CATL (Minutes): Demand is strong, profitability does not rely on price increases
The following are the minutes of the 3Q25 earnings call of CATL organized by Dolphin Research. For the earnings report interpretation, please refer to"Full Capacity Expansion! Has the King of Ning Finally Made It?"
I. Review of Core Financial Information
II. Detailed Content of the Earnings Call
2.1 Management Statements
1. Capacity
Domestic: Significant expansion at bases in Jining, Shandong (Jining base alone is expected to add over 100GWh of new energy storage capacity by 2026), Ruiqing, Guangdong, Yichun, Jiangsu, Xiamen, Fujian, Qinghai, and Ningde, Fujian;
Overseas:
a. German plant: To commence production in 2024 and maintain profitability;
b. Hungary plant Phase I: Cell production line equipment has been installed and is under commissioning, expected to be completed by the end of 2025;
c. Spanish plant: Preliminary approval procedures completed, joint venture company officially established, and plant construction to commence soon;
d. Indonesia battery industry chain project: Expected to start production in the first half of 2026.
2. Technology
Power:
a. Launched the world's first NP3.0 technology: Ensures no power loss and no open flame or smoke in extreme thermal runaway scenarios, providing safety support for L3 and above intelligent driving;
b. The first battery equipped with NP3.0 technology, the Shenxing Pro battery: Significantly improves energy density and battery pack rigidity through innovative micro-arc cell structure; c. Sodium-ion battery: Becomes the first sodium-ion battery to pass the new national standard certification, with significant advantages in low-temperature performance, safety, and cost, reducing dependence on lithium resources and providing a new solution for energy security.
Energy Storage:
Demand: Global wind and solar new energy installations are increasing (requiring grid stability adjustment), and the global AI data center scale is expanding (solar storage systems provide efficient green power solutions), leading to rapid growth in energy storage demand;
Capacity: Current energy storage market demand is strong, and capacity is saturated;
Products: Accelerating the production of new generation energy storage products such as 587AH; energy storage products have outstanding advantages in high safety and long life, providing highly competitive returns for end-operating customers.
3. Ecological Layout:
Cooperation with JD.com: Integrating battery technology with digital supply chain and omni-channel service advantages to create a model of green low-carbon digital industry collaboration; jointly establishing a direct sales channel for Chocolate battery swap, promoting the vehicle-battery separation model, and expanding Chocolate battery swap vehicle sales;
Cooperation with Sinopec: Jointly building a nationwide battery swap ecosystem network, with both Chocolate battery swap stations and the first heavy truck battery swap station already in operation, supporting green travel.
$CATL(300750.SZ) $CATL(03750.HK)
2.2 Analyst Q&A Session
Q: How was the shipment volume in the third quarter? What is the ratio of power to energy storage? What is the domestic and overseas ratio?
A: The shipment volume in the third quarter was approximately 180GWh;
Power and energy storage: Power 80%, energy storage 20%;
Domestic and overseas ratio: Domestic 70%, overseas 30%.
Among them, the invoiced volume exceeded 165GWh; the difference is due to energy storage products (cabinet side, AC/DC side, system side) requiring installation and acceptance, with cycles mostly within 180 days, to be confirmed subsequently.
Q: What are the plans for energy storage capacity at the end of the year and next year? Is there an increase in capital expenditure, and will there be a price increase?
A:Current capacity utilization is extremely high, and capacity is at full load, with the scale of capacity under construction continuously increasing (such as new bases in Jining), and the supply tension will improve after subsequent capacity release;
The company's core driving force is not price increases, but rather to meet customer needs with high-quality, diversified products for long-term win-win.
Q: What is the reason for the inventory exceeding 80 billion yuan in the third quarter (an increase of 8 billion yuan quarter-on-quarter)? Is it affected by the overseas confirmation rhythm?
A: The inventory growth is due to two parts:
a. After business scale expansion, some delivered products are in transit;
b. Stocking up in advance for subsequent deliveries;
Although the absolute amount of inventory has increased, the inventory turnover days have remained stable for several consecutive quarters, belonging to normal circulating inventory, and will be digested according to the normal cycle subsequently.
Q. Unit profit outlook: Slightly decreased compared to the third and second quarters, how to view the unit profit outlook, and will the increase in energy storage system sales bring about an increase in unit profit?
A: It is necessary to distinguish between "unit gross profit" and "unit net profit": Unit net profit has remained stable for many quarters, and efforts will be made to maintain it in a relatively stable range in the long term;
Unit gross profit is affected by factors such as product structure, and the difference this quarter compared to previous periods is not significant, within an acceptable range, and looking at unit net profit is a more reasonable state.
The increase in energy storage system sales has some help for net profit, but the overall proportion of energy storage in shipments is only 20%, and the short-term disturbance to overall data is small.
Q. What is the impact of China's lithium battery export control and Europe's technology transfer requirements on overseas capacity/LRS cooperation?
A: China's lithium battery export control has no impact on current battery exports, and equipment exports are not "prohibited" but are achieved through declaration and approval for orderly competition;
The company has smooth communication with the government, and overseas plant construction and LRS cooperation are not affected;
Europe already has three major plants in Germany, Hungary, and Spain advancing, with industry-leading localization layout, and there is currently no substantial adverse impact from policies.
Q. How does the increase in upstream raw material prices (such as 6F) due to strong demand affect profitability and what are the countermeasures for the industry chain layout?
A: The lithium battery industry, whether for power or energy storage, is a very strong demand scenario, bringing more orders to upstream production and operations, and it is believed that upstream material companies are also frequently expanding capacity, so there are also reports of price increases.
Material price increases are divided into two categories - bulk commodity price increases can be transmitted through price linkage, with little impact on profitability; price increases driven by supply and demand are hedged by the company's upstream supply chain layout (such as holding Jiangxi Shenghua);
Lithium battery material prices show cyclical fluctuations, from the last cycle to this cycle, it has been three to four years. Now that the market is good, lithium battery material expansion must also be done.
CATL's upstream layout is the most complete in the industry, consolidating supply chain advantages and mitigating some of the supply tension impacts.
Q. Financial expenses are negative 1 to negative 1.2 billion, what is the situation with exchange losses and impairments (especially those related to mine shutdowns)?
A: In terms of exchange, the company uses hedging tools, and the book exchange losses are offset by gains on the cost side, which is overall reasonable and effective;
In terms of impairment, it is mainly inventory impairment (provisioned according to the aging and prudence principle); mine-related impairments have been fully provisioned, and no additional impairments are required after testing.
Q. What is the proportion of heavy trucks in power batteries and the outlook for next year? Can high penetration be achieved without battery swap stations?
A: Commercial vehicles (including heavy trucks and logistics vehicles) account for about 20% of power batteries, with growth significantly higher than passenger vehicles - heavy truck market growth this year exceeds 100%, and logistics vehicles nearly 60%;
Heavy truck electrification has reached an "economic inflection point", with infrastructure (charging, battery swap) improving, and this year is the "first year of heavy truck electrification", current penetration rate is 23%, and it may reach 60% by 2030;
Q. Do heavy trucks need battery swap stations for support, and can penetration rates exceed 60% without battery swap?
A: Battery swap is a very good model for heavy trucks, with battery swap stations more suitable for trunk transportation (medium to long range), and charging suitable for short-distance transportation. The trend of electrification is unstoppable under the promotion of multi-mode infrastructure and new models.
Q. Energy storage currently accounts for 20%, has the shipment structure changed in key markets? What are the future plans for energy storage, and what is the judgment on domestic profitability?
A: Energy storage growth exceeds power, driven by Document No. 136 (energy storage has peak shaving, frequency regulation, and arbitrage functions), opening up market space; This year, energy storage delivery is limited by capacity, and after subsequent capacity release, both domestic and overseas shares and profitability are expected to improve.
Q. What is the proportion of power products (fast charging, Shenxing, Kirin, sodium batteries) and the progress of solid-state batteries?
A: New products such as Shenxing and Kirin are expected to account for 60% of shipments this year, becoming mainstream products in the future;
Sodium batteries have been piloted in some commercial vehicles, with cooperation in passenger vehicle development, and products will be launched by the end of the year, with volume starting next year (specific scale depends on customer terminal sales);
Progress on solid-state batteries is not disclosed for now and requires time for verification.
Q. What is the energy storage increment in the fourth quarter and the growth expectation for energy storage?
A: The energy storage industry growth is positive, with no problem in growth this year, and the momentum will continue next year. The economic inflection point has arrived, and as capacity is gradually released, the company's energy storage shipments and deliveries will significantly increase with capacity release. Specific data is not guided, but the trend is clearly positive.
Q. What is the demand forecast for next year, and is there a pre-arrangement for capacity based on the company's production plan received from the industry chain, with growth rates of 40%-50%? How much energy storage and power next year?
A: Next year's demand, whether for power or energy storage, is good. The industry chain production plan information is unknown, but the trend is good, after Document No. 136, overseas data centers and large storage, as well as domestic demand, are all good.
Power also maintains a high growth momentum, there is no need to worry about the impact of the purchase tax decline, as China's new energy vehicles have experienced several declines, with strong resilience. The rapid growth of commercial vehicles and energy storage will offset short-term fluctuations, and the demand trend is clear before 2030.
Q. What is the competitive landscape of energy storage: the company mainly focuses on energy storage systems, and the product barriers are not as strong as power barriers. Is there any concern about the market share and unit profitability after the production of second-tier/Korean energy storage capacity? How do you view energy storage barriers?
A: There is a misunderstanding in the market that energy storage barriers are very low, but in fact, energy storage barriers are very high - it is necessary to ensure the safe and stable operation of a system with millions of components for more than 15 years, and recent accidents in European and American power stations highlight the importance of safety;
The company's products are highly recognized overseas, and Korean energy storage is just starting, with costs far higher than the company, and technology iteration following the company; the US market is affected by geopolitical factors, not a corporate competition issue;
The verification of the energy storage business model has a long cycle to prove or disprove, and energy storage requires higher safety requirements, which requires a longer cycle to confirm whether the efficiency is as expected; CATL is also heavily used in buses, and as a production tool in heavy-use scenarios, its market share is increasing.
It is believed that in the future, energy storage is likely to be tested through practice and move in this direction. More stable and safer systems, as well as systems delivered as promised, will gain more recognition.
Q. Will the trend of single vehicle battery capacity increase next year? Is pure electric selling better than plug-in hybrids? Is there a trend for large batteries in range extenders?
A: Single vehicle battery capacity will continue to increase - pure electric vehicle users have an increasing demand for range, and battery capacity is steadily increasing;
Range extender vehicle users prefer low electricity costs and long range; large battery range extender vehicles are popular (such as the company's Xiaoyao battery adapted models), and this trend will continue next year.
Q. What is the progress of the Hungary plant's production, cost comparison (Germany/domestic), and its help to the European market share?
A: The Hungary plant will be completed by the end of the year, and production will commence after equipment commissioning;
According to the current budget, costs are 20% lower than the German plant, and need to be verified after ramp-up;
The German plant is already profitable, and European plants are expected to achieve good profitability;
The company will do a good job in localized operations, and in the complex European environment, it cannot be overly optimistic, as overseas costs can also be very high.
Q. Leapmotor recently used CATL's batteries for large battery plug-in hybrids, previously using other suppliers' batteries. Can you see which customers use our products through technology iteration? How much profit margin improvement compared to before?
A: Leapmotor initially focused on cost control, with a low share for the company; as Leapmotor's profitability improved, cooperation expanded, currently covering pure electric, hybrid, and overseas export models, with the core being the company's product advantages in performance and quality;
The company helps customers enhance competitiveness through technical solutions (Shenxing second generation, multi-core batteries, sodium batteries), maintaining stable unit net profit without pursuing short-term windfall profits.
Q. Under the tight capacity of high-end batteries, are rebate and payment policies tightened?
A: The company has a long-term cooperative relationship with OEMs and does not raise prices or tighten policies due to short-term supply tensions;
Rebates are dynamically adjusted according to customer shipment volume and proportion, unrelated to capacity tension;
There is no proactive adjustment to the payment policy, focusing on helping customers improve vehicle circulation efficiency (such as avoiding hoarding), jointly facing market challenges.
Q. What is the shipment proportion of 587Ah cells next year, and will there be a supply shortage?
A: The 587Ah cell has significant advantages in energy density, safety, lifespan, and temperature adaptability, with high customer recognition, and the shipment proportion will increase with demand;
The Jining base in Shandong plans to have over 100GWh capacity, and there are no major issues with subsequent deliveries, so there is no need to worry excessively about supply shortages.
Q. What is the form of energy storage support for data centers and the progress of main power applications next year?
A: There are two types of energy storage support for data centers - backup power (lead-acid to lithium, small proportion);
Solar storage/wind-solar storage + main power (providing long-term stable clean energy for data centers, larger volume);
The current support forms are diversified, and the main power applications will increase significantly next year, with considerable demand.
Q. This year's market demand is good, but capacity constraints have affected the domestic electric vehicle market share. Will the industry/company capacity be released next year, and will market share be regained?
A: This year's share was slightly affected by capacity constraints; after capacity release next year, relying on product competitiveness, the share is expected to rebound; the company adheres to a long-term strategy and does not exclude industry partners from growing together, and specific shares need to be judged based on next year's market situation.
Q. What is the impact of the 25% energy storage tariff imposed by the US at the beginning of next year on demand and policy trends?
A: The US tariff policy has great uncertainty (multiple adjustments), making it difficult for customers to make long-term plans, and has already affected US energy storage and data center demand; the company hopes that policy uncertainty will be eliminated to create more opportunities for US business, and specific policy trends need to be monitored through high-level China-US communication.
Q. What is the impact of domestic energy storage capacity pricing policy on orders and cooperation models?
A: The capacity pricing policy and Document No. 136 promote energy storage "profitability", opening up more possibilities for the entire ecosystem, and the industry is beginning to explore new cooperation models (the company is also trying, but details are not disclosed); the market-oriented direction is correct, opening up long-term space for energy storage.
Q. What are the application scenarios and model adaptations for sodium batteries in the next five years?
A: Sodium batteries have advantages (low cost, good low-temperature performance, good fast charging), and can be applied to commercial vehicles, passenger vehicles (battery swap models), start-stop systems, etc.;
Early adaptation to economical models or models in cold regions, the next generation of sodium batteries will have increased energy density, and will "expand the boundaries of electric vehicles" in the future, rather than simply replacing lithium batteries; the specific scale needs to be combined with customer development and market recognition.
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