this year, Contemporary Amperex Technology Co., Limited (CATL) earned 64.53 billion yuan, a year-on-year increase of 31.60%, averaging 230 million yuan in net profit per day. Yet this translated into a sharp stock price decline and a halving of its market capitalization.
On October 21, the first trading day after the release of its third-quarter report, CATL's A-shares opened low and drifted lower, closing down 12.03%, with more than 140 billion yuan in market value wiped out in a single day. Its Hong Kong-listed shares simultaneously plunged 11.41%, pushing the combined A+H market capitalization below 1.1 trillion yuan.
If calculated from the historic high of 467.35 yuan on May 7, the Battery King's stock price has been cut in half over more than five months, with a decline exceeding 50%.
Was it an earnings blowup? The third-quarter report shows that CATL's revenue remained strong, with a year-on-year growth rate of nearly 60%. But behind the impressive data, net profit growth slowed to 14.54%, revealing the dilemma of revenue growth without profit growth, which prompted the market to vote with its feet. Combined with complaints from automakers that the money is all being earned by CATL and the push for de-CATLization, is CATL beginning to decline?
When looking only at the scale of revenue and profit, the Battery King remains formidable. In the first three quarters, the company's revenue reached 442.137 billion yuan, up 56.19% year-on-year; net profit attributable to shareholders was 64.53 billion yuan, up 31.60% year-on-year, making it one of the most profitable companies on the A-share market. However, looking only at the third quarter, the hidden risks become apparent: quarterly revenue was 165.221 billion yuan, up 58.58% year-on-year, setting a historic high; net profit attributable to shareholders was 21.246 billion yuan, up only 14.54% year-on-year and down 5.77% quarter-on-quarter.
From the first to the third quarter of this year, CATL's single-quarter revenue growth rates were 52.46%, 56.9%, and 58.58%, gradually accelerating; net profit growth rates were only 48.55%, 36.4%, and 14.54%, accelerating their decline. The scissors gap between the two widened from less than 4 percentage points in the first quarter to more than 44 percentage points in the third quarter.
Pressure fell first on gross margins. In the third quarter, CATL's revenue increased by approximately 17.4 billion yuan quarter-on-quarter, but gross profit slipped slightly from 34.22 billion yuan to 34.18 billion yuan, meaning more batteries were sold but almost no additional money was made. The single-quarter gross margin was 20.69%, down 5.1 percentage points year-on-year and down 2.46 percentage points quarter-on-quarter.
Is CATL cutting prices to win orders? Judging from financial reports and brokerage analyses, the answer is not that simple. According to Soochow Securities, the continued squeeze on profits is not rooted in proactive price cuts. On one hand, power batteries generally adopt a cost-plus pricing model, so when lithium prices decline, battery quotes adjust in tandem, and the resulting cost benefits flow through the pricing mechanism to automakers, making it difficult to retain them in battery makers' income statements. On the other hand, the resumption of battery consumption tax collection starting in September and the reduction of export tax rebate rates have brought new tax burdens that erode profit margins. The battery consumption tax was reinstated on September 1 (it had been exempted since 2015), with lithium-ion batteries taxed at 2%, causing quarterly taxes and surcharges to jump directly to 2.21 billion yuan, compared with only about 690 million yuan in the second quarter and less than 600 million yuan in the same period last year; taxes and surcharges for the first three quarters totaled 3.539 billion yuan, up 92% year-on-year. The impact of the export tax rebate reduction is mainly recorded in operating costs rather than taxes and surcharges. Starting January 1, 2027, the export tax rebate rate will drop from 6% to 0; starting September 1, 2027, the consumption tax rate will double from 2% to 4%, further raising tax costs.
At the same time, the proportion of low-margin energy storage orders continued to rise, with some long-term energy storage contract orders previously locked in at low prices concentrated for delivery in this quarter, further dragging down overall profitability. In response, CATL stated at its earnings briefing that the peak delivery period for low-priced long-term energy storage contract orders has passed, and fourth-quarter delivery volume will decline significantly.
Another important reason weighing on profits is proactive investment and one-time provisions. In the first three quarters, CATL's R&D expenses reached 18.517 billion yuan, up 22.9%, with the third quarter alone spending about 1 billion yuan more than the second quarter. The sharp drop in lithium carbonate prices also led to a substantial increase in asset impairment provisions. Although R&D spending is a proactive investment for the next technology cycle, and impairments follow lithium prices and may reverse in the future, both have genuinely weighed on current profits. In addition, exchange losses are also dragging down profits: the net benefit from financial expenses in the first three quarters fell from about 7 billion yuan in the same period last year to 1.45 billion yuan.
Operating cash flow is also facing challenges. In the first three quarters, net cash flow from operating activities was 61.625 billion yuan, down 23.60% year-on-year, with the third quarter alone contributing only about 1.4 billion yuan, compared with around 22 billion yuan in the same period last year. As of the end of September, the company's inventory stood at 144.77 billion yuan, up 53.15% from the beginning of the year; accounts receivable were 112.912 billion yuan, up 47.78%, with a combined total of over 250 billion yuan locked up in inventory and customer payment cycles. On the other side, the company proactively shortened payment terms for upstream suppliers starting in the third quarter, with accounts payable at the end of the third quarter decreasing by about 22 billion yuan from the end of June, while prepayments increased by about 3.7 billion yuan, which is also an important reason for the sharp drop in single-quarter operating cash flow.
In response, CATL stated that inventory mainly consists of goods shipped, turnover days are stable, and there is no sluggish sales; the shortening of supplier payment terms is a phased arrangement expected to last two to three quarters; and the expansion from selling battery cells to selling systems in energy storage has lengthened the revenue recognition cycle. Although this logic holds, the market chose to sell first and ask questions later.
On the cost side, whether it is consumption tax, R&D, or impairments, these can still be addressed in financial reports and earnings briefings. But on the market side, the accounts are not so easy to settle. The most direct change is that customers are voting with their orders. Since the beginning of this year, de-CATLization has been transforming from a slogan into collective action by automakers. Li Auto's new L8 launched in June featured its self-developed battery for the first time (designed by Li Auto, manufactured by Sunwoda and others), with CATL removed from the supply list for that model; Li Auto also invested 2.65 billion yuan to increase its stake in Sunwoda Power, becoming its second-largest shareholder; its best-selling i6 also launched a no-CATL version equipped with a self-developed 5C battery in the fourth quarter. Xiaomi introduced its Dragon Armor battery, partnering with Sunwoda and CALB; XPeng brought battery pack and system integration back in-house; even AITO, which has long relied on CATL as its primary supplier, designated Gotion High-tech's battery pack for the M6 pure electric version.
Automakers collectively defecting is first and foremost a cost consideration. In the first half of 2026, Li Auto's overall gross margin was only 9.5%, compared with 20.3% in the same period last year; its net loss in the first half was 3.98 billion yuan, compared with a profit of 1.74 billion yuan in the same period last year. Leapmotor, the sales champion among new forces, had a gross margin of only 11.7% in the first half. Batteries account for 30% to 40% of vehicle costs, and when automakers are not making money, they will inevitably calculate battery costs. Supporting second suppliers and taking back battery pricing power is essentially about securing room for price reductions. Leapmotor calculated that self-developed and self-manufactured parts already cover 65% of vehicle costs, saving about 10% compared with external procurement.
Mismatched supply cycles are also forcing automakers to find backups. The most typical example is Li Auto, whose hit model i6 experienced significant delivery delays due to insufficient supply of core components, after which Li Auto brought in Sunwoda as the second battery supplier for the i6. CATL's explanation was that Li Auto's safety standards for battery cells are higher than national standards, requiring longer production cycles; some also believe that Li Auto's own capacity planning was the main reason. But regardless, a non-standard battery cell exclusive to Li Auto must compete with other customers for production lines when capacity is tight. In contrast, second-tier manufacturers can offer faster response times and more flexible payment terms.
The deeper backdrop to automakers daring to switch suppliers is that the balance of power is shifting. In the past, high-end vehicles came standard with ternary lithium batteries, and CATL was happy to use the narrative that ternary lithium equals high-end to maintain the premium of high-end batteries. At CATL's Super Technology Day on April 21 this year, Chief Technology Officer Gao Huan publicly stated when introducing the third-generation Kirin battery: choosing lithium iron phosphate for pure electric vehicles priced above 250,000 yuan is a disguised downgrade. But this narrative is being rewritten by BYD's second-generation Blade Battery. On March 5, the second-generation Blade Battery was released, first installed on BYD's own high-end models such as the Yangwang U7, U8, and Denza Z9GT, with the new Tang also making its debut at the launch event. Meanwhile, Blade Battery has long been supplied externally to brands such as Xiaomi and Mercedes-Benz, and in August the second-generation Blade Battery officially began external supply, securing a designation for Hongqi's next-generation pure electric platform, and these brands are not cheap. In addition, manufacturers such as Sunwoda, CALB, and Gotion High-tech, with similar performance and quality, have begun to win orders through pricing and payment terms, and some have already started making money. In the first half of this year, Sunwoda Power had revenue of 15.5 billion yuan but still lost 324 million yuan; CALB had revenue of 27 billion yuan and net profit of 1.523 billion yuan, doubling year-on-year; Gotion High-tech had net profit of 1.386 billion yuan, up 278% year-on-year.
This is also what the market fears most: demand is still there, but market share and pricing power are being divided, making it harder for the Battery King to make money.
What is the market pricing in? Earnings expectation gaps, asset impairments, and exchange rate fluctuations may be reversible; but once an industry trend passes its inflection point, it is not so easy to turn around. The power battery industry, once a high-growth sector, is now switching to the logic of a mature industry, and CATL, as the leader, is the first to bear the process of moving from excess profits toward mean reversion.
The most notable change is that the industry ceiling is beginning to appear. According to statistics from the China Passenger Car Association, in September, retail sales of new energy passenger vehicles were 1.084 million units, down 16.7% year-on-year, with a retail penetration rate of 67%. Over the same period, overall passenger vehicle retail sales fell 28% year-on-year, and although new energy vehicles outperformed the broader market, they have also shifted from growth to decline; at a high penetration rate of 67%, achieving high growth by replacing fuel vehicles is becoming increasingly difficult. In energy storage, seen as the second growth curve, newly added installed capacity in China from January to September grew only about 6% year-on-year in GWh terms, and CITIC Securities has lowered its forecast for domestic large-scale energy storage new installations this year to 230-250 GWh. However, CATL's own shipments are still growing rapidly, with third-quarter battery sales exceeding 260 GWh, and the market is worried about how long such growth can last. Citigroup cited data from consultancy ZE Consulting in a research report stating that the top five battery makers' production schedules in October increased only 1% month-on-month, far below the expected 7%, indicating a weak peak season.
Once demand slows, the nature of competition changes. In the past, supply fell short of demand and the bargaining power was with battery makers; now with overcapacity, automakers have gained the upper hand. The impact of slowing demand will be reflected in the sharing of consumption tax. Who ultimately bears the new costs tests not the tax rate itself but bargaining power. At the earnings briefing, CATL stated that it is communicating with customers about sharing the tax impact. If subsequent negotiations do not go smoothly, gross margin pressure will persist. For automakers, supporting second and third suppliers and leaving themselves a way out is precisely to avoid bearing this tax on behalf of battery makers at the negotiating table. The 2% reinstated in September is only the beginning; the real test is the long-term contract renewal prices after the tax rate doubles next year.
Another figure in the financial report is equally intriguing. In the first three quarters, CATL's investment income was 9.066 billion yuan, up 73% year-on-year, with income from associates and joint ventures accounting for the bulk. Separately, according to people familiar with the matter cited by Bloomberg, in DeepSeek's recent new funding round of approximately 100 billion yuan, CATL was one of the largest investors, but none of the parties involved responded. This investment occurred after the third-quarter reporting period and is not included in the first three quarters' investment income, yet it shows that CATL's external investment footprint is still expanding. When investment income accounts for an increasingly heavy share of a manufacturing leader's profits, the market will naturally re-examine its valuation.
What the market is truly pricing in is not the profit level of any single quarter, but the combined result of three factors: a downshift in demand growth, redistribution of profits across the industry chain, and a heavier growth model for the company. For CATL, what it needs to prove next is no longer whether batteries can still be sold, but whether it can turn revenue into profit, retain customers, and whether pricing power is still in its own hands.
Comments