CATL: Price Battle, Can The King Break Through the Domestic Internal Competition Dilemma?

On the evening of July 30, 2025,$CATL(03750.HK) announced its second-quarter results for 2025. Here are the highlights:

1. Revenue fell short of expectations, mainly due to continued decline in battery unit prices: In the second quarter, CATL's revenue was significantly below expectations, primarily because battery unit prices continued to decline. The market had expected that the stabilization of lithium carbonate prices and contributions from European power battery shipments would offset the headwinds from the domestic price war, but it was still dragged down by the domestic power/storage price war.

2. Although gross margin increased quarter-on-quarter, it was mainly driven by improved gross margin in battery materials, while the core battery business gross margin continued to decline: Looking at CATL's gross margin, the overall gross margin for the first half of 2025 was 25%, up 2.3 percentage points from the second half of 2024. However, in the core battery business, the overall battery business gross margin fell from 25.2% in the second half of 2024 to 23% in the first half of this year, with the energy storage battery business experiencing a more severe decline, mainly due to the impact of the domestic price war.

3. However, CATL's overall capacity utilization rate returned to a high level: From the key capacity utilization data, CATL's capacity utilization rate has been at a good level since the second half of 2024, maintaining a high level of over 85%, reaching 90% in the first half of 2025, up 25 percentage points from the first half of 2024.

Dolphin Research believes that the improvement in CATL's capacity utilization is mainly due to the overall positive trend in the lithium battery industry and the increase in European power battery exports, as well as CATL's strategy of participating in the price war to capture market share with low prices.

4. However, despite the low-price strategy, the domestic power battery market share continues to decline, and downstream demand for low-priced LFP batteries remains strong, making it difficult for CATL to achieve its own alpha in the domestic market. It is more reliant on the beta bottom reversal of the lithium battery industry and overseas growth: Under the low-price strategy, CATL's market share in the domestic power battery market continues to decline, mainly because the share of LFP batteries is being taken by second-tier battery manufacturers. This reflects the severe low-price competition in the domestic LFP battery market, and CATL is also in the transition period between the first and second generation of its Shenxing batteries.

Fortunately, the "anti-involution" policy may help control the battery price war, and the decline in CATL's domestic power battery market share is expected to be limited. However, with the downstream application still showing strong demand for low-priced LFP batteries, it is difficult for CATL to achieve its own alpha trend in the domestic power market. It is more likely to benefit from the beta recovery of the domestic lithium battery industry and the high growth of European power exports.

5) Net profit attributable to the parent company was in line with expectations due to the quarter-on-quarter increase in gross margin and strict control of the three expenses: In this quarter, despite revenue falling short of expectations, CATL continued to strictly control the three expenses (especially management expenses, which were only 2.5 billion, below the market expectation of 3 billion), and asset impairment remained at a relatively low level, resulting in the release of net profit.

Second-quarter net profit attributable to the parent company was 16.5 billion yuan, up 2.5 billion yuan quarter-on-quarter, with net profit excluding non-recurring items at 15.4 billion yuan, also in line with market expectations of 15.5-16 billion yuan.

Dolphin Research's overall view:

From CATL's second-quarter performance, compared to the already high stock price, this financial report is average. The market had expected that CATL's strong performance in European power battery exports (with the penetration rate of new energy vehicles in Europe accelerating from January to May 2025, and CATL's market share in Europe continuing to rise) and higher unit prices for exported power batteries would offset the headwinds of low-price competition in the domestic LFP battery market (LFP batteries have weaker barriers compared to NCM batteries).

However, the actual unit price of power batteries this quarter continued to decline quarter-on-quarter, falling short of expectations. This may imply that CATL has started to participate in the price war with peers and is forced to use low prices to capture market share in LFP batteries, especially during the current transition period between the first and second generation of Shenxing products, and the situation in the domestic energy storage battery price war may be more severe.

Therefore, when the battery unit price declined quarter-on-quarter, the increase in gross margin was mainly stabilized by the improvement in battery material gross margin, while the core battery business gross margin continued to decline.

Finally, the net profit excluding non-recurring items was 15.4 billion yuan, in line with the market expectation of 15.6 billion yuan, due to the quarter-on-quarter increase in gross margin (driven by the improvement in battery material gross margin) and the strict control of the three expenses.

Fortunately, looking ahead to the second half of the year, Dolphin Research expects the lithium battery industry to remain in a good state, and CATL is also preparing for the second half of the year:

1) Downstream passenger car demand is expected to be secured in the second half of the year:

a. Passenger car segment: In 2025, there may be a need to start levying purchase taxes on new energy vehicles, coupled with the uncertainty of whether the state subsidy policy will continue, which may lead to a rush to install new energy vehicles in the second half of 2025;

b. Commercial vehicle segment: In the second half of 2025, commercial vehicles are expected to continue to benefit from the old-for-new subsidy policy, with a sustainable high growth trend year-on-year.

2) The power battery industry is also expected to benefit from the "anti-involution" policy at the domestic policy level, with the supply side expected to see control over backward production capacity: The core content of the "anti-involution" policy for the lithium battery industry is expected to focus on controlling production and raising prices, so the supply side may also see control over backward production capacity, maintaining a relatively balanced supply-demand relationship in the overall lithium battery industry.

2. CATL is also preparing for the second half of the year:

Inventory levels continued to increase significantly in the second quarter, rising by 12.5 billion yuan from the second half of 2024 to 72.3 billion yuan in the first half of 2025, with the largest increase in inventory being finished goods. CATL explained that both shipped goods and finished goods inventory have designated customers, belonging to healthy inventory, and are expected to be prepared in advance for the second half of the year.

Therefore, Dolphin Research believes that as long as the trend of increasing demand for low-priced LFP batteries in the domestic downstream power battery application side does not change, it is difficult for CATL to have an alpha logic for increasing market share in the domestic power battery segment, but it may continue to benefit from the beta recovery of the domestic lithium battery industry and the high growth of European power exports.

According to Dolphin Research's assumption of a shipment volume of 620-630Gwh this year (including the incremental assumption for Europe), CATL's current P/E ratio for 2025 in the Hong Kong stock market is around 25 times, which is already at a relatively high level, while the current P/E ratio in the A-share market is about 18-19 times, which is also at a relatively reasonable level, with limited upside potential at present.

Currently, there is still a price gap of about 45% between the Hong Kong and A-share markets mainly due to:

1) Low liquidity: Most shares in the IPO are locked by anchor investors (unlocked in November)

2) Foreign investor preference: CATL is the most heavily held A-share by overseas investors, and some funds can only hold H-shares due to compliance requirements. CATL is a global leader in power batteries, and similar targets are scarce in the Hong Kong stock market, making H-shares a core asset pursued by funds, driving a premium.

3) Passive funds and index inclusion expectations

CATL's H-shares have been included in the MSCI index, and the market expects CATL to be quickly included in the Hang Seng Index, which will attract a large amount of passive fund allocation, thereby increasing the valuation of H-shares.

The following is the main text:

I. Overall Performance: Revenue fell significantly short of expectations, mainly due to the decline in battery unit prices in the second quarter

1. Revenue was dragged down by the decline in battery unit prices, showing a trend of volume increase and price reduction:

In the second quarter of 2025, single-quarter revenue was 94.2 billion yuan, although it showed a trend of positive year-on-year growth (up 8% year-on-year), it was still below the market expectation of 100.8 billion yuan and some major banks' expectations of 104.7 billion yuan.

The revenue falling short of market expectations this quarter was mainly due to the continued decline in CATL's unit prices in the second quarter. While battery shipments were in line with the overall positive sentiment in the battery industry, CATL's performance also basically reached the upper limit of market expectations. Specifically:

a. Battery shipments: Power battery shipments continued to maintain a good growth rate

This quarter, battery shipments were 150Gwh, basically reaching the upper limit of market expectations for this quarter's shipments of 140-150Gwh, including:

Power battery shipments were 120Gwh, with a year-on-year growth rate of 47%, continuing to show a high growth trend.

Energy storage shipments were 30Gwh, although the year-on-year growth rate slowed, fortunately, this quarter was not significantly affected by the uncertainty of US tariffs, and overseas energy storage shipments in the first half of the year still accounted for more than half.

b. Battery unit prices continued to decline quarter-on-quarter, and CATL may have started using low prices to capture market share:

In terms of battery unit prices, according to Dolphin Research's estimates, the battery unit price in the second quarter has declined from 0.63 yuan/wh in the previous quarter to 0.56 yuan/wh this quarter. With the upstream raw material lithium carbonate price not declining significantly, the quarter-on-quarter decline in unit wh revenue has reached 11%. Combined with the high capacity utilization level in the first half of the year, Dolphin Research estimates that CATL may have started participating in the price war with peers this quarter, adopting a strategy of using low prices to capture market share.

From the performance of power and energy storage unit prices in the first half of 2025, the pressure on energy storage battery unit prices is greater:

1) The proportion of low-priced LFP in power batteries continues to increase, and downstream car manufacturers still face significant cost pressures, with power battery unit prices continuing to decline:

From the performance of power battery unit prices, the unit price of power batteries declined from 0.63 yuan/Wh in the second half of 2024 to 0.61 yuan/Wh in the first half of 2025. On the one hand, the domestic market's demand for low-priced LFP batteries continues to increase, so CATL's shipment structure also shows a trend of increasing the proportion of LFP batteries (the proportion of LFP batteries in CATL's domestic battery installations increased from 65% in the second half of 2024 to 70% in the first half of 2025), lowering the unit price of power battery shipments.

This quarter, the market originally expected that CATL's strong performance in European power battery exports (with the penetration rate of new energy vehicles in Europe accelerating from January to May 2025, and CATL's market share in Europe continuing to rise) and higher unit prices for exported power batteries would offset the headwinds of low-price competition in the domestic LFP battery market (LFP batteries have weaker barriers compared to NCM batteries).

2) The decline in energy storage battery unit prices is more severe:

From the unit price level of energy storage batteries, the unit price of energy storage batteries declined from 0.61 yuan/Wh in the second half of 2024 to 0.53 yuan/Wh in the first half of this year, with a quarter-on-quarter decline of 13%. This decline in unit price occurred even though the proportion of energy storage battery exports in the first half of 2025 still exceeded 50%. It can be foreseen that due to the lower technical barriers of energy storage compared to power batteries, competition is more intense, leading to a more severe price war situation, resulting in a more significant decline in the unit price of CATL's energy storage batteries.

Similarly, from the regional revenue distribution of CATL, it can be verified that the proportion of overseas revenue in the first half of this year has increased to 34% quarter-on-quarter, driven by the growth of overseas, especially European power battery shipments, and energy storage battery exports. However, the overall unit price level of CATL's batteries still declined from 0.62 yuan/Wh to 0.59 yuan/Wh quarter-on-quarter, reflecting that both power and energy storage batteries in the domestic market are still in low-price competition, with downstream applications of LFP power batteries and energy storage batteries focusing more on cost-effectiveness.

In terms of sales rebates (as a deduction from revenue, a price linkage mechanism where the company provides financial returns to downstream), since the price of lithium carbonate continued to decline this quarter, Dolphin Research estimates that sales rebates this quarter were around 3.6 billion yuan, accounting for 4% of revenue, further lowering the battery unit price this quarter.

2. Although gross margin increased quarter-on-quarter, the core battery business gross margin declined quarter-on-quarter:

Looking at CATL's gross margin, the overall gross margin for the first half of 2025 was 25%, up 2.3 percentage points from the second half of 2024. However, in the core battery business, the overall battery business gross margin fell from 25.2% in the second half of 2024 to 23% in the first half of this year.

Breaking it down, the decline in the gross margin of the energy storage battery business was more severe:

The gross margin of power batteries declined by 2 percentage points quarter-on-quarter to 22.4% in the first half of 2025, while the gross margin of energy storage batteries declined by 4 percentage points quarter-on-quarter to only 25.5% in the first half of 2025, mainly due to the decline in battery unit prices.

However, CATL's overall gross margin still showed a quarter-on-quarter improvement trend, mainly due to the significant quarter-on-quarter improvement in the gross margin of lithium battery materials, which increased from 12.8% in the second half of 2024 to 26% in the first half of 2025. CATL's battery material business mainly involves recycling and upstream precursors, and the core reason for the increase in gross margin is the rise in metal prices caused by international events. The company expects that although the long-term gross margin of this business is difficult to maintain at a high level, it will remain at a relatively high level due to resource scarcity.

This quarter, the warranty provision was 3 billion yuan (included in the cost of sales), accounting for 3.2% of revenue, with little drag on the cost of sales and gross margin, and is considered a normal provision.

II. However, the overall prosperity of the lithium battery industry is good, and CATL's capacity utilization level has returned to a high level

From the key capacity utilization data, CATL's capacity utilization rate has been at a good level since the second half of 2024, maintaining a high level of over 85%, reaching 90% in the first half of 2025, up 25 percentage points from the first half of 2024.

① The overall prosperity of the lithium battery industry is good:

From CATL's basic domestic power battery market, the overall prosperity is at a relatively good level.

In the second quarter of 2025, the year-on-year growth rate of domestic power battery installations reached 43%, and the year-on-year growth rate of demand returned to a good level, with the year-on-year growth rate of downstream new energy vehicle sales reaching 35%. The overall growth rate is still acceptable, but the growth rate of single-vehicle battery capacity reached 6%, mainly benefiting from:

a. This year, the proportion of pure electric models with higher single-vehicle battery capacity began to show a recovery trend;

b. The single-vehicle battery capacity of plug-in hybrid models continues to show a growth trend, and the battery capacity of plug-in hybrid models will gradually become a trend in the next two years (the transition from large fuel tanks + small batteries to small fuel tanks + large batteries in plug-in hybrid models);

c. The year-on-year growth rate of commercial vehicles with higher battery capacity in new energy vehicles continued to rise in 2025, mainly benefiting from the increased subsidies for new energy commercial vehicles in the old-for-new policy (the average subsidy standard per vehicle increased from 60,000 yuan to 80,000 yuan), and this trend is expected to be sustainable in the second half of the year;

From the overall supply-demand relationship in the domestic lithium battery industry, the current industry sales/production ratio also shows a quarter-on-quarter improvement trend, increasing by 5 percentage points from the first quarter to 72% in the second quarter, marking that the lithium battery industry has now moved away from the cyclical bottom and is in the early to mid-stage of recovery.

② The market share of overseas power batteries continues to increase, and Europe is expected to become CATL's largest incremental market for overseas power batteries

From the two largest markets for overseas electric vehicles, due to policy reasons, CATL can currently only export to the US through its asset technology authorization (LRS), so Europe is likely to be CATL's largest incremental market for overseas power batteries:

1. Growth in the European new energy vehicle market share

From the penetration rate of new energy vehicles in Europe, the market share in Europe showed a relatively obvious upward trend from January to May 2025, increasing from 23% in 2024 to 25.5% in 2025, with the penetration rate of new energy vehicles reaching 27% in May alone.

Although the compliance plan for carbon emissions of new energy vehicles in Europe has been relaxed in terms of time, changing from the original single-year assessment in 2025 to an average assessment from 2025 to 2027, providing a three-year window period, it will also drive European car companies to transition from fuel vehicles to new energy vehicles. At the same time, the demand for pure electric models will increase as a proportion of new energy vehicles (pure electric models have lower CO₂ emissions compared to plug-in hybrid models), so the penetration rate of new energy vehicles in Europe and the overall battery capacity per vehicle are both showing an upward trend.

2. CATL's own market share in Europe is expanding:

From CATL's market share in Europe, CATL's market share has shown a continuous expansion trend since 2025, increasing from 35% in 2024 to 44% from January to April 2025.

From the market share of several major players in Europe, CATL continues to erode the market share of LG/SK On, partly because after the gradual decline of electric vehicle subsidies in Europe, the demand for economical electric vehicles will continue to increase. CATL's dual layout of LFP + ternary routes, compared to LG/SK On/SDI, which mainly focuses on ternary, with LFP just starting, CATL's LFP batteries have a price advantage and can better meet the demand for economical electric vehicles in Europe.

At the same time, CATL is also accelerating the construction of factories in Europe to avoid tariffs and logistics costs, making the price of power batteries in Europe more competitive and seizing the time window for the continuous increase in demand for new energy vehicles under the 2025-2027 carbon emission regulations in Europe.

Therefore, it can be seen that in the fiercely competitive domestic power battery market, the European market is instead a very good opportunity for Chinese battery manufacturers to layout, and CATL can both enjoy the growth of the new energy vehicle market share in Europe and achieve a trend of expanding market share.

Dolphin Research expects that with the overall penetration rate of new energy vehicles in Europe reaching 28%-30% in 2025, and CATL's market share in Europe continuing to increase to 48% (from 35% in 2024), the European market can contribute an incremental power battery shipment volume of 40-50Gwh to CATL in 2025.

Compared to the total shipment volume of 380Gwh in 2024, this is equivalent to contributing 13 growth points, and the unit price per wh shipped to Europe is nearly twice that of the domestic market, so the corresponding revenue growth from this shipment volume is even higher.

③ CATL has started using a low-price market capture strategy, but the current domestic power market share is still declining:

In the second quarter, despite a good proportion of exports, CATL's battery unit prices continued to decline, and it is expected that CATL adopted a low-price market capture strategy for both power and energy storage batteries in the domestic market in the second quarter, especially with a larger decline in energy storage battery unit prices, to meet the demand for low-priced LFP batteries and energy storage batteries in downstream applications,

a) However, from CATL's overall market share, under low-price competition, CATL's domestic power battery market share continues to show a downward trend:

From the trend of CATL's market share in the domestic market (excluding BYD, which mainly supplies itself), CATL's market share in the domestic market continues to show a downward trend, and the fundamental reason for the decline is still the continuous decline in the market share of LFP batteries.

At the industry level, the proportion of low-priced LFP batteries continues to increase, reflecting the high degree of involution in the domestic terminal car sales, leading to high demand for cost-effective models. Car manufacturers can only achieve a balance between gross margin and pricing by purchasing LFP batteries under the demand for low pricing.

CATL is expected to have also reduced prices in the domestic power battery segment this quarter, but CATL's overall market share of LFP batteries continues to decline. In the second quarter, CATL's market share (excluding BYD) has continued to decline by 4 percentage points from 59% in the first quarter of 2025 to about 55%. Although CATL has always maintained a high level of market share in NCM high-end batteries, it is still losing market share in mid-to-low-end LFP batteries.

CATL's market share of LFP batteries (excluding BYD) declined by 4 percentage points to 54.7% this quarter, mainly being taken by second-tier battery manufacturers such as CALB/Sunwoda/Zhengli New Energy. This reflects the severe low-price competition in the domestic LFP battery market, and CATL is also in the transition period between the first and second generation of its Shenxing batteries.

III. The lithium battery industry is expected to remain prosperous in the second half of the year, and CATL is also preparing for inventory

1. The lithium battery industry is expected to remain prosperous in the second half of the year

1) Downstream passenger car demand is expected to be secured in the second half of the year:

2. CATL is also preparing for the second half of the year:

IV. Reasonable control of the three expenses, with some release of net profit

In this quarter, despite revenue falling short of expectations, CATL continued to strictly control the three expenses (especially management expenses, which were only 2.5 billion, below the market expectation of 3 billion), and asset impairment remained at a relatively low level, resulting in the release of net profit.

April 15, 2025, financial report commentary "CATL: Has the trough passed, and is dawn not far away?"

April 16, 2025, conference call minutes "Full capacity, has CATL started cleaning the battlefield?"

March 16, 2025, conference call minutes "Before the battery battle at dawn, did CATL make a move to end it?"

March 16, 2025, conference call minutes "CATL 4Q23 conference call minutes"

October 19, 2023, financial report commentary "CATL: When will the trillion-dollar era return as growth slows?"

October 20, 2023, conference call minutes "As growth slows, does CATL continue to maintain gross margin while losing market share?"

July 25, 2023, financial report commentary "CATL: Stable enough, but has it become 'mediocre'?"

July 25, 2023, conference call minutes "CATL minutes: Attacking overseas, maintaining gross margin"

April 21, 2023 "CATL: Perfect counterattack expectations? A strong foundation is key"

April 21, 2023 "CATL: Grasping both energy storage and overseas, maintaining stable gross margin (minutes)"

March 9, 2023, financial report commentary "CATL: Car manufacturers cry, batteries laugh, how far can this profit go?"

March 9, 2023, conference call minutes "CATL: 'The current gross margin is a reasonable level' (minutes)"

October 22, 2022, financial report commentary "CATL, the darling of the stars, the real test of love is next year"

October 22, 2022, financial report conference call minutes "Lithium prices will go down next year, and the penetration rate of new energy vehicles will be faster than expected"

August 24, 2022, financial report commentary "CATL: Small setbacks are just interludes, YYDS is the main theme"

August 24, 2022, financial report conference call minutes "The profit of power batteries in the second half of the year will not be worse than the second quarter"

May 20, 2022, power battery sector overview "The collapse of new energy, has the investment divergence point arrived?"

April 30, 2022, financial report commentary "The performance bomb arrived as expected, is the era of CATL over?"

April 30, 2022, financial report conference call "CATL doesn't care about performance bombs, market share and customer structure are the core observation indicators"

April 22, 2022, financial report commentary "The dispersion of people's hearts kills valuation, CATL faces a dual test of profitability and confidence"

October 28, 2021, financial report commentary "Facing the YYDS of CATL, should we still respect the valuation?"

August 25, 2021, financial report commentary "CATL: Investment is not just a story in the distance, but also the current performance"

July 14, 2021, company in-depth "CATL (Part 2): Is faith building a 'rigid bubble'?"

July 7, 2021, company in-depth "CATL (Part 1): Where is the confidence in a trillion-dollar market value?"

Risk disclosure and statement of this article: Dolphin Research Disclaimer and General Disclosure