CATL financial performance and market pressure

Contemporary Amperex Technology Co. Limited (CATL) experienced significant stock price volatility following its third-quarter financial report. Although the company reported a year-on-year revenue increase of 58.58% to 165.22 billion yuan, its net profit grew by only 14.54% year-on-year, marking a 5.77% decline from the previous quarter.

Profitability has been pressured by declining gross margins, rising research and development costs, and new battery consumption taxes in China. Market analysts have expressed concern over the company’s ability to pass these additional costs, such as export VAT changes and a 2% consumption tax, to customers. Consequently, some analysts have lowered profit forecasts for the years 2026 through 2028.

In late October 2026, CATL’s stock price saw a sharp decline, losing nearly 15% of its value over two trading days. This downturn followed a third-quarter report showing gross profit margins had fallen for three consecutive quarters, reaching 20.69%. Management attributed these pressures to one-time cost mismatches from long-term energy storage contracts, the 2% consumption tax on lithium batteries, and a reduction in export tax rebates from 9% to 6%.

Despite these challenges, CATL reported that total sales of EV and energy storage batteries exceeded 260 GWh in the third quarter. To mitigate margin compression, the company is engaging with customers to share the impact of tax changes and is accelerating the introduction of new technologies and products.

Further challenges include competition from downstream automakers like Xiaomi and Li Auto, which are developing in-house battery technology. Fund managers have noted that automakers are increasingly seeking to reduce dependence on CATL by supporting secondary suppliers. Additionally, intense price competition in the emerging energy storage market is expected to continue pressuring unit profit margins.