CATL posts strong Q1 results amid policy headwinds

Contemporary Amperex Technology Co. Limited (CATL), the world’s leading lithium-ion battery manufacturer, reported robust first-quarter results for 2025, with net profit surging 32.85% year-on-year to CNY 13.96 billion ($1.9 billion) and total battery sales reaching 126 GWh, up 33% from a year earlier.

Revenue rose 6.18% to CNY 84.71 billion, a slower pace than in previous years due to stable unit pricing (around CNY 0.6 per GWh, flat versus Q4 2024). Nevertheless, profitability outpaced revenue, with a gross margin improving 1.15 percentage points to 24.4% and net margin hitting a recent high of 17.5%. Core profit, excluding non-recurring items, stood at CNY 11.83 billion, up 27.92% year-on-year. A sharp 831% decline in financial expenses—largely due to foreign exchange gains—further boosted earnings.

CATL ramped up R&D spending by 10.92% to CNY 4.81 billion in the quarter, reinforcing its long-term commitment to innovation. Operating cash flow reached CNY 32.87 billion, up 15.91%, providing ample liquidity for overseas capacity expansion and continued technological investment.

The firm’s dual-engine growth in EV and energy storage batteries underpinned the Q1 performance. EV battery shipments rose 36% to 102 GWh, buoyed by China’s growing NEV market. Storage battery sales climbed 20% to 24 GWh, though around 60% of Q4 in-transit inventory was recognized as Q1 revenue, suggesting real-time demand may need further assessment.

Domestically, CATL’s EV installation volume grew 39% to 57.53 GWh, though its market share dipped by 4.15 percentage points due to a broader contraction in ternary battery deployment, which fell 19% year-on-year. Overseas, performance was stronger: sales in Europe grew 20%, pushing CATL’s market share in the region from 17% in 2021 to 38% in 2024. Its German plant is now profitable and poised for growth alongside Europe’s accelerating EV transition.

In the energy storage segment, demand remained strong across global markets, particularly in the Middle East and Australia. However, looming US tariffs—to reach up to 145%—pose a significant threat to CATL’s 30% share of the US storage market. If imposed, exports could grind to a halt, prompting inventory write-down risks. If lifted before June, however, CATL may still benefit from the US grid-connection window.

Inventory levels remain elevated, rising by CNY 5.8 billion from Q4 to CNY 65.6 billion, with turnover days up to 89. This was attributed to longer revenue recognition cycles in energy storage projects. Despite an 80.04% rise in contract liabilities, indicating solid future orders, inventory efficiency remains a concern.

Meanwhile, CATL continues its global expansion. Following the profitability of its German site, projects in Hungary, Spain, and Indonesia are progressing. In February, the firm launched its Hong Kong IPO process, securing approval in March and completing its hearing in April. It aims to raise USD 5 billion, with 80% earmarked for overseas capacity and international business expansion.

The company is also reshaping its business model. It plans to build 1,000 battery-swap stations in 2025, partnering with Sinopec, NIO, and Didi to develop both passenger and commercial vehicle ecosystems. Its “CATL Tianxing” series commands over 70% market share in commercial vehicles. While rapid charging (6C) “CATL Shenxing” batteries and sodium/solid-state technologies are under development, large-scale adoption remains on the horizon.

Despite its strong performance, CATL faces strategic uncertainties. Heavy exposure to the US market and reliance on exchange rate gains introduce volatility. Analysts suggest that if trade barriers are resolved and overseas production scales up, CATL could achieve 25–30% shipment growth this year. Otherwise, pressure on the storage segment could intensify.

As of publication, CATL has not officially commented on potential US tariffs but confirmed that contingency plans are in place. With its interim report approaching, key indicators to watch include inventory turnover, overseas expansion, and policy developments.

Notably, on April 21, just a week after its earnings release, CATL unveiled three new EV battery products in Shanghai, including a sodium-ion model, reinforcing its ability to incoming market challenges.