Ning Wang's new cycle: Is its "gold content" still rising?

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Author | Zhou Zhiyu

CATL used its annual report to alleviate investors' concerns from the past period.

On the evening of March 9, CATL disclosed its 2025 annual report. 72.2 billion yuan in net profit attributable to the parent, up 42% year-on-year. The profit growth rate is 2.5 times the revenue growth rate. More crucially, in the second half of the year, capacity utilization soared to 102.6%—while everyone is discussing who will be cleared out, this industry leader, accounting for nearly 40% of the global market, has already outgrown its own capacity.

In the past year, lithium carbonate prices fluctuated dramatically, second-and third-tier battery companies aggressively ramped up production, and the narrative of price wars was omnipresent in the lithium battery industry. Wallstreetcn has learned that some CATL orders are limited by capacity, while some orders have spilled over to other second-and third-tier companies. In other words, it's not a lack of demand, but the leader’s capacity is insufficient.

Furthermore, CATL remains optimistic about the industry's overall growth in the medium to long term. Internally, CATL expects the industry to maintain a compound annual growth rate of 20%-30% over the next 3–5 years.

The capital market gave its judgment. After the results, some institutions have begun raising their 2026 profit forecasts to over 94 billion yuan.

Looking back at the past few years, regardless of lithium carbonate price fluctuations, CATL has maintained relatively stable profit per Wh. In the same period, most second-tier companies were squeezed by costs in price hike cycles and lacked hedging tools in price decline cycles. The same market, different profit margins.

Where does profit come from, how is market share won, and as the industry enters a new cycle, can this cross-cycle pricing power continue—three questions point to three different answers.

Locking in Profit

423.7 billion yuan in revenue, up 17%. 661 GWh sales, up 39%. 72.2 billion yuan net profit, up 42%. The three growth rates are on totally different scales.

Sales growth far exceeds revenue growth, indicating unit prices are falling. A simple calculation shows single GWh income dropped from about 762 million yuan last year to 641 million yuan this year, a decrease of about 16%.

But profit growth leads.

The answer lies in cost. The annual report shows that direct materials as a percentage of operating costs fell from 76.48% to 71.79%, nearly 5 percentage points in a year. Periodic decline in lithium carbonate prices is one reason; another is the manufacturing efficiency boost from mass rollout of PSL super production lines. Prices fell 16%, but costs fell faster—yielding the so-called "scissors effect."

However, what truly stabilizes CATL’s profits is not just cycle luck, but an institutional design.

Contracts with downstream automakers generally include a lithium carbonate price linkage mechanism, with a transmission cycle of about 1–2 months. When raw material prices rise, costs can be passed downstream within a month or two. At the same time, CATL holds upstream mining equity, BRUNP Recycling reclaimed 210,000 tons of used batteries/materials in a year, and lock-in exposure via derivatives with notional principal near 370 billion yuan.

When lithium carbonate rises, the linkage mechanism passes on costs, and upstream equity shares price gains. When it falls, low-cost stockpiling and recycling channels fully unleash cost reduction benefits. Both directions are hedged, and profit per Wh stabilizes near 0.1 yuan/Wh. In contrast, most second-tier companies get squeezed by costs in up cycles, and lack price locking tools in down cycles—passive both ways.

Cash flow also validates profit quality. Operating cash flow for the year totaled 133.2 billion yuan, up 37% year-on-year, much higher than net profit. Financial expenses were -7.94 billion yuan, nearly doubled from last year—a “hidden profit” from 333.5 billion yuan monetary funds yielding interest and exchange gains.

More crucial is Q4’s acceleration. Quarterly revenue was 140.6 billion yuan (+37% YoY, +35% QoQ), net profit attributable to parent was 23.2 billion yuan (+57% YoY), strongest single quarter of the year. If annual data is the trend, Q4 shows the trend’s slope getting steeper.

Of course, there is some noise to distinguish. Asset impairment reached 8.66 billion yuan for the year, concentrated in Q4. CATL management explained that fixed asset impairment mainly targets early production lines whose old equipment can't meet current process and capacity needs; inventory impairment is a prudence-based provision, and its proportion is even shrinking relative to the total asset size.

But from another perspective, equipment impairment outweighs inventory impairment. This structure is a signal—not asset quality deterioration, but a display of generational technological upgrade. Actively eliminating early small-capacity lines and reallocating resources for new PSL process lines is essentially swapping impairment for efficiency and short-term profits for long-term manufacturing upgrade.

Inventory rose from 106 GWh at the start of the year to 186 GWh at year-end, up 75%. But breaking it down, a significant portion of the increase is “shipped goods”—the cycle from factory delivery to installation, commissioning, and acceptance for storage systems can be months. Large amounts of shipped but unrecognized products inflate the numbers. Essentially, it is "revenue to be confirmed," not unsold inventory. Also, stockpiling low-cost materials during lithium carbonate up cycles is proactive cost management.

Digesting this pace needs tracking. But from the profit structure, this round’s growth is solid: cost optimization outpacing price decline is the underlying logic, linkage mechanism plus upstream layout secures profit stability as institutional guarantee, Q4 acceleration confirms the cycle position, and impairment structure hints at active evolution in manufacturing.

Full-Capacity Siphoning

High profit quality is one thing, high share quality is another.

Market share gained by price cutting is often “inflated.” CATL’s 2025 market share boost is fundamentally different.

According to SNE Research, global power battery usage reached 1,187 GWh (+31.7%) in 2025. CATL’s power battery sales were 541 GWh (+41.85%), beating the industry average by nearly 10 points. Global market share was 39.2% (+1.2ppt), top for the ninth consecutive year. Overseas share broke 30% for the first time. Energy storage was #1 globally for the fifth year running.

Meanwhile, power battery gross margin was 23.84%, essentially unchanged. Storage was 26.71%, also stable. Overseas gross margin was 31.44%, about 7.4 points higher than domestic. Market share expanded without sacrificing profit margins.

So, where did the incremental share come from?

One key structural change is happening: power battery sales growth (+41.85%) far exceeds global NEV sales growth (+21.5%). Batteries are growing much faster than vehicles.

Two drivers are behind this. First, per-vehicle battery capacity is systematically rising—pure EVs are moving from "optional long-range" to "standard long-range," range-extended models' battery capacity core has jumped from 40 kWh to 60–80 kWh, and advanced ADAS pushes up battery capacity still further. Second, NEV commercial vehicle sales grew 63.7% in 2025, penetration hit 26.9%. Commercial vehicles have much higher battery demand per unit; each new pure electric heavy truck equals the demand for 3–4 passenger vehicles—a demand lever in itself.

With these two variables together, installed battery capacity and vehicle sales have a marked gap. Whoever has enough high-quality capacity to fill it wins market share.

Wallstreetcn has learned that CATL's capacity is fully booked, causing some orders to spill over to other second-and third-tier companies.

Insiders say some second-and third-tier manufacturers have high production expectations for 2026—low at 50%-60%, high at 80%-100%. Previously, Ding Yueli, UBS China's basic materials research head, told Wallstreetcn that the lithium carbonate market in 2026 will remain tight and balanced.

According to Ding's estimates, next year’s demand for lithium carbonate from EVs is expected to rise 15% YoY, with storage as the key variable. UBS expects industry leaders’ storage demand to double next year, with large companies expecting more than 70% growth.

Data shows CATL's capacity utilization in the second half reached 102.6%, already overloaded. Year-end contract liabilities hit a record 49.2 billion yuan—as an indicator of orders in hand, this is firmer than any verbal statement.

As for concerns about price wars amid aggressive second-tier production, CATL management judged that lithium battery industry was never short of capacity, only short of high-quality capacity, which is what customers genuinely need.

By year-end, CATL was building 321 GWh of capacity. Wallstreetcn learned CATL’s scale under construction in 2026 will be larger, with capital expenditure further increased.

But there’s a distinction easily overlooked: CATL’s capacity expansion is backed by locked-in long-term supply agreements and technical relationships, and expansion decisions are entirely based on order visibility, not a linear extrapolation of industry average growth rates. Second-tier companies' aggressive production without equally deep customer binding may face pressure of “overcapacity upon commissioning.”

In other words, second-tier high growth this round is partly based on the leader’s inability to absorb all demand. Once CATL releases enough certain capacity, the overflowed water will flow back. Expansion quality should not only be measured by GWh numbers, but more by order conversion rate and customer structure.

This is the essence of full-capacity siphoning—not CATL grabbing others’ share, but demand coming to their door.

The Cards in the Second Half

Whether CATL's high quality will continue in the new cycle depends ultimately on structural changes in the industry itself.

Now, energy storage has shifted from selling cells to selling systems, with competitive metrics being redefined.

Energy storage battery shipments were 121 GWh (+29%), but revenue grew just 9% to 62.4 billion yuan. Cell unit prices were compressed, profit space bottoming out. But system integration shipments grew over 160% year-on-year, with over 70 projects delivered globally—value is shifting from cells to systems.

Product iteration direction is clear: 587Ah large cell mass production, Tianheng 6.25 MWh system batch grid connection, TENER Stack 9 MWh solution global debut. Degree of integration is rising, delivery units are getting bigger. CATL revealed that energy storage is more about delivering the entire solution for owners, and 587Ah cells can boost throughput by nearly 50% compared to 314Ah cells, raising owner's IRR by two to three points.

A 2–3 percentage point IRR improvement can mean hundreds of millions in net present value for an energy storage plant project. The market still watches cell price reductions per Wh, but the true tender-winning factors are shifting—LCOS, grid stability, intelligent dispatching, are becoming the comprehensive scorecard for energy storage projects. Whoever integrates electrochemistry, power electronics, and AI algorithms across domains will score high on this new card.

There’s also a new demand variable: AI data centers’ rigid demand for energy storage. AI training/inference loads have huge pulsing swings, requiring energy storage to buffer power shocks and shave peaks/valleys, and some grid operators demand new large loads be self-regulating. For data centers, the opportunity cost of power failure or delayed grid connection is much higher than the marginal battery price increase—a nearly price-insensitive rigid demand.

Current entrants mostly focus on single-point capabilities—some only make cells, some only make inverters. But endgame competition for energy storage needs full-stack capability—from cells to boxes, PCS, EMS, to grid-side synergy. Pure cell price wars have hit rock bottom; future pricing power lies with system integration.

On the other hand, overseas localization is turning from a bonus to an admission ticket.

CATL’s overseas revenue hit 129.6 billion yuan (30.6% share), overseas gross margin 31.44%, 7.4 points higher than domestic. High premium comes from localized capacity delivering customer stickiness and assurance.

Hungary Phase I over 30 GWh finished commissioning and is ramping up, Indonesia is under construction, Spain is being planned. Wallstreetcn learned CATL's overseas plant unit investment is 1.5–2 times higher than domestic, and Hungarian orders are fully saturated.

External environment is forcing change. EU in March offered up to 3 billion euros for local battery manufacturing, Zimbabwe restricted lithium ore exports demanding local processing, Indonesia pushes nickel ore processing localization. The global lithium chain is shifting from "Made in China, global export" to "regional production, local delivery."

LG, SK, Samsung SDI are building plants in North America; Chinese companies are placing bets in Europe and Southeast Asia. The battery industry is repeating the semiconductor path to regionalization. The window for going abroad won't stay open forever—the first comers win.

At present, "hidden clearing" has begun.

On the surface, the industry isn’t shrinking—second-and third-tier companies ramp up production, new capacity is still coming online. But the leader’s capacity utilization in the second half is 102.6%, gross margin rising, market share expanding, while the apparent prosperity of second-tier is built partly on overflow from the leader.

A deeper asymmetry lies in profit tools. CATL has price linkage to pass on cost fluctuations, nearly 370 billion hedges locking exposure, upstream mines and 210,000 tons annual recycling easing resource risk. Whether lithium carbonate rises or falls, profit per Wh stays near 0.1 yuan/Wh. SME’s are more passive both ways—the same market, different profit margins.

CATL’s capacity expansion logic has shifted from scale-first to certainty-first—behind 321 GWh under construction are locked-in long-term contracts and technical relationships; record contract liabilities of 49.2 billion yuan confirm order visibility. Second-tier companies' aggressive ramping without equally deep customer ties may have their capacity release become their profit margin pressure point.

Orders that flowed to second-tier may return quickly; differentiation in capacity utilization and profit concentration may arrive faster than market expects. This is what "hidden clearing" means: no capacity is cut, but profit is concentrated.

From topping global power battery shipments in 2017, to capturing nearly 40% global market share and surpassing 70 billion yuan annual profit in 2025, CATL took eight years to leap from an industry dark horse to the absolute leader. Hong Kong listing, global factory building, storage system integration, sodium battery mass production—the company is moving from battery manufacturer to defining new energy infrastructure.

But new cycle challenges are rising. Lithium carbonate prices enter a new volatility round, overseas localization window narrows, and storage competition evolves from cells to systems. Whether CATL can maintain profit stability while expanding at full capacity, and outperform policy shifts in global layout, is not just a company problem, but a key battle for how far China’s lithium battery industry can go in global energy transition.

Risk Warning and DisclaimerThe market is risky, investment should be cautious. This article does not constitute individual investment advice and has not considered any particular user’s special investment goals, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their specific situation. Investing based on this is at your own risk. ```