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CATL Posted Massive YoY Growth of 558% in Net Profit for 1Q23 and Took in Around RMB 100 Million Every Day for Same Period

published: 2023-04-28 9:30

Suppliers for Li-ion batteries have begun to release their 1Q23 earnings reports starting in the middle of April, and many of the major suppliers have posted impressive results. On April 20, CATL presented its financial results for 1Q23. Its report reveals that its realized revenue rose by 83% YoY to RMB 8.9 billion, and its net profit surged by 558% YoY to RMB 9.82 billion. Based these figures, CATL is estimated to have earned an average of RMB 100 million per day during 1Q23.

At its most recent quarterly report and earnings call, CATL also held a teleconference with its shareholders. During this teleconference, the company responded to numerous inquiries about gross margins, production figures, sales figures, battery prices, new battery technologies, and its rebate scheme for lithium.

CATL’s Gross Profit Margin Came to 21.3% in 1Q23

CATL has increased investments in R&D and innovations since the start of April. The company claims it continues to unveil the most cutting-edge solutions and services in the Li-ion battery industry. By the end of 1Q23, CATL’s inventory was reduced to RMB 6.404 billion and its net operating cash flow reached RMB 20.97 billion. Its currency reserve totaled about RMB 210.45 billion.

CATL’s Battery Sales Exceeded 70GWh for 1Q23

CATL reported that sales of its battery systems surpassed 70GWh for 1Q23. Of that total, products for energy storage applications accounted for around 20GE. Due to the general movement of prices across the industry chain for Li-ion batteries, prices of battery systems also fell marginally.

CATL Is Expected to Initiate Lepidolite Mining in Jiangxi in Mid-2023

At its earnings call, CATL said the mass production of lepidolite at its mining operation in Jiangxi has been progressing as scheduled, and the newly added ore mining and processing capacity is expected to enter operation starting in the middle of this year. The value of lepidolite is lower than that of spodumene, but there is a greater reserve of the former. Hence, CATL will be stocking up on lepidolite as a part of its own lithium reserve. In the future, the company will adjust its mining activities based on the changes in ore prices and market demand. This way, the company will maintain a stable and economical supply of lithium-related resources.

When asked about the impact of the recent price decline on the profit margins of upstream materials, CATL responded that it would selectively and rationally expand or tighten supply for its upstream materials. Such decisions would be based on its own needs and market conditions. On the whole, CATL is focusing on obtaining high-quality upstream materials at a low cost from sources around the world.

Additionally, CATL explained that 4Q22 cannot be directly compared with 1Q23 in terms of gross profit margin because of seasonality. The company expects that its gross profit margin will return and maintain at a reasonable level in the future. To ensure this will happen, the company is thus rolling out its lithium rebate scheme and negotiating with its clients to find a mutually favorable solutions.

Development Is Proceeding on Schedule for CBL’s Project and Luoyang Base

CATL said Lygend, a supplier for nickel-related materials, was originally supposed to join the development of CBL’s project. However, it later abandoned this plan due to its own strategic considerations. Still, CATL and Lygend continue to collaborate in other areas.

As for the new base that is built in Luoyang. CATL said it is one of a series of projects that the company has arranged with the government of Henan Province. The construction of the base is moving ahead as planned, and the products that the base will be manufacturing in the future will be determined based on market demand and other factors.

New Technologies and Products Will Soon Be Unveiled

CATL’s Qilin series of cell-to-pack EV power batteries have been adopted by several Chinese car brands recently. For instance, Zeekr, a premium EV brand under Geely Auto, will be adopting Qilin for its executive car 001 and minivan 009. Li Auto will be adopting Qilin for its all-electric platform 4C. Furthermore, CATL is collaborating with Chery to develop EV power batteries based on the Na-ion battery technology. Within this year, Chery is expected to start mass producing a vehicle model that adopts CATL’s Na-ion battery called M3P.

Also, at Auto Shanghai that was held in the middle of April, CATL introduced its “condensed matter battery”. The company is claiming that this battery technology provides the sufficient energy density to support the operation of civilian aircrafts. The automotive-grade condensed matter battery is expected to be ready for mass production within this year. Besides materials and structural designs, CATL is also pushing the boundary with respect to other components within the battery system. For instance, the company has been improving its superconducting wires.

Overseas Markets and Energy Storage Come into Focus

In the market segment for energy storage batteries, CATL at its earnings call said that it successes in promoting its EV power batteries in overseas markets have also contributed to the formation of a competitive advantage in the field of energy storage. Regarding its overseas capacity expansion activities, the new plant in Germany is ramping up, and the construction of another new plant in Hungary is proceeding as scheduled. Its collaboration with Ford to build a plant in Michigan is also moving forward. CATL told its shareholders that its strengths in innovation, supply chain, and manufacturing will gradually become more visible in the overseas markets in the future.

Thanks to the rapidly growth of the market for energy storage solutions, CATL has actually become the global leader in energy storage batteries in terms of market share. For products related to energy storage applications, the company now commands a sizable portion of the US and European markets. This success mainly has to do with the company’s efforts to achieve breakthroughs with respect to operation lifespan and safety. CATL said it helped clients raise their investment returns by immediately addressing any issues that they have with its products. Hence, the company has gained positive brand recognitions worldwide.

CATL Forecasts That Energy Storage Market Will Grow Faster Than EV Market

CATL forecasts that EVs and NEVs will continue to grow in terms of market supply. Currently, their market penetration rate has now reached above 30%. Going forward, the company will monitor for changes in market indicators so to adapt to new situations. Turning to energy storage, CATL actually believes that this market will grow faster than the EV market. Therefore, the company is collaborating with customers across the industry chain for energy storage equipment and hope to establish long-term partnerships. Additionally, the company is maintaining a flexible strategy for inventory management. It is closely observing changes in prices of critical upstream materials such as lithium carbonate so as to formulate corresponding actions.

This Year’s Outlook on EV Market Is Positive

CATL at the earnings call stated that the sales of EVs and NEVs improved on a monthly basis during 1Q23, so CATL also saw sales outstripping production for EV power batteries. This, in turn, reduced its inventory. Auto Shanghai that took place in mid-April generated a lot of buzz and had a great attendance record. Therefore, the outlook on the EV market is fairly bright for 2023.

Many car companies attended Auto Shanghai, reflecting an increase in the intensity of the competition within the automotive industry. Also, the activation of a significant amount of new production capacity for EV power batteries has also raised concerns among shareholders. One shareholder asked whether there will be a gradual shift of pricing power from battery suppliers to carmakers. CATL replied that excess production capacity has always been a structural issue within the Li-ion battery industry. However, this issue manifests differently for individual suppliers because each supplier has its own technology, production capacity, and management system. They are also not equal in terms of innovation, manufacturing, and operation.

Lastly, CATL mentioned that major carmakers are showing increasing interest in vehicles powered by new energy technologies, so the competition in the downstream of the supply chain is getting fiercer. In the future, CATL will continue to provide its clients with the most competitive solutions for their respective needs.

This article is a translation of a Chinese article posted by Martin at TrendForce. It contains information that is either sourced from other news outlets or accessible in the public domain. Some Chinese names are transcribed into English using Hanyu Pinyin.

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