With net profit up 93%, China’s CATL is so far ahead in the global EV battery race President Xi just told them to pull their heads in

Very fat profits are flowing thick and fast from China’s flagship battery producer, Contemporary Amperex Technology (CATL), which its boss says just delivered an impressive 93% net profit surge last year to over well over 30 billion yuan ($US4.4 billion).

Stock in the company which supplies EV batteries to SAIC, Honda, BMW, Tesla and just about everyone else, was down circa 19%% from a post-January high, but the malaise for shares in the Shenzhen-listed CATL appeared to be snapped on Friday, rising significantly to close well above 405 yuan, to close the session nearly 2.5% stronger.

Don’t know who I’m on about? This company vid should sort you out:

Enthusiasm, if not momentum has been building for CATL since Ford announced plans to license technology from the Chinese battery group much to the ire of a White House which sees both China as a strategic competitor and Chinese technology, in which it sees a potential Trojan Horse.

Ford said last month it intends to incorporate CATL systems within its US$3.51bn factory out in Michigan as part of the US auto giant’s own strategic competition with Elon Musk’s market dominant EV maker Tesla.

Meanwhile, CATL’s group revenue last year grew 150% to 328.5 billion yuan (US$49 billion), driven by its mainline automotive battery business drove group earnings.

One of the central pillars of upscaling Chinese manufacturing into advanced and renewable markets, CATL also enjoyed a headline performance in its factories and power plant storage segemnt.

Turns out CATL’s new Qilin batteries are working out just fine.

To save you the confusion wrought by the following product video – Qilin is the name of CATL’s latest EV battery.

Time Magazine in fact named them the Qilin among the world’s best inventions last year, but, to be absolutely frank, I’d always assumed that was because Time’s massive product placement investment in The Secret Life of Walter Mitty hadn’t worked out, so…

But no, they seem to actually work – according to details released late on Thursday, the amount of energy held by CATL’s EV batteries worldwide jumped 90% to a total of more than 190 gigawatt-hours.

The South Korean market intelligence provider SNE Research, reckons the company can now lay claim to global market share of some 37%, putting CATL firmly ahead in the sprint for scale.

 

CATL… and then thin air

In a January  Benchmark Mineral Intelligence (BMI) report,  the firm says that the  top 10 global producers will increase production in the next 6 -0 7 years by circa 400% on the back of expansion plans and rising EV sales.

“The world’s largest battery producer, CATL, is set to see the largest absolute growth in battery production this decade, growing output by over half a terrwatt hour between now and 2030,” BMI says.

China’s dominance in vertical integration across the rest of the EV supply chain puts the country way ahead of other manufacturing nations, BMI adds.

In 2022, Chinese companies accounted for 57% of the top ten’s production output but with Svolt and Sunwoda soon expected to join the list – China’s market share will increase to 70% by 2030.

 

Dealing with spotty lithium

JPMorgan reckons CATL intends to peg its battery prices to the lithium spot market based. That’s probably not a dumb play, although a little late in the day.

Demand for lithium carbonate has ripped on alongside EV demand. The spot price keeps jumping like a cat and during a volatile year, lithium prices still managed to double without really trying.

Following CATL’s update, Wall Street brokers were almost universally upbeat on the company’s outlook. In fact almost everyone but for Jefferies who Downgraded CATL to Hold from Buy, taking a cleaver to the target price to 416 yuan from 507 yuan.

Jeffries called Zeng’s dwindling margins “unimpressive” and while the Chinese giant – given its headstart – is going to to likely outperform the intense sectoral competition the broker just doesn’t “see upside on profitability” with so many players running at the same gap.

 

Xi: Don’t get cocky Mr Zeng

According to the Xinhua News Agency, the news is so good, President Xi Jinping is equal parts excited and anxious.

Although “delighted” that CATL’s leading China’s battery industry to the “forefront of global competition,” Xi then turned to Zeng to warn of the dangers and pitfalls of sprinting on ahead.

Xinhua reported the remarks while Xi was being presented the good news at a closed-door session with industry and commerce representatives including CATL.

What was assumed to have been fairly terrific news was revealed to Xi on the sidelines of the NPC in Beijing on Tuesday by Zeng Yuqun, CATL’s Chairman.

Not only is Zeng the head of the world’s largest supplier of electric vehicle batteries, he’s also a member of the Chinese People’s Political Consultative Conference (CPPPC), China’s other slightly more real political lunch club, made up of important Communist significant others from all sectors of commerce and society.

The CNPCC is still in Beijing right now, concurrently whistling dixie at the “Two Sessions” meets right next door to the National People’s Congress (NPC) which is also busy rubber-stamping the Chinese Communist Party’s big ideas for the next 12 months.

Presenting before his newly re-empowered boss, Zeng laid out CATL’s world-beating business detailing how CATL’s enjoyed a surge in deliveries which more or less offset higher raw material prices.

Profit margin’s fell some 4.8% to 17.2%, on higher costs for lithium and other battery materials.

Zeng’s success in marching out alone in an invincible fashion was unfortunately met with caution by the president. Both Reuters and Xinhua quoted  Xi as chiding Zeng (and therefore everyone else), that top Chinese companies ‘need to balance development and security.’

“Emerging industries must do a good job in planning, figuring out how big the market is and where the risks are… They should avoid marching ahead alone in an invincible fashion, only to be caught out by others and fail in the end.”

 

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