CATL’s logo on a 2023 Shanghai Auto Show display. Credit: CnEVPost
- CATL’s Hong Kong shares fell to their lowest since July 2025 after third-quarter net profit declined 5.77% from the previous quarter.
- Reduced tax support is forcing the company to negotiate how to share costs with customers.
CATL (HKEX: 3750), the world’s largest electric vehicle battery maker, saw its shares tumble Wednesday after reporting a sequential decline in third-quarter profit, with tax policy changes adding to pressure on profitability.
At the time of writing, CATL’s Hong Kong shares were down 10.64% at HK$368, their lowest since July 2025. Its Shenzhen-listed shares fell about 12%.
The company reported Tuesday that third-quarter net profit attributable to shareholders totaled 21.25 billion yuan ($3.16 billion), up 14.54% year-on-year but down 5.77% from the previous quarter.
Revenue rose 58.58% year-on-year and 11.8% sequentially to 165.22 billion yuan. Quarterly gross margin fell to 20.69%, marking its second consecutive quarterly decline.
The results highlight how growing battery demand and revenue have yet to halt weakening profitability, while reduced tax support is forcing the company to negotiate how to share costs with customers.
On its earnings call Tuesday, CATL attributed the decline in profit per unit to changes in product mix, a consumption tax on lithium batteries and a reduction in battery export tax rebates.
China resumed levying a consumption tax on lithium-ion batteries and other battery products on September 1 at a transitional rate of 2%. The rate will rise to 4% on September 1, 2027.
Meanwhile, the value-added tax export rebate rate for battery products was cut from 9% to 6% on April 1 this year and will be eliminated on January 1, 2027.
CATL CFO Zheng Shu explained that the consumption tax is included in product prices, making it difficult to pass the additional burden downstream without renegotiating prices with customers. Discussions on cost-sharing arrangements remain underway.
The export rebate reduction was not fully reflected in second-quarter sales because of the timing difference between shipments and revenue recognition. Its impact was more fully reflected in the third quarter.
The consumption tax will apply throughout the fourth quarter, compared with only September in the third quarter. Management said future profit per unit would depend on progress in sharing the tax burden and the sales contribution from new products with higher margins.
JPMorgan has downgraded CATL’s Hong Kong shares to Neutral and lowered its earnings forecasts, while maintaining an Overweight rating on its A-shares, according to 21jingji.
The bank is concerned that the combined effects of battery consumption taxes, reduced export rebates and trade barriers could cause industry profitability to deteriorate faster than expected, with automaker customers’ own profits already under pressure.
CATL management, however, views some of the quarterly earnings pressure as temporary. It expects new products, new technologies and negotiations to share costs with customers to help sustain long-term profitability.
The company remains positive on demand, saying growth of 20% to 30% in global power and energy storage battery demand is achievable in 2027, supported by commercial vehicle electrification, the European market and overseas energy storage demand.
The system pairs a swappable main battery with a 77-kWh range-extension battery to improve battery utilization and lower fleet operating costs.
($1 = 6.7192 yuan)
