'Chinese Battery Maker' CATL Shares Plunge 11% on Profitability Concerns

Third-quarter revenue rose, but net profit grew just 14.5%, its lowest rate in two years
China's consumption tax reinstatement and reduced export tax rebates weigh on results

CATL, China's leading electric vehicle battery maker, saw its shares plunge as much as 11% intraday after reporting third-quarter results that fell short of market expectations. The increase in quarterly net profit slowed to 14.5%, its lowest level in about two years.

Reuters-Yonhap

According to Bloomberg on October 21, CATL shares fell as much as 11% in early trading on the Shenzhen Stock Exchange and as much as 9.3% on the Hong Kong Stock Exchange. The declines followed the company's third-quarter results, announced on October 20, which fell short of market expectations.

CATL's third-quarter revenue rose 58.6% year on year to 165.2 billion yuan (approximately 32.76 trillion won), while net profit increased 14.5% to 21.25 billion yuan (approximately 4.21 trillion won). The net profit growth rate was the lowest in about two years and well below the market forecast of 41.2%. Revenue surged, but profitability deteriorated because of rising costs and reduced tax benefits.

China's tax reform plans are also weighing on the company. In July, the Chinese government ended a consumption tax exemption for lithium-ion batteries that had been in place for 10 years and began imposing a 2% consumption tax in September. It also reduced value-added tax rebates on battery exports and plans to eliminate them entirely starting in 2027. The measures are seen as an effort to curb overproduction and cutthroat competition in the battery industry.

Markets expect the impact to extend beyond CATL, the industry leader, to small and midsize battery makers. Citigroup said, "If even CATL cannot fully pass the consumption tax burden on to its customers, it will be difficult for second-tier companies to absorb it."

Inside the battery cell factory of Chinese battery maker CATL in Debrecen, Hungary, on October 1, 2026 (local time). AFP-Yonhap News

Automakers' efforts to reduce their dependence on CATL are also seen as a headwind. Some automakers are diversifying their suppliers by turning to small and midsize battery makers to reduce their reliance on CATL, intensifying price competition. CATL's shares on the Shenzhen Stock Exchange have fallen to about half their peak in May 2026.

However, on its earnings conference call on October 20, CATL said it was "actively communicating" with customers to mitigate the impact together. The company added that it was "advancing new technologies and products to reduce the impact on profitability."

CATL maintained a positive outlook for next year. The company said global demand for batteries used in electric vehicles and energy storage systems (ESS) "may not be as pessimistic as the market expects and has good growth potential."

Morgan Stanley said in a report that CATL's competitive edge in quality remains intact, but price competition in the ESS market could put pressure on profit margins per product. The firm expects earnings to recover, while noting that "this will increasingly depend on product mix and the intensity of competition."

This content was produced with the assistance of AI translation services.