CATL conference call: Production capacity is at full load, price increases are not the core driving force, and the energy storage demand brought by data centers is considerable

Yesterday, CATL released its third-quarter financial report, with Q3 revenue increasing by 12.9% year-on-year and net profit rising by 41.21% to 18.5 billion yuan, significantly outpacing revenue growth.

In the subsequent earnings call, CATL further detailed its capacity and future business outlook. The company's capacity utilization rate is continuously improving, and production is at full capacity. Price increases are not the core driving force. This year, energy storage growth has been good, and the momentum is expected to continue next year, as the business model has formed and reached an economic inflection point, allowing for profitability.

Here are the key points from the call:

• The current capacity utilization rate is continuously improving, production is at full capacity, and the scale of capacity under construction is steadily increasing. As new bases such as Jining are developed, capacity will gradually be released, alleviating supply tightness.

• The company hopes to achieve long-term win-win development with industry chain partners. Price increases are not the core driving force; the focus is more on meeting customers' diversified needs through high-quality products and creating more competitive products for customers.

• Sales of energy storage systems account for about 20% of total shipments, with an increasing proportion of system-side and AC/DC-side products, which helps net profit to some extent, but will not significantly disrupt overall data in the short term. Power batteries remain the main factor affecting unit profit.

• This year, energy storage growth has been good, and the momentum is expected to continue next year, as the business model has formed and reached an economic inflection point, allowing for profitability. In the future, there will be more ways to support energy storage for data centers, and applications for main road power sources will also increase, leading to considerable energy storage demand from data centers.

• Price increases in bulk commodities can be transmitted through linkage and have little impact on the company; the expansion of lithium battery materials is cyclical, and current prices are fluctuating around the value center. The core remains product competitiveness, and the company has a complete layout in the upstream supply chain, capable of mitigating related impacts.

• Sodium batteries are already in pilot testing for commercial vehicles, and collaborative development for passenger vehicles is underway. Products are expected to be launched by the end of this year, with shipments starting next year and gradually increasing (specifics depend on customer terminal sales), but customer verification work needs to be completed.

• China's lithium battery export control policy has no impact on the company's battery exports. Equipment exports are not completely banned but are managed through declaration and approval for orderly competition and export. The company communicates smoothly with the government, and there is no impact on overseas factory construction and LRSO cooperation layout. In Europe, the company has established factories in Hungary, Germany, and Spain, leading the localization process in the industry, and current policies have no substantial adverse impact on the company's development.

Here is the original text from the call:

Dear investors, good evening, I am Lin Meina from CATL. Welcome to the CATL 2025 Q3 earnings exchange meeting. Thank you for your continued support and attention. First, I would like to introduce the leaders attending the meeting. Present at this meeting are Mr. Jiang Li, Secretary of the Board and Vice President, and Mr. Zheng Shu, CFO. Today's meeting will be divided into two parts: first, I will briefly report on the company's operating conditions during the reporting period, and then we will enter the Q&A interactive session. First, regarding the company's operating conditions, during the reporting period, the company continued to launch innovative products, deepen customer cooperation, and achieve steady growth in performance In the third quarter of 2025, the company achieved total revenue of 104.19 billion yuan, a year-on-year increase of 12.9%. The net profit attributable to shareholders of the listed company was 18.55 billion yuan, a year-on-year increase of 41.2%. The net profit margin for the period was 19.1%, an increase of 4.1% year-on-year. With ample cash reserves, the total monetary funds and trading financial assets exceeded 360 billion yuan at the end of the period, strongly supporting high-intensity R&D investment and large-scale capacity construction. The company's R&D expenses for the first three quarters of 2025 totaled 15.07 billion yuan, an increase of 15.3% year-on-year, leading the industry in R&D investment.

In addition, to respond to the surge in customer orders, the company is fully promoting global capacity construction. Leveraging forward-looking demand forecasting, the company has taken the lead in large-scale capacity expansion, with significant expansions at domestic bases in Jining, Shandong; Zhaoqing, Guangdong; Yichun, Jiangxi; Xiamen, Fujian; Qinghai; and Ningde, Fujian. The Jining base alone is expected to add over 100GWh of energy storage capacity by 2026. The overseas layout has also achieved significant results, with the German factory having commenced production in 2024 and continuing to be profitable. The first phase of the Hungarian factory's battery cell production line equipment has been installed and is expected to be completed by the end of 2025. The Spanish factory has completed preliminary approval procedures and officially established a joint venture, with factory construction work about to begin. The Indonesian battery industry project is expected to commence production in the first half of 2026.

In the power sector, the company focuses on innovation and application of cutting-edge technologies, launching the world's first NP3.0 technology, aimed at ensuring that the battery system maintains high voltage without interruption and no visible smoke or fire in extreme thermal runaway scenarios, providing key safety support for intelligent driving at Level 3 and above. The first battery equipped with this technology, the Shenxing Pro battery, significantly enhances energy density and battery pack rigidity through an innovative micro-composite cell structure. At the same time, the company's sodium-ion battery has become the first sodium-ion battery to pass the new national standard certification, laying a solid foundation for its large-scale application. Sodium-ion batteries have significant advantages in low-temperature performance, safety, and cost, and can reduce dependence on resources, providing a new solution for energy security.

The global demand in the energy storage sector is entering a rapid growth phase. On one hand, the rapid increase in global installed capacity of wind and solar new energy has raised higher requirements for the stability and regulation capabilities of the power grid, leading to a rapid growth in energy storage demand. On the other hand, the rapid expansion of global AI data centers has also brought huge electricity demand. As an ideal efficient green power supply solution, photovoltaic energy storage systems are expected to generate a large amount of new demand. Currently, the energy storage market is booming, and the company's capacity is saturated, actively expanding production and accelerating the output of modern energy storage batteries such as 58GWh. The advantages of the company's DPP-level energy storage products in high safety and long lifespan are becoming increasingly prominent, providing more competitive returns for end-operating customers.

In terms of ecology, the company is deepening its industrial ecosystem layout through strong alliances with industry giants. The company has reached a strategic cooperation with JD.com to integrate battery technology with digital supply chain and omni-channel service advantages, jointly creating a model of green, low-carbon, and digital industrial collaborative development. They are collaboratively establishing official direct sales channels for chocolate battery swapping and jointly promoting the vehicle-battery separation model to expand the sales of chocolate battery swapping vehicles. In addition, the company is working with Sinopec to build a nationwide battery swapping ecological network, with both parties' chocolate battery swapping stations and the first Junchi heavy truck battery swapping station already in operation, continuously empowering green travel In terms of ESG, during the Munich International Motor Show, the company issued an initiative for recycling to the entire industry at the Global Battery Circular Economy High-End Forum. The company believes that achieving battery recycling is not just a systematic project; it must integrate the concept of recycling from the source of design. Through innovation in technology and business models, a globally collaborative platform that is standardized, data-transparent, and globally participatory must be constructed. This is not only to maximize the lifecycle value of each battery but also to lead the entire industry towards a truly sustainable future. The company has achieved a dual advancement in technology and ecology on top of robust performance growth. The world’s first NP3.0 technology has solidified the foundation of safety for intelligent driving, and the first sodium-ion battery that meets the new national standards has opened the door to large-scale applications. Meanwhile, the company is accelerating the construction of a global green energy ecosystem through deepening strategic cooperation with numerous partners, continuously leading the sustainable development of the battery industry. With leading technological innovation, a solid market position, and a deep industrial ecological layout, the company will continue to create long-term value for shareholders. Thank you all for listening; this concludes the company's operational report. Next, we will enter the Q&A interactive session. Please have the meeting assistant announce the question-asking method.

Q&A Session

Q: What is the shipment level of the company in the third quarter? What is the approximate proportion of power and energy storage, as well as overseas?

A: The shipment volume in the third quarter is approximately 180 GWh. The proportion of power and energy storage is close to 28:72, with energy storage accounting for 20% and power accounting for 80%; the domestic and overseas ratio is approximately 37:63, with domestic accounting for 70% and overseas for 30%.

Q: In the context of tight supply and demand in the industry, what are the company's capacity plans for the end of this year and the end of next year? Will there be further increases in capital expenditure? Is there any consideration for price increases?

A: Currently, the capacity utilization rate is continuously increasing, and capacity is at full load. The scale of capacity under construction is continuously increasing. As the construction of new bases such as Jining progresses, capacity will gradually be released, and the supply tightness will improve. The company hopes to achieve long-term win-win development with partners in the supply chain; price increases are not the core driving force, and more emphasis is placed on meeting customers' diversified needs through high-quality products to create more competitive products for customers.

Q: The inventory in the third quarter exceeded 80 billion, an increase of about 8 billion compared to the previous quarter. What is the reason? Is it affected by the overseas energy storage confirmation structure?

A: The increase in inventory is mainly due to two aspects: first, after the expansion of business scale, some delivered products are in transit; second, it is to prepare for subsequent deliveries. Although the absolute amount of inventory has increased, the inventory turnover days have not changed. This part of the inventory belongs to normal circulating inventory and will be shipped out within the normal turnover cycle.

Q: What is the outlook for the company's unit profit in the future? How does the sale of energy storage systems affect the improvement of unit profit?

A: In terms of unit net profit, it has remained stable over the past few quarters, with long-term efforts to maintain it within a relatively stable range. The unit gross profit is affected by various factors such as product structure changes, with fluctuations between quarters within an acceptable range. Sales of energy storage systems account for about 20% of the overall shipment volume, and the proportion of system-side and AC/DC-side products is gradually increasing, which has some help for net profit, but in the short term, it will not cause significant disturbances to the overall data, as power batteries remain the main part affecting unit profit Q: What is the situation regarding the company's shipment volume and invoicing standards?

A: There is a difference between shipment volume and sales invoicing, with the invoiced amount being slightly smaller. The shipment volume in the third quarter of 2025 is approximately 180GWh (rounded), while the actual invoicing standard exceeds 165GWh. The dozen GWh gap between the two mainly arises from energy storage products (on the cabinet side, AC/DC side, system side) that need to wait for installation acceptance before revenue can be recognized, typically within a 180-day period.

Q: How do China's lithium battery export control policies and European technology transfer requirements affect the company's overseas capacity and cooperation?

A: China's lithium battery export control policies have no impact on the company's battery exports. Equipment exports are not completely banned but are managed through declaration and approval to achieve orderly competition and export. The company maintains smooth communication with the government, and there is no impact on overseas factory construction and LRSO cooperation layout. In Europe, the company has established three factories in Hungary, Germany, and Spain, leading the localization process in the industry. Currently, the policies have no substantial adverse impact on the company's development.

Q: How to assess the impact of rising raw material prices on the company's profitability next year, and how does the company overcome and ensure profitability through its industrial chain layout?

A: The rise in raw material prices needs to distinguish between changes in supply and demand and two types of situations caused by commodity or international environmental changes. Price increases in commodities can be transmitted through linkage, which has little impact on the company; price increases due to supply and demand changes can be mitigated by the company's extensive layout in the upstream supply chain (such as investments in companies like Shenghua), which can strengthen upstream and downstream cooperation and consolidate supply chain advantages to hedge against some of the impacts of supply tightness. The expansion of lithium battery materials is cyclical, and current prices are fluctuating around a value center. The core remains in product competitiveness, and the company has a complete layout in the upstream supply chain, capable of mitigating related impacts.

Q: What is the specific data for foreign exchange losses in the third quarter? Will the mining-related business experience impairment effects due to production stoppages in the third and fourth quarters?

A: Regarding foreign exchange, the company uses hedging tools, and the foreign exchange gains and losses on the financial statements are hedged against the cost side, making it a reasonable and effective hedge overall, with no specific foreign exchange loss data disclosed. Impairment mainly comes from inventory impairment (due to a large inventory base, provisions are made based on prudence and aging); the mining-related business has been fully addressed through risk forecasting last year, and there is no need to make new impairment provisions this quarter. The production stoppage in the mining business will not cause new impairment effects in the third and fourth quarters.

Q: What is the proportion of trucks (including heavy trucks, light trucks, commercial vehicles, and logistics vehicles) in the power battery business this year? How do you view its development?

A: In the power battery business, passenger vehicles still account for the majority, with commercial vehicles accounting for about 20%, and the growth rate is very fast. The heavy truck market has seen a growth rate of over 100% this year, while logistics vehicles have grown nearly 60%, and commercial vehicles are growing faster than passenger vehicles. Heavy trucks have become a development milestone this year due to the arrival of an economic turning point and improved infrastructure, with a current penetration rate of about 23%, expected to rise to 60% or even higher by 2030 The battery swapping system is a good model for long-distance trunk transportation in heavy trucks, while short-distance transportation is more suitable for charging models. The launch of new models, improvement of infrastructure, and the emergence of economic inflection points will drive the electrification rate of heavy trucks and logistics vehicles to continue to rise in the coming years.

Q: What is the growth situation of the energy storage business, expectations for market share increase, domestic and international market layout, and the profitability of domestic energy storage? Will there be significant incremental capacity in energy storage starting from the fourth quarter? What are the growth expectations for energy storage?

A: The growth rate of the energy storage business is faster than that of power batteries, but delivery is affected by capacity saturation this year. As capacity is gradually released, there will be more layouts in the domestic and international energy storage markets in the future. Since the issuance of Document No. 136, domestic energy storage demand has increased due to enhanced peak shaving, frequency modulation, and arbitrage trading. From the perspective of capacity layout, energy storage shipments are expected to achieve significant incremental growth starting from the fourth quarter. The industry outlook is good, the growth rate of energy storage this year is decent, and the growth momentum is expected to continue next year, as the business model has formed and there is an economic inflection point that can achieve profitability.

Q: What is the shipment proportion of new products in the power sector (such as Shenxing, Qilin, etc.)? When will sodium batteries have effective production? What new progress has been made in solid-state batteries?

A: The shipment proportion of new products such as Shenxing and Qilin is expected to be around 60% this year, with high customer recognition, and they will become mainstream products in the future. Sodium batteries are already in pilot projects for commercial vehicles and are being developed in cooperation for passenger vehicles. Products will be launched by the end of this year, with shipments starting next year and gradually increasing (specifics depend on customer terminal sales), but customer validation work needs to be completed. Progress on solid-state batteries is not disclosed at this time and needs to be tested over time.

Q: What is the general growth direction for power and energy storage demand next year? The production scheduling plans feedback from the industrial chain show a high growth rate; is this accurate?

A: Both power and energy storage will maintain a relatively high growth trend next year. In terms of energy storage, with the issuance of Document No. 136 and further promotion of overseas data centers and large storage, demand both domestically and internationally is very good; in terms of power, there is no need to worry about the impact of the decline in the new energy vehicle purchase tax, as Chinese new energy vehicles have experienced declines multiple times without significant impact, and the rapid growth of energy storage and commercial vehicles can also hedge related risks. The company has a clear positive expectation for demand until around 2030. Information from the industrial chain needs to be carefully identified.

Q: What is the competitive landscape of the energy storage industry? Are the product barriers on the energy storage side lower than those of power products? After the production capacity of second-tier companies and Korean energy storage comes online, can the company maintain a high market share and unit profitability?

A: Energy storage systems are extremely complex and need to operate safely and stably for 15 years or even longer, with very high safety requirements, making it not a field with low barriers or thresholds. The overseas market has a high recognition of the company's safety and quality. Korean companies are just starting in the lithium iron phosphate field and are in a technology-following stage, with product costs far exceeding those of the company. The verification and falsification cycle of the energy storage business model is long, similar to the heavy usage scenarios of commercial vehicles; more robust, safer systems that can deliver as promised will gain more recognition, and CATL's high market share in the commercial vehicle sector confirms this. The challenges in the U.S. market mainly stem from geopolitical factors Q: What is the trend of battery capacity per vehicle for domestic new energy vehicles next year? How will pure electric and range-extended models perform respectively?

A: The battery capacity per vehicle will continue to increase. Pure electric models are steadily improving in battery capacity due to consumer demand for longer range; in range-extended models, consumers prefer to use electricity, and there are more and more high-capacity range-extended models that are becoming popular. This trend will continue next year, with both pure electric and range-extended models seeing ongoing increases in battery capacity.

Q: What is the latest production progress of the Hungarian factory? How does its unit production cost compare to the German factory and domestic factories? How will production help the local market share in Europe?

A: The Hungarian factory is expected to start production by the end of the year and is currently in the process of equipment installation and debugging. Production can commence once debugging is completed. In terms of cost, the efficiency cost of the Hungarian factory is about 20% lower than that of Germany, and the factory has already begun to turn a profit, with good comparable profit prospects expected in the future.

Q: In high-end models and new products with large battery capacity, which customers might increase the company's battery share through technological iteration and upgrades? How much has the profit margin of the new battery products improved compared to previous ones?

A: As customer sales and profitability grow, their requirements for battery performance and quality have increased. The company has established in-depth cooperation with leading customers in various models, including pure electric and hybrid, leveraging product advantages. In the future, new battery products such as the second-generation Shenxing and dual-core multi-core will be gradually applied to customers' new models, further enhancing customer recognition and potentially increasing market share among more customers. The company's net profit per product will remain stable and will not seek excessive profits through products.

Q: With tight capacity for high-end batteries like Qilin and Xiaoao, will the company tighten vehicle-side sales rebates and payment policies in the future?

A: The company will not pass pressure onto customers due to short-term supply tightness or fluctuations in raw material prices, nor will it adjust cooperation through price increases. During supply tightness, the company will negotiate with partners to meet genuine needs, avoid stockpiling, and promote vehicle circulation. The payment policy will be adjusted based on the proportion of customer shipments, but will not be adjusted due to supply shortages; currently, there are no proactive adjustments planned for payment terms, as the company is committed to helping customers sell cars better. The company focuses on establishing long-term strategic partnerships with customers to face the market together and will not exploit short-term market fluctuations for temporary profits. The industry ecosystem requires large enterprises to collaborate and will not adjust policies temporarily due to short-term difficulties.

Q: What is the expected overall shipment proportion of the 5 series, 8 series, and 7 Ah cells next year? Will structural shifts lead to regional cell shortages?

A: The 5 series, 8 series, and 7 Ah cells are highly favored by customers due to their significant advantages in interface, temperature, energy density, and safety boundaries, making them a sweet spot product for this phase. The expected shipment proportion will increase, similar to how products like Shenxing and Qilin quickly gained market share through customer recognition. The current capacity situation is expected to gradually ease in the next one to two quarters, and delivery is not a core issue.

Q: What are the common energy storage configurations for data centers? Can the main power supply be quickly applied next year? A: The energy storage configurations for data centers include internal backup power (transitioning from lead-acid to lithium batteries, with a small proportion), solar-storage combination providing long-term stable clean energy output as the main power source (larger capacity, such as in Middle Eastern projects), as well as combinations of solar, wind, and storage, and connections to the grid. In the future, there will be more energy storage configurations for data centers, and the application of main power sources will increase, leading to significant energy storage demand from data centers.

Q: What is the outlook for the domestic passenger car power battery market share if the company's production capacity is released next year?

A: This year, the market share has indeed been slightly affected by production capacity constraints, but the product competitiveness is here. If production capacity is released next year, I believe the products will be more welcomed by customers. The company adheres to long-term strategic thinking, not short-term behavior, and there is no need to overly worry about competition issues.

Q: Will the 25% energy storage tariff imposed by the U.S. at the beginning of next year affect the company's energy storage shipments by pulling forward or overdrawing next year's demand? Is the recent U.S. policy easing or tightening?

A: The U.S. tariff policy has uncertainties, and customer business arrangements are long-term. This uncertainty has already begun to affect the entire U.S. energy storage market and data centers. The company hopes to eliminate geopolitical uncertainties to gain more business opportunities in the U.S., but the policy direction depends on high-level negotiations between both parties.

Q: After the introduction of domestic energy storage capacity pricing policies, what impact will it have on the company's orders and cooperation models with customers?

A: After the introduction of policies such as energy storage capacity pricing, energy storage stations can make profits, bringing market-oriented development space to the industry. The company and its industry competitors are exploring new cooperation models, but currently, immature models will not be elaborated on a large scale.

Q: What are the main application scenarios or fields for sodium batteries in the next five years? What price range or vehicle types are suitable for power applications, and how do they position themselves compared to lithium batteries?

A: Sodium batteries have advantages such as relatively low cost, good low-temperature performance, and fast charging performance, and can be applied in various scenarios such as commercial vehicles, passenger vehicles with battery swapping, and start-stop products. Initially, they may be used in economical models or cold regions, and with the development of the next generation of sodium battery products, energy density and other performances will improve. Sodium batteries are to expand the boundaries of electric vehicles, rather than just replacing traditional lithium batteries, and the specific scale needs market recognition