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CATL Defies Market Headwinds

As the lithium battery industry enters a period of adjustment, the performance of leading manufacturers, such as CATL, has become a focal point of market interest.

On April 20, CATL released its first quarter report, revealing revenues of CNY 89.04 billion ($12.47 billion) for Q1 2023, a year-on-year increase of 92.9%; net profit of CNY 9.82 billion ($1.37 billion), a year-on-year increase of 558.0%; and non-net profit of CNY 7.80 billion ($1.09 billion), a year-on-year increase of 698.4%.

These results highlight the resilience of lithium battery leaders amid the industry’s downward trajectory. The entire lithium battery industry chain faced a crisis of overcapacity in early 2023, due to excessive expansion. Additionally, new energy vehicle sales were halved, pushing the industry into a destocking phase.

CATL’s inventory levels serve as an indicator of the lithium battery industry’s future trends. Healthy inventory levels at CATL can have a significant impact on the upstream and downstream of the industrial chain, including raw material prices, purchasing willingness, and battery costs for automobile manufacturers.

According to the Q1 financial report, CATL’s inventory amount dropped from CNY 76.67 billion ($10.73 billion) at the beginning of the year to CNY 64.04 billion ($8.97 billion), a decrease of 16.5% from the previous quarter. In terms of absolute amount, inventory data has reverted to levels seen at the end of Q1 2022.

CATL stated that its battery system sales in Q1 exceeded 70GWh, helping the company reduce inventory while maintaining sales greater than production. The company will also monitor market conditions, including the prices of key raw materials like lithium carbonate, and adjust inventory accordingly.

Major battery manufacturers have seen a decline in inventory since mid-April, particularly in mainstream battery systems such as lithium iron phosphate. On the downstream side, the auto market is recovering rapidly, with new energy vehicle sales increasing month-on-month in February and March.

CATL also noted the month-by-month improvement in new energy industry sales during Q1, expressing overall optimism for the demand for new energy vehicles in 2023.

The inventory reduction of battery manufacturers and the rising demand in the downstream auto market are expected to contribute to a recovery in the lithium battery industry.

Beyond inventory concerns, CATL has made progress in energy storage business and technology research and development. Energy storage business accounted for approximately 20% of CATL’s battery system sales in Q1, with the company maintaining a sizable market share in North America and Europe. As CATL achieves breakthroughs in product safety and longevity, overseas customers’ recognition continues to grow.

Regarding the launch of innovative products, CATL announced that several new technology products will be introduced in 2023, including Kirin batteries for Jikrypton, mass-produced M3P batteries for automobiles, and car-grade condensed matter batteries. These developments are expected to further bolster the confidence of downstream automobile companies and consumers.

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