The world's largest electric vehicle battery manufacturer, China's Contemporary Amperex Technology Co., Limited (CATL), saw its stock price drop more than 10% on October 21 in Hong Kong and Shenzhen following disappointing third-quarter results.
CATL's shares fell by 11% in Hong Kong and over 12% in Shenzhen. The decline came after the company reported earnings that fell below market expectations, raising concerns about its future growth prospects.
CATL announced a net profit of 21.25 billion yuan (approximately $4.2 billion) for the third quarter, a 14.5% increase from the same period last year. However, this figure was below the market forecast of 26 billion yuan compiled by Bloomberg. Revenue increased by 59% to 165 billion yuan, but the gross profit margin dropped significantly to 19.3%, down from 25.2% in the same quarter last year.
Analysts at Citigroup attributed the decline in profitability to a higher proportion of sales from lower-margin products and the reduction of certain government tax incentives, such as consumption taxes and export rebates. CATL also indicated during a conference call following the earnings announcement that it is negotiating to pass on the increased tax burden to its customers.
The disappointing results come amid a growing trend in the Chinese electric vehicle industry to reduce reliance on CATL. This movement, referred to as '脱CATL化' (脱CATL), involves automakers developing their own battery cells or collaborating with smaller battery manufacturers that offer cheaper products.
According to the Nikkei newspaper, Chinese electric vehicle manufacturers Xiaomi and Li Auto recently announced plans to source batteries for their latest models from CALB Group and Xinwangda, competitors of CATL in China. Both companies have also revealed plans to develop their own batteries.
The push to decrease reliance on CATL is driven by intensifying price competition in the electric vehicle market, necessitating a reduction in battery costs. Batteries account for about 30% of the total cost of electric vehicles.
According to the China Automotive Power Battery Industry Innovation Alliance, CATL held a 46.7% market share in battery installations for passenger vehicles in China during the first half of this year. Given CATL's significant market dominance, automakers are seeking to diversify their battery suppliers to lower procurement costs and reduce dependence on a single supplier.
* This article has been translated by AI.
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