CATL's Moment of Re-evaluation: From "Money Printer" to "Infrastructure Maniac"

In late October, the sharp volatility of CATL, the global leading power battery manufacturer, in the capital market was not merely caused by its Q3 financial report featuring revenue growth without profit growth.

In the first three quarters, its revenue reached 442.1 billion yuan, up 56% year on year; its net profit attributable to shareholders hit 64.5 billion yuan, with a daily net profit of about 240 million yuan. The single-quarter revenue of 165.2 billion yuan hit a record high, but the gross profit margin in the third quarter fell to 20.69%, a new low in nearly two years, and the profit growth rate (14.5%) lagged far behind the revenue growth rate (58.6%), creating a gap of more than 40 percentage points between the two. In the trading days after the financial report was released, CATL's A-shares and H-shares both plunged, with a single-day decline once exceeding 10%.

If this plunge is only explained by "industry price war" or "automakers' de-CATL trend", it obviously underestimates the predicament the company is currently facing. What really puts pressure on profits is that CATL is forced to pour massive capital expenditure into energy storage, battery swapping networks and overseas factory construction to maintain its basic market share.

It is transforming from a "high-end manufacturing company" that obtains high gross profit margins relying on technological generation gaps and production capacity scarcity, to an "infrastructure company" dragged down by heavy assets. The capital market uses completely different valuation models for these two types of corporate identities.

Diluted Pricing Power: From "Seller's Market" to "Buyer-Dominated Market"

The underlying logic of CATL's high gross profit margin in the past few years was built on "supply falling short of demand". When the price of lithium carbonate soared in 2022, automakers were even willing to accept price linkage mechanisms and pay premiums to get batteries.

But now, this logic is collapsing inside CATL. The most direct manifestation is the passive adjustment of product structure and the transformation of customer strategy.

In the second half of this year, automakers have adopted an extremely pragmatic strategy: "use CATL to support the brand image, and use secondary suppliers to guarantee sales volume". Li Auto has gradually switched to its self-developed "Lianshan" battery on flagship models such as MEGA, and the entire new generation of L8 models have turned to Sunwoda; XPeng publicly stated that it will develop batteries on its own and embrace CALB; the battery supply for Xiaomi YU7 has changed from CATL supplying 90% of the batteries in the SU7 era to FinDreams being the main supplier for the standard version and Pro version, with CATL only retaining the supply for the top-spec Max version; Harmony Intelligent Mobility and Leapmotor are also expanding the proportion of secondary and tertiary suppliers.

The motivation of automakers is extremely simple: there is not enough profit to share. In the first half of 2026, CATL's net profit attributable to shareholders was 43.284 billion yuan, while the total net profit attributable to shareholders of 22 A-share and H-share listed automakers was about 33.4 billion yuan, with the former being about 1.3 times the latter; based on the total caliber of 14 mainstream listed automakers with a total profit of about 18 billion yuan, CATL's profit alone is more than twice the sum of the 14 automakers. The figures vary under different statistical calibers, but the fact that "the profit of one supplier exceeds the sum of most of its customers" holds true under all calibers. Batteries account for 30% to 40% of the total vehicle cost. In today's highly competitive market where the profit margin of the whole vehicle is extremely squeezed, reducing battery cost is the most direct and effective way for automakers to cut costs.

From the data point of view, CATL's market share has not collapsed. In the first half of the year, its domestic passenger car installation share reached 46.7%, and the share of ternary battery route was as high as 75.2%, close to the sum of the second to tenth players. But the "quality" of the share is changing: top-spec and flagship models continue to use CATL's batteries to maintain the high-end label of products; mid-to-low spec and volume-selling models switch to secondary suppliers or self-developed batteries to gain cost space. This means that CATL's bargaining power in incremental orders is being systematically weakened. It has retained the small piece of cake with the highest profit, but lost the scale leverage of using mid-to-low end products to dilute the overall manufacturing cost.

Profit Misalignment in Energy Storage: Filling Production Capacity, Narrowing Profit Margin

In order to fill the lost volume-selling share and digest its huge production capacity, CATL has shifted its focus to energy storage.

In the first half of the year, the revenue of energy storage battery systems reached 53.26 billion yuan, up 87.5% year on year, accounting for nearly 20% of the total revenue, and the sales volume in the third quarter still maintained a year-on-year growth rate of nearly 60%.

But the energy storage track has a completely different profit structure from the power battery track from the very beginning. In the power battery era, CATL enjoyed extremely high technical premium; while in the energy storage track, its clients are extremely powerful state-owned power enterprises. Energy storage cells have a very high degree of standardization, with transparent bidding mechanisms and high price sensitivity. In 2025, the price of energy storage cells once fell below the life-and-death line of 0.3 yuan/Wh; after entering 2026, the price has rebounded - the average price of mainstream 314Ah LFP cells rebounded from about 0.31 yuan/Wh at the end of 2025 to around 0.365 yuan/Wh in August 2026, with an increase of more than 20% - but this price level is still far from enough to replicate the high gross profit structure of the power battery era, and the gross profit margin of the energy storage business is still significantly lower than the historical high of power batteries.

It is completely infeasible to apply the profit model for high-end power batteries to the energy storage business. Energy storage solves the problem of idle production capacity, but fails to solve the problem of declining profits. When the revenue structure is increasingly tilted towards the energy storage business with thinner profit margins, the overall gross profit margin falling below 21% is an inevitable result at the financial level. The improvement of production capacity utilization brought by energy storage cannot offset the profit loss caused by the long-term low operation of unit price.

Great Leap Forward of Battery Swapping: Using Heavy Assets to Increase Customer Conversion Cost

Facing the declining customer stickiness of power battery clients, CATL made a major strategic adjustment in late October: fully rolling out the battery swapping business.

It signed a cooperation agreement with Seres on October 10, brought in Huawei Harmony Intelligent Mobility on October 19, and formed in-depth cooperation with BAIC on October 22. In just half a month, CATL has built a circle of automakers participating in the battery swapping ecosystem. At the same time, CATL promoted Yang Jun, the head of its battery swapping business, to the position of Co-President of the Marketing System.

From the perspective of commercial competition, selling batteries is a one-off deal, and automakers can switch suppliers at any time; while building battery swapping stations is an attempt to form in-depth binding with automakers through infrastructure. Once the chassis design, battery pack size and BMS communication protocol of automakers are aligned with CATL's "Chocolate Battery Swapping Block" standard, automakers will need to carry out re-development if they want to switch to secondary suppliers, leading to extremely high conversion costs. CATL tries to use this method to hedge the risk of automakers switching away from its supply.

But the cost is extremely high. According to the plan, CATL will build 1,000 high-speed battery swapping stations by 2027, with a long-term target of 30,000 stations, which is seven times the current scale of NIO's battery swapping stations. Each battery swapping station requires millions of yuan in capital expenditure, plus battery reserves, which is an investment at the level of tens of billions of yuan. At the moment when battery swapping models have not been widely popularized, this network is first of all a continuous cash outflow, generating depreciation and operation and maintenance costs every day, and cannot contribute profits immediately.

European Factory Construction: Exchanging Profit Statement for Market Access Ticket

Apart from battery swapping, another factor eroding profits is the ramp-up of overseas production capacity.

In late September, the Hungarian factory with an investment of 7.34 billion euros started trial production. Against the background that the EU's New Batteries Law has increasingly stringent requirements for carbon footprint and localized production, not building factories in Europe is equivalent to giving up the European market.

But the cost of localized factory construction is rigid and upfront. The energy cost and labor cost in Europe are much higher than those in China, and the supporting supply chain is also imperfect. It usually takes two to three years from trial production to full production, and then to stable yield and final profitability. During this period, overseas factories show huge depreciation, high manufacturing costs and meager revenue on the financial statements. In addition, facing the geopolitical barriers from Europe and the United States, CATL also needs to keep making trials and errors in modes such as technology licensing and joint venture factory construction.

The net operating cash flow shrank by 23.6% year on year, and the company's official explanation is that it actively adjusted the supplier payment arrangement from the third quarter - shortening the payment term, paying advance payments, and providing R&D fund support, which is an active behavior of working capital management. This adjustment overlaps with the ramp-up of overseas production capacity and the expansion of the battery swapping network in time, jointly forming the pressure on the cash flow statement.

Conclusion: The Switch of Valuation Logic

CATL still has strong anti-risk capabilities at present, with book cash of more than 430 billion yuan and a global market share of nearly 40% providing it with a buffer zone.

But the capital market's pricing logic for it has changed. In the past, the market valued CATL with the formula of "new energy vehicle penetration rate × market share", and growth was the only variable. Now, whether the gross profit margin of energy storage can be stabilized, when the heavy asset investment in the battery swapping network can be converted into revenue, and whether the operation of overseas factories can deliver expected benefits have become the new valuation anchors.

The gross profit margin has declined for two consecutive quarters, and the operating cash flow has shrunk. These figures point to a common fact: CATL has gone through the stage where "as long as the cells are manufactured, there is no worry about sales and profits". Energy storage has taken over the growth momentum, but not the profit margin; battery swapping and overseas expansion have opened up new space, but both have the time lag of paying the cost first and reaping returns later.

For a company with annual revenue moving towards 600 billion yuan, it is more difficult to increase profits than to expand revenue. The difficulty does not lie in technology or production capacity, but in finding a balance point that can not only maintain market share but also restore gross profit margin under the triple squeeze of decentralized customers, intensified competition and rising geopolitical barriers. So far, this balance point has not appeared on the financial statements.

This article is from the WeChat official account "Tech Business", authored by Tech Business, and authorized for release by 36Kr.