Morgan Stanley on CATL: Breakthrough in Europe, solid industry position, solid-state batteries currently speculative, CATL will continue to lead.
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CATL’s moat remains solid.
According to news from Zhui Feng Trading Desk, on September 11th, Morgan Stanley released a report stating that the industry leadership of battery giant CATL has not only remained undiminished, but has been further strengthened in the face of competition.
The firm believes that as CATL makes breakthroughs in the European market, while smaller competitors are stuck in profit struggles in the critical energy storage sector, and as the currently hot solid-state battery technology is seen as short-term hype, CATL’s lead will continue; its valuation is now significantly attractive among peers, having become "the cheapest in the industry."
Competitive Landscape: The Strong Get Stronger, European Market Is the Key Breakthrough
According to the report’s analysis, data from the first half of 2025 shows CATL’s industry position has further solidified. The most prominent change is in the European electric vehicle battery market, where CATL achieved “significant market share growth.” Meanwhile, other small battery manufacturers’ market shares remain “sluggish.”
This trend indicates that in one of the most competitive markets globally, CATL's technology, capacity, and customer relationships are translating into tangible market share, and its globalization strategy is achieving substantive results.
Energy Storage Business: An “Asymmetric” Battle
The report highlights a key differentiation within the industry: Despite booming demand for energy storage (ESS) and surging sales for small battery manufacturers, most remain at breakeven or in loss, with already thin margins even lower than last year. The bank believes that regardless of how actively these firms expand, their energy storage businesses may have difficulty achieving profitability.
Behind this dynamic is CATL’s effective strategy: leveraging its significant cost advantages and superior quality warranty terms to deliberately suppress market prices, squeezing competitors’ profits below the break-even line.
The report stresses that CATL sets aside a 3-4% revenue provision for product warranties, while many smaller manufacturers “set aside too little or none,” which poses major risks in the energy storage sector, where battery degradation and even fire incidents occur. The example of US energy storage integrator Powin’s bankruptcy protection is cited as a warning, suggesting that low-reliability products may be at risk of severe warranty claims in the future.
Solid-State Batteries: “Hype” Far Greater Than Opportunity
On the recently hyped concept of solid-state batteries in capital markets, Morgan Stanley offers a very sober judgment, calling it “more hype than opportunity.” The report points out that the recent rise in A-share battery-supply-chain stocks has mainly been driven by improved liquidity and market pursuit of hot topics, causing “irrational” premiums on some small battery manufacturers' valuations compared to CATL.
The report firmly believes that the commercialization of solid-state batteries is a competition of R&D input based on mature material sciences and engineering capabilities. In this respect, CATL will “continue to lead this frontier market,” with the probability of a disruptive “dark horse” new entrant being “very small.” The report bluntly states that so-called prototype products released to the market currently still require “a massive amount of work over the next three years” to reach commercialization, equating to “zero revenue opportunity” at this stage.
Valuation Sweet Spot Emerges, Capital Expenditure Trending Rational
In terms of capital expenditure, the report predicts that CATL will maintain a steady pace of expanding 150-200 GWh of new capacity per year between 2025 and 2027 to meet demand growth. In contrast, the report suggests that due to currently low capacity utilization and profitability issues, smaller battery manufacturers should slow capacity construction.
In the end, the report anchors on one particularly attractive point for investors: valuation. Report data shows that after a round of sector rallies, CATL’s A-share valuation has actually become “the cheapest in the industry.” Based on the 2026 forward P/E ratio, CATL is only at 17.5x, while some peers are far above this level.
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