▲ Chinese EV battery manufacturer CATL
The shares of CATL, the world's largest electric vehicle battery manufacturer, plummeted over 10 percent on the 21st local time following third-quarter earnings that fell short of expectations.
Shares of other Chinese battery makers also showed a synchronized decline.
According to Chinese portals such as Baidu, CATL's shares closed down 12.03 percent from the previous session at 227.9 yuan on the Shenzhen Stock Exchange.
This is about half of its peak of 460.0 yuan reached on May 6 on a closing price basis.
On the Hong Kong Stock Exchange, where it is dually listed, CATL's shares also dropped 11.41 percent on the same day.
CATL's market capitalization shrank from 1.22 trillion yuan (approximately 242.1 trillion won) the previous day to 1.07 trillion yuan (approximately 212.4 trillion won) as of the closing price.
Amid intensifying competition in the EV battery market, CATL announced in its third-quarter earnings release the previous day that its net profit increased by 14.54 percent year-on-year to 21.25 billion yuan (approximately 4.2 trillion won).
This figure fell significantly short of not only its second-quarter net profit growth rate but also the market consensus of 41.2 percent compiled by market research firm London Stock Exchange Group.
It is also the lowest since the fourth quarter of 2024, when it recorded 13.6 percent.
The South China Morning Post (SCMP) reported that CATL's shares have been on a downward trend since Chinese EV makers Xiaomi and Li Auto announced last month that they would cooperate with other battery manufacturers.
In the market, there are also observations that automakers have recently shown a trend of moving away from CATL.
Investment bank JPMorgan recently downgraded its investment rating on CATL's Hong Kong shares to "Neutral," citing that the profitability of China's EV industry is deteriorating faster than expected due to tax changes and other factors, which could affect demand for CATL battery products.
Citigroup, Morgan Stanley, and others have warned of the possibility that market consensus forecasts could be lowered.
According to Chinese media such as the Securities Times, CATL addressed concerns over demand that day by stating, "Demand is not that pessimistic," and adding that "industrial capacity utilization remains at a relatively high level."
Regarding next year's battery demand, it stated that it is "still worth looking forward to."
Regarding the 23.6 percent year-on-year decline in operating cash flow for the first three quarters, CATL stated that it was due to proactively adjusting payments to partner suppliers and does not affect the company's long-term cash generation capability.
However, the market views that the resumption of China's battery consumption tax collection to prevent overcapacity and the reduction of value-added tax rebate rates for new energy vehicle exports will act as a burden on the earnings of CATL and the broader Chinese battery industry.
Bloomberg reported that CATL's sluggish earnings are fueling concerns over Chinese battery companies.
Citigroup analysts noted that CATL's latest earnings carry negative implications for other players as well, stating, "If CATL cannot do it, other companies will not be able to fully pass on the consumption tax."
Other Chinese battery stocks also closed lower that day, including Gotion (-6.94%) and EVE (-5.27%) on the Shenzhen Stock Exchange, and CALB (-3.57%) on the Hong Kong Stock Exchange.
(Photo: Getty Images)
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