CATL Surpasses Expectations with Impressive Growth, Driven by Rising EV Demand and Declining Raw Material Costs

Contemporary Amperex Technology Co. Ltd. (CATL), the world's largest maker of electric vehicle (EV) battery cells, posted impressive results that surpassed market expectations, driven by increasing demand for cleaner vehicles and declining raw materials costs. The company reported an 83% jump in revenue, reaching 89 billion yuan ($13 billion) for the first quarter of 2023, significantly higher than the analysts' forecast of 75.1 billion yuan.

Net income at the Tesla supplier surged to 9.8 billion yuan, a remarkable increase from 1.5 billion yuan in the previous corresponding quarter when a first-quarter derivatives charge impacted earnings. In addition to its growth, CATL announced plans to raise 4 billion yuan in capital through its units for projects in Indonesia, a resource-rich Southeast Asian nation known for its electric car battery ingredients.

CATL's strong financial performance continued throughout 2022, with net income swelling 92.9% to 30.72 billion renminbi ($4.4 billion), beating analysts' expectations of 28.8 billion RMB. Full-year revenue soared 152% to a record 328.6 billion RMB ($47.3 billion), aligning with estimates.

The company's fourth-quarter results showcased impressive growth, with revenue reaching 118.25 billion RMB ($16.98 billion), a 107.5% YoY increase and a 21.4% rise from Q3. CATL's Q4 net profit amounted to RMB 13.14 billion, up 60.6% YoY and 39.5% from Q3. Its gross margin improved to 22.6% in Q4, following declines in Q1 and Q3 due to rising battery raw material prices.

CATL cited the rapid global market demand for new-energy vehicles as a key driver for the growth of the power battery industry. The company supplies numerous Western automakers, including Tesla, Mercedes-Benz, BMW, and Volkswagen. In February, Ford announced plans to license technology from CATL to manufacture lithium iron phosphate (LFP) batteries at a $3.5 billion plant in Michigan. CATL also supplies Chinese EV makers such as Nio, XPeng, and Li Auto.

According to South Korea's SNE Research, CATL accounted for 37% of global sales in the first 11 months of 2022. China's BYD and South Korea's LG Energy Solution held joint second place with a 13.6% share each. Despite recent market fluctuations, CATL maintains a dominant global position, boasting a nearly 34% market share based on data from the first two months of this year.

CATL's dominance was evident at China's premier auto show in Shanghai, where local and international automakers showcased renewed vigor following China's Covid lockdowns and restrictions. At the show, CATL unveiled a new battery technology with the potential to power electric aircraft due to its high energy density. The condensed state battery is set to be mass-produced later this year, initially at a lower density for EVs.

Despite the growth in car purchases over the past 12 to 18 months, sales have wavered in the most recent quarter, with China's total passenger vehicle sales down 13.4%. As electric and hybrid cars account for an increasingly larger portion of overall sales, battery makers like CATL, which have invested billions of dollars to expand output, may face challenges in meeting surging demand.

On the upside, CATL is well-positioned for the future with plans to join PT Aneka Tambang and PT Industri Baterai Indonesia in a project encompassing nickel mining, battery materials, recycling, and an EV battery factory.