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China’s CATL reports severe drop in profit growth as EV demand weakens

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© Chinas CATL reports severe drop in profit growth as EV demand weakens

China’s CATL (SZ:), the leading global battery manufacturer for electric vehicles (EV), announced on Thursday that its third-quarter profits had grown by 10.7%, representing the company’s slowest quarter since the beginning of last year. Management attributes the slowdown to a combination of reduced demand and intensified competition.

This growth figure stands in stark contrast to the 63.2% profit increase in the previous quarter and the substantial 188.4% surge experienced in the third quarter of 2022.

Recent data revealed that CATL witnessed a decline in its market share in China during September, reaching its lowest point in over a year, highlighting the challenges the company is grappling with, including heightened competition from smaller competitors and a weakening demand in the world’s largest electric vehicle market.

“CATL is facing pressure in the near term, given competition from tier-2 battery makers who price their products at a discount to CATL, and weaker-than-expected lithium-ion battery demand,” analysts at Citi said in a note.

According to data from the China Automotive Battery Innovation Alliance (CABIA), CATL’s market share in terms of battery installations in China-produced EVs plummeted to 39% in September. The lowest market share since June last year and a decline from 45% just three months earlier.

By contrast, the data indicates that the second-ranked BYD (SZ:) and third-placed CALB (HK:) witnessed a substantial surge in their shipments in China, exceeding 71% in the first nine months of the current year. This growth far outpaced CATL’s comparatively modest 18.8% expansion during the same period.

CATL’s slower earnings growth is happening as EV sales in China decline, leading to a price war among automakers and putting pressure on battery firms and suppliers to cut costs.

Last month, Ford Motor (NYSE:), a partner of CATL, announced the temporary suspension of work on a $3.5 billion EV battery plant in Michigan. A decision made in response to mounting concerns among U.S. politicians that the plant could potentially facilitate the flow of U.S. EV tax subsidies to China.

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