BEIJING — Shares of CATL, the world's largest battery maker, have lost nearly a quarter of their value in the past month on concerns that automaker clients are moving away from the Chinese company. Worries have grown that CATL's market dominance could weaken as Chinese automakers diversify their battery supply chains to defend profitability.
On the Shenzhen Stock Exchange, CATL closed at 297.10 yuan on the 21st, down 1.61% from the previous session. The stock narrowly avoided a 52-week low of 295.55 yuan, having tumbled 24.04% in September alone and 36.5% from its early-May peak this year.
The decline stems from major automaker clients reducing their reliance on CATL. Li Auto recently invested 2.65 billion yuan to become the second-largest shareholder in Sunwoda, a Shenzhen-based battery maker, and fitted its latest model with Sunwoda batteries instead of CATL's. Xiaomi, which had used CATL batteries in its main models, said it would jointly develop batteries with CALB and cooperate across the entire supply chain. Xpeng has also expanded the share of batteries it sources from EVE Energy.
Profitability pressure is cited as the reason Chinese automakers have turned to supply chain diversification. Amid weak domestic demand and intensifying price competition, profits at Chinese automakers fell 20% in the January-July period. CATL, by contrast, has thrived on a market share of close to 50% in China. Its total net profit in the first half of this year, at 43.28 billion yuan, was double the 21.05 billion yuan posted by 15 major listed Chinese automakers over the same period.
Automakers also want a stronger voice in product development and price negotiations. Unlike CATL, the overwhelming market leader, latecomers such as CALB and Sunwoda cannot afford to lose a single customer and can therefore work more flexibly with automakers. Li Auto's move to become Sunwoda's second-largest shareholder was aimed at that leverage.
Still, analysts largely expect CATL's dominance to hold despite the external pressure, as automakers have been unable to sever ties with the company altogether. CATL has also been broadening its portfolio beyond electric-vehicle batteries into energy storage systems and battery recycling. Energy storage already accounts for about 25% of revenue, and the company expects that to rise to 50% within a few years.
Kenny Ng Lai-yin, a strategist at Chinese brokerage Everbright Securities, said CATL's market share would remain stable for some time because the EV battery industry has high entry barriers, requiring enormous capital and technology investment as well as time to build up talent.
