Ningde Times (CATL) saw a significant slowdown in profit growth in the third quarter, due to the slower increase in car sales in China and the increasingly fierce competition in the electric vehicle battery market. On Tuesday, October 20th, documents submitted to the stock exchange showed that CATL, the electric vehicle battery manufacturer, saw a 14.5% year-on-year increase in net profit in the third quarter, reaching 21.2 billion Chinese yuan (approximately 3.17 billion US dollars). This growth was far below the analysts’ earlier forecast of 41.2% based on LSEG SmartEstimate data.
Following a 36.5% growth in the second quarter, the net profit growth in the third quarter hit the lowest level in nearly two years. Revenue in the third quarter increased by 58.6% year-on-year, reaching 165.2 billion Chinese yuan, lower than the expected 60.2% growth; the revenue growth in the previous quarter was 56.9%.
Industry data shows that while CATL expanded its supply to overseas car manufacturers, its share of global electric vehicle battery installations in the first eight months of this year reached 39.4%, higher than the 37.7% in the same period last year. BYD, ranking second, saw its market share drop from 17.1% to 15.1%.
CATL’s share in China’s power battery installation market decreased from 49.8% in January to 40.9% in September; during the same period, BYD’s market share increased from 17.4% to 21.1%.
On Tuesday, prior to the financial report release, CATL’s stock price dropped by 6.58% in the Hong Kong market, closing at 411.80 Hong Kong dollars; and by 2.97% in the Shenzhen market, closing at 259.08 Chinese yuan.
Since Chinese electric vehicle manufacturers Xiaomi and Nio announced partnerships with second-tier battery suppliers in September, CATL’s stock price has been declining. So far this year, its stock price has fallen by over 20% in the Hong Kong market and by 31% in the Shenzhen market.
On Tuesday, JPMorgan downgraded CATL’s Hong Kong stock rating to “Neutral.” The bank stated concerns about the deteriorating profitability of China’s electric vehicle industry surpassing expectations, which could potentially impact the market demand for CATL’s batteries. The investment bank pointed out that with China resuming the collection of battery consumption tax, adjusting export tax rebate policies, and increasing external trade barriers, the profitability of Chinese electric vehicle manufacturers is under pressure.
Furthermore, concerns about weaker-than-expected demand for Energy Storage Systems (ESS) have intensified the recent wave of stock sell-offs in the market.
In a report released earlier this month, Citigroup projected that the global battery demand growth rate will slow to 26% next year. The analysis suggests this is mainly due to the limited room for improvement in China’s electric vehicle penetration rate and the growth potential of energy storage systems being somewhat constrained by base effects.
(This article has referenced a report from the South China Morning Post)