Despite the aforementioned challenges, we remain optimistic about CATL’s long-term investment value, due to the following key reasons:

Diversified Layout and Full Industry Chain Integration: Building a Competitive Moat

CATL’s dominant position in the global power battery industry is no accident — it is the result of sustained investment in technological innovation, deep vertical integration, a forward-looking globalization strategy, and refined operational management. These core strengths reinforce one another, creating powerful synergies and a robust competitive moat that enable CATL to maintain leadership and sustain rapid growth despite intensifying market competition.

According to its latest annual report, CATL delivered solid financial performance in 2024 despite headwinds in the new energy vehicle (NEV) market. For the full year, the company posted operating revenue of RMB 362.0 billion, representing a year-over-year decline of 9.7%, largely due to industry-wide pricing pressure. However, total profit rose by 17.2% to RMB 63.2 billion, and net profit attributable to shareholders increased by 15.0% to RMB 50.7 billion, demonstrating the company’s ability to preserve profitability through cost control, product mix optimization, and operational efficiency.

1. Technological Leadership: Continuous Innovation Driving Industry Trends

CATL’s technological leadership stems from its deep, integrated expertise and relentless focus on innovation. Backed by a vertically integrated supply chain, robust strategic partnerships, and advanced manufacturing capabilities, CATL continues to strengthen its position at the forefront of the global power battery market.

The company places heavy emphasis on R&D, with nearly 20,000 R&D staff—many holding advanced degrees—and over 12,000 authorised patents alongside more than 23,000 pending applications. According to its 2024 annual report, the ratio of R&D spending to revenue has risen significantly. CATL is actively investing in next-generation battery technologies, including sodium-ion and solid-state batteries, and collaborates closely with leading universities to drive breakthrough innovation.

Beyond R&D, CATL leverages cutting-edge Battery Management Systems (BMS) and highly automated production lines to enhance efficiency and reduce risk. Its vertical integration enables tighter cost control and resilience against raw material price fluctuations. As reported by Benchmark Mineral Intelligence in 2024, CATL’s manufacturing yield exceeds 90%—well above the global average of 80–85%—and its per-GWh investment cost is 15% lower than that of LG Energy Solution. In high-energy-density solutions, CATL’s Qilin Battery (CTP 3.0) delivers 255 Wh/kg, outperforming key competitors. Meanwhile, its lithium iron phosphate (LFP) batteries are 20–30% cheaper than the ternary batteries produced by Korean and Japanese rivals, further reinforcing its global cost and performance advantage.

CATL is actively advancing next-generation battery technologies and aims to begin mass production of solid-state batteries by 2027 — a milestone that could mark the start of a new growth trajectory. According to SNE Research, CATL has led the global power battery market for eight consecutive years (2017–2024). In 2024, it held a dominant 37.9% share, outpacing the second-largest player by 20.7 percentage points.

While maintaining its leadership in market share, CATL has also delivered strong profitability. In 2024, its gross margin reached 24%, second only to Panasonic. Panasonic’s higher margin is primarily driven by its close partnership with Tesla, for whom it supplies over 80% of battery needs — largely for high-end models. This concentrated client base gives Panasonic a margin edge but limits its market reach. In contrast, CATL’s diverse customer base and broad product portfolio have enabled it to capture significantly greater scale and market share, positioning it as the clear industry leader.

In the energy storage sector, CATL has maintained its global leadership for four consecutive years (2021–2024), capturing a dominant 36.5% market share in 2024 — 23.3 percentage points ahead of the next competitor. According to SNE Research, CATL is projected to retain a technical lead of over 15% through 2028, underscoring its entrenched position in the industry. With its cutting-edge technology and extensive production capacity, CATL remains difficult to displace in the near term.

The company continues to demonstrate strong R&D commitment, with research spending accounting for one of the highest proportions of revenue in the industry. In 2024, R&D expenses reached RMB 1.9 billion, reflecting sustained investment in innovation. At the same time, CATL has implemented effective cost control measures — total operating costs declined year-on-year, while financial expenses turned negative at RMB -413 million, signalling improved efficiency and optimised capital management.

Table 1: CATL’s operating metrics compared to peers

2. Full Industry Chain Integration: Building Competitive Barriers and Ensuring Supply Chain Security and Profit Stability

CATL has built a fully integrated industry chain ecosystem spanning raw materials, manufacturing, and recycling — a strategy that strengthens its competitive edge, ensures supply chain security, and enhances profitability and resilience.

Upstream: Securing Critical Resources

CATL actively invests in and partners with upstream players to secure long-term access to key raw materials such as lithium, cobalt, and nickel. Notable examples include investments in North American Lithium (Canada), equity stakes in Pilbara Minerals, and involvement in copper-cobalt projects in the Democratic Republic of the Congo. These moves reduce supplier dependency, improve cost control, and strengthen CATL’s bargaining power.

Midstream: Leading in Core Technologies

Through independent R&D, CATL has mastered core technologies like CTP (cell-to-pack), BMS (battery management systems), and advanced intelligent manufacturing. These capabilities drive operational efficiency, improve product quality, and create high barriers to entry for competitors.

Downstream: Expanding Markets and Closing the Loop

CATL has broadened its reach into downstream sectors including new energy vehicles and energy storage systems. It maintains long-term partnerships with major OEMs, contributes to vehicle development, and offers diversified storage solutions. Importantly, CATL has also built out a battery recycling ecosystem, reducing costs and boosting resource efficiency through a sustainable, closed-loop model.

3. Globalisation Strategy and Market Leadership: Reshaped Overseas Market Structure to Offset Tariff Impact

Current US tariff policies have directly impacted CATL’s market share in the US, but the company is actively mitigating this through a reshaped overseas strategy and domestic market consolidation. As of 2024, battery systems for EVs and energy storage made up approximately 86% of CATL’s total revenue, with China accounting for around 70%. While Europe now leads in overseas revenue contribution, the US and Southeast Asia follow behind.

To offset tariff-driven headwinds, CATL is accelerating its global expansion — particularly in tariff-free regions — and deepening partnerships with second-tier automakers in China by scaling down product lines. In its domestic market, supportive government subsidies are expected to drive ~30% annual growth in EV sales, lifting EV penetration to 55%. CATL is also engaging in aggressive pricing strategies to gain share from competitors like CALB, aiming for over 65% market dominance in China, which contributes more than 75% of its revenue.

Though Tesla is working to scale up 4,680 battery production in Nevada and exploring alternative suppliers like LG Energy Solution and SK, its partnership with CATL remains solid. Tesla has reportedly asked CATL to fast-track its Mexico plant — set to begin production in 2025 with 50 GWh capacity — to bypass US tariffs and continue supply to Tesla and Ford.

Despite a current 8% market share in the US, CATL’s profitability remains largely insulated due to its broader global footprint. In Europe, it operates dual manufacturing bases in Germany and Hungary, with a combined capacity set to reach 124 GWh by 2026, supplying OEMs such as BMW and Volkswagen. CATL held over 35% of Europe’s EV battery market in 2023, ahead of LG Energy’s 25%.

In Southeast Asia, CATL is rapidly gaining ground. A joint venture with Thailand’s Arun Plus targets the fast-growing ASEAN EV market, which saw 120% growth in 2024. CATL’s regional market share has surged from 8% in 2022 to 22% in 2023, thanks to its strong cost advantages.

Table 2: Near- and Mid-Term Operational Impacts on CATL

In the near term (1–2 years), CATL is expected to face triple pressures: a near-complete retreat from the US market due to elevated tariffs, intensified competition in Europe that may reduce its market share to 25–28%, and margin compression driven by price wars in China. These combined challenges could lower CATL’s global market share to around 30–32%.

However, the long-term outlook (3–5 years) remains robust. The ramp-up of its 100 GWh Hungary plant will help CATL reclaim leadership in Europe, while the 50 GWh Mexico facility is set to meet demand from U.S. clients such as Tesla and Ford. At the same time, China's accelerating demand for energy storage solutions and the company’s progress in sodium-ion battery technology are expected to drive future growth. With these developments, CATL is projected to maintain a global market share above 35%. Its sustained technological leadership and expanding localized production footprint will remain key competitive advantages.

Recent high-level economic and trade talks between China and the US in Geneva signalled a willingness to ease tensions. The resulting China-US Joint Statement on Geneva Economic and Trade Talks reflects some progress and consensus, which markets welcomed. Nonetheless, the long-term structural nature of the US-China trade rivalry suggests that frictions will persist, regardless of short-term agreements.

Against this backdrop, CATL’s strategy — focused on accelerating overseas production capacity and pursuing technological innovation (notably in solid-state batteries) — positions the company to navigate trade uncertainties while continuing its international expansion. This resilience underpins its ability to execute a stable and forward-looking global strategy, even amid geopolitical volatility.

4. Actively Expanding the Energy Storage Market: Creating a New Growth Engine
CATL has successfully established a strong foothold in the fast-growing energy storage market, positioning it as a key growth engine to diversify revenue streams and reduce reliance on electric vehicle batteries. Leveraging its technological innovation and cost leadership, CATL continues to solidify its dominance despite intensifying competition. According to SNE Research, China accounts for 80% of global energy storage battery capacity, with CATL capturing over 50% of the domestic market.

A critical factor behind CATL’s rapid ascent in energy storage is its “high-tech popularisation” strategy. For instance, its energy storage batteries offer cycle lives exceeding 10,000 cycles — significantly above the industry average of around 6,000 — enhancing product longevity and cost-effectiveness. CATL also pursues a dual-technology approach: lithium iron phosphate (LFP) batteries are deployed to consolidate leadership in high-end storage and EV applications, while sodium-ion batteries target emerging markets such as low-end EVs and telecom base station storage.

Sodium-ion technology offers multiple advantages, including roughly 20% lower mass-production costs compared to LFP and stable performance at temperatures as low as -20°C. The technology is gaining traction, with orders secured from 10 automakers, including Chery and Neta. Notably, CATL secured more than 40% of China Tower’s 2024 storage tender for sodium-ion batteries.

With energy storage demand projected to reach 1,500 GWh by 2030 — a compound annual growth rate of approximately 30%, according to the IEA and McKinsey — CATL is well-positioned to capitalize on this secular trend and further enhance its revenue diversification and long-term growth prospects.

Valuation and Investment Recommendation

CATL’s recently announced share repurchase plan underscores management’s strong confidence in the company’s long-term prospects. On 7 April 2025, the company revealed plans to repurchase shares using internal or self-raised funds totalling between RMB 4 billion and RMB 8 billion through centralised bidding, with the buyback price capped at RMB 392.3 per share. This move is expected to serve as a near-term catalyst for valuation re-rating.

From a valuation perspective, CATL currently trades at a price-to-earnings (P/E) ratio of approximately 20.2x — near historical lows and well below the sector average of 29.5x. Given CATL’s dominant position in the global battery industry, this discount appears unjustified. Assuming a conservative target P/E multiple of 25x for its Hong Kong-listed shares, we estimate meaningful upside potential in the medium term.

Despite its strengths, CATL faces growing earnings headwinds in the short term. The US tariff environment poses a significant challenge, particularly with limited near-term production capacity in Mexico to offset the expected loss of market share. Additional risks include:

·       Coordinated trade restrictions from U.S. allies such as the EU, Japan, and South Korea.

·       Margin compression from intensified price competition in China.

·       Possible delays or setbacks in solid-state battery R&D, which could allow Korean rivals to gain ground.

In light of these risks, we have revised our earnings outlook downward. Previously, we forecasted a 20% compound annual EPS growth rate over the next three years. Under a more conservative scenario — factoring in limited upside in overseas markets and potential share loss in Europe and Southeast Asia — we now expect average EPS growth of around 11% annually through 2027.

Nonetheless, CATL’s domestic strategy and rapid capacity expansion could help cushion some of these pressures. Based on our revised earnings assumptions and a target P/E of 25x, we project that CATL’s Hong Kong-listed stock could reach a price of approximately HKD 426 by end of FY2027 — implying an upside potential of around 39%. 

Table 3: Valuation Comparison Between CATL and Its Peer Companies

Conclusion

Based on our analysis, we remain constructive on CATL’s long-term profitability and growth trajectory. The company’s technological leadership in power batteries, vertically integrated supply chain, robust global expansion strategy, and disciplined operational management collectively form a strong competitive moat. These structural advantages position CATL to maintain its leadership in the global battery market while navigating an increasingly complex competitive landscape.

While CATL’s stock saw a sharp increase on its IPO debut, we believe the company still offers attractive long-term investment potential. Applying a reasonable forward P/E multiple of 25x, CATL appears undervalued relative to its industry dominance and future earnings growth. The combination of technological innovation, market leadership, and global scale provides a solid foundation for sustained value creation.

Key Risks to Monitor

·       US Market Exposure & Tariff Risk: Heightened tariffs and limited near-term production capacity in Mexico may lead to a further decline in US market share, weighing on overall profitability.

·       Geopolitical Tensions: Increasing geopolitical friction, including US efforts to restrict Chinese battery exports, could constrain CATL’s access to strategic markets such as the EU and other allied regions.

·       Intensifying Competition: Escalating price wars in China and strong competition from Korean battery makers may compress margins and pose a challenge to CATL’s market share and earnings momentum.