Net profit growth at CATL, the world's largest battery maker, fell to its lowest level in seven quarters as Chinese customers shifted orders to smaller suppliers and Beijing withdrew support measures aimed at curbing overcapacity.
CATL said third-quarter net profit rose 14.5% from a year earlier to 21.25 billion yuan (about 4.22 trillion won), according to the South China Morning Post on the 21st. The growth rate fell far short of a market forecast of 41.2% and was the weakest since the fourth quarter of 2024, when profit rose 13.6%.
Third-quarter revenue climbed 58.58% from a year earlier to 165.22 billion yuan. That was faster than the 56.9% growth in the second quarter but still below a market forecast of 60.2%.
One factor behind the weaker results is that Chinese electric-vehicle makers, whose margins have been squeezed by overcapacity, are reducing their reliance on CATL to drive down battery procurement prices. CATL shares fell sharply last month after Xiaomi and Li Auto signed supply contracts with second-tier producers including CALB and Sunwoda.
Measures taken by Chinese authorities to curb neijuan — ruinous price competition driven by overcapacity — also weighed on earnings. Beijing this year fully ended a consumption tax exemption on lithium-ion batteries that had been in place since 2015, and began levying a 2% consumption tax last month. The rate will double to 4% in September next year.
Authorities have also cut the value-added tax rebate rate on battery exports and plan to scrap it entirely from next year.
JP Morgan on the 19th cut its rating on CATL to neutral, saying profitability in China's EV industry was deteriorating faster than expected and could hurt demand for the company's batteries. Citigroup said demand for energy storage systems in China may also prove weaker than expected. CATL's inventories jumped 53% from a year earlier in the first nine months of this year. The company attributed the increase to business expansion and added production capacity, saying it remains positive about the outlook for battery demand next year.