Tesla supplier CATL smashes profit estimate as electric vehicle sales soar
CHINA’S Contemporary Amperex Technology Co Ltd (CATL) reported annual earnings that beat estimates, buoyed by strong demand for cleaner cars.
The results underscore its dominance as the world’s biggest maker of batteries for electric vehicles (EVs).
The Tesla supplier on Thursday (Mar 9) reported net income for the 12 months ended Dec 31 of 30.72 billion yuan (S$6 billion), an increase of 92.9 per cent from the previous year. That beat analyst estimates of 28.8 billion yuan, data compiled by Bloomberg showed, and was in line with CATL’s January preliminary guidance of profit 29.1 billion yuan to 31.5 billion yuan.
Revenue came in at 328.6 billion yuan, up 152 per cent and in line with analyst forecasts. CATL’s core power battery business, which in 2021 accounted for the majority of the company’s sales, generated margins of 17.2 per cent matching market estimates.
The company also experienced a strong performance in its fast-growing energy storage segment, which generated revenue of 45 billion yuan, ahead of expectations. That is an area of the business that billionaire chairman Zeng Yuqun is taking a keener interest in, recently calling for stricter standards – a move that could benefit his company at the expense of smaller rivals.
CATL commanded a 37 per cent share of the global market for EV batteries in 2022, testimony to the popularity of its cheaper-to-produce lithium-iron-phosphate (LFP) batteries. In joint second place, with 13.6 per cent each, are South Korea’s LG Energy Solution and China’s BYD, the Warren Buffett-backed company that also makes cars, according to SNE Research data.
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The size and dominance of CATL has caught the attention of Chinese President Xi Jinping, who in rare remarks offered at annual parliamentary meetings in Beijing earlier this week said he viewed its leading position with “joy and worry”.
CATL also faces a global battery market facing intensifying competition. Those dynamics are in part being spurred by CATL itself, which reportedly has been offering discounts some to Chinese carmakers against the backdrop of tumbling raw material prices such as lithium, where it has direct investments.
Citibank analysts led by Jack Shang said in a Feb 20 note that they expect more competition “is likely the developing trend” this year. But they added that “our top pick remains CATL, which we believe is better positioned among the battery producers with lower costs”.
Jefferies Financial Group’s Johnson Wan cautioned that any price war could lead to earnings deterioration this year and next. He recommended focusing on leading battery makers such as CATL as the supply chain consolidates.
Being the industry behemoth means CATL is particularly exposed to geopolitical risk, especially with the US seeking to limit reliance on Chinese companies in the EV supply chain and encouraging carmakers to manufacture in North America.
CATL’s recent agreement with Ford Motor to license its LFP battery technology for use in a new US$3.5 billion EV battery plant that Ford will run and control in south-west Michigan has drawn scrutiny from Beijing, said to people familiar with the matter, with officials concerned that competitive aspects of CATL’s technology could be given to or accessed by the American carmaker.
CATL is on a global expansion push, with 13 production bases around the world including in Germany and Hungary, according to its website, and five R&D centres. It is mulling a Swiss GDR fundraise of up to US$6 billion to fuel its many capital investments. BLOOMBERG
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