Has CATL "Fallen from its pedestal"? A profound shift in profits, discourse power, and industry cycles
Hello everyone, I'm your financial analyst. Recently, CATL, once revered by investors as the "King of Batteries," has seen its stock price trend become perplexing to many. Despite ongoing growth in its performance, why has the stock price plummeted by a third from its peak?
Today, we'll break down this in simple terms to understand what's really happening behind the scenes. In short, this is not just a problem for CATL; it's an inevitable result of the entire new energy vehicle industry transitioning from a phase of rapid, unregulated growth to one of more focused, efficient development.
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Summary of Key Points: From "Leverage" to "Cost," a Change in Status
The core logic of this article can be summarized in one sentence: During the period of rapid industry growth, when the "cake" was expanding, CATL was the "leverage" that everyone sought; but as the industry's growth slowed down and competition intensified, it became the "largest cost factor" that car manufacturers urgently needed to manage.
Over the past two years, CATL's decline was seen as an opportunity, as the industry was still booming, and having batteries meant having cars to sell. However, now that the penetration rate of new energy vehicles has exceeded 50% and growth rates have slowed to single digits, car manufacturers are no longer willing to tolerate high costs and long payment terms. They are turning to alternative suppliers and developing their own batteries to regain control over profits and influence in the market. As a result, the market has re-evaluated CATL's value: it is no longer seen as a high-growth tech stock but as a mature manufacturing leader, and its valuation has returned to a more realistic level.
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In-Depth Analysis: Understanding the Logic Behind the Shift Away from CATL in Four Dimensions
1. **The Awakening of Car Manufacturers:** No Longer "Employees," but Owners of Their Own Destiny
Previously, car executives would complain that batteries accounted for 60% of costs and that they were essentially working for CATL. Now, this has turned into action:
- Li Auto's "Choose One" Strategy: Li Auto has made significant moves, investing 2.65 billion yuan to become the second-largest shareholder in Xindawang Power and replacing all models in the new Li L8 with Xindawang batteries, thus removing CATL as the primary supplier. Even for its high-end MEGA model, Li Auto decided to use its own batteries due to CATL's limited 5C battery production capacity.
- Xiaomi's Self-Sufficiency Route: Xiaomi's newly released Pengcheng N70 and N90 models use its own "Longjia Battery System," with cells supplied by Zhongxin Innovation Aviation and Xindawang. CATL didn't even get a chance to supply them.
- Industry-wide Trend: This is not unique to Li Auto and Xiaomi. Mainstream car manufacturers like Xpeng, ZeroRun, and HarmonyOS are also expanding their list of alternative suppliers. The previous approach was to use CATL for their main models and others for less critical ones; now, even their main high-end models are switching suppliers.
Simple Explanation: It's like when there was only one Michelin-starred restaurant (CATL) that everyone wanted to dine at, even if it was more expensive and required a long wait. Now, there are many other good restaurants (second-tier battery manufacturers) offering discounts and faster service. Car manufacturers naturally don't want to be dependent on one supplier and are looking for more options to control costs and quality.
2. **Profit Imbalance:** The Dominance of CATL Causing Issues for Both Upstream and Downstream
Why are car manufacturers so eager to switch batteries? Because they are too expensive, and CATL earns too much, putting pressure on both parties:
- Profit Disparity: In the first half of 2026, CATL's net profit was 43.284 billion yuan, while the 15 leading listed car manufacturers combined only had 21.05 billion yuan—less than half of CATL's. In 2025, the entire lithium battery industry's net profit was 96.786 billion yuan, with CATL accounting for 74.6%. This means that CATL took three-quarters of the industry's profits.
- Car Manufacturers' Critical Margin: In 2025, the average net profit margin for car manufacturers was just 2.6%, with many losing money on each car sold. With batteries accounting for 30%-40% of the cost, a 5%-10% difference in price can make a huge difference for their profitability.
- Upstream Suppliers' Struggles: CATL also delays payments, taking nearly 9 months to pay its suppliers but collecting payments from car manufacturers in less than 2 months. This double-pressure situation has led to financial difficulties for upstream suppliers, with some even filing lawsuits against CATL for unpaid debts.
Simple Explanation: Imagine a food chain where CATL is the top predator. When there were many prey (car manufacturers), it could take a large share of the profits. Now, with fewer prey and less profit, CATL still wants to take the majority and requires upstream suppliers to pay in advance, while car manufacturers have to pay high fees. This forces suppliers to seek alternative partners or learn to be more independent.
3. **The Industry's Turning Point:** From Growth Frenzy to Competitive Stagnation
Why didn't this matter before? Because the industry was growing rapidly:
- Penetration Rate Peak: The penetration rate of new energy vehicles reached 25.6% in 2022, but it's expected to drop to 55% in 2026, indicating that most potential buyers have already made their choices.
- Growth Slump: Sales growth has slowed from 93.4% in 2022 to 10.1% expected for 2026, and the growth rate of battery installations has also dropped from 42% to 14%.
- CATL's Revenue Slower: CATL's own revenue growth has slowed from 152% to 17%, and its domestic market share has declined for the first time, from 45.6% to 43.4%.
Simple Explanation: It's like a new trendy奶茶 shop that was extremely popular at first, with long queues. Now, with many similar shops, customers have more options and are more price-sensitive. Car manufacturers no longer want to be at the mercy of one supplier and are looking for cheaper and better alternatives.
4. **Valuation Reset:** From "Tech Growth Stock" to "Manufacturing Leader"
Finally, let's talk about why the stock price has dropped:
- Valuation Shift: In May 2025, with a market value of 2.2 trillion yuan, CATL was valued at 30x PE, reflecting expected annual profit growth of over 25% over three years.
- Lowered Expectations: Due to declining market share, trade barriers, and price competition in the energy storage sector, market expectations for CATL's profit growth have been lowered to around 10% over three years.
- Return to Reality: A 10% growth rate corresponds to a valuation suitable for a mature manufacturing company, which is around 10-15x PE. The stock price drop is not because CATL has improved; it's because it has grown and no longer meets the expectations of explosive growth, so the market is evaluating it more pragmatically.
Simple Explanation: Investors were buying CATL because they saw its potential to disrupt the industry, similar to Apple or Tesla. Now, although it remains a leader, it's more like a stable, traditional manufacturing giant. Its valuation has adjusted accordingly.
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Conclusion: The Cold Wind Reveals the True Value
CATL hasn't "sunk"; its technology, scale, and cost control are still among the best in the industry, and no one can shake its leading position in the short term. However, being "excellent" doesn't necessarily equate to a high valuation. The new energy industry has moved beyond its most chaotic phase and is now focusing on efficiency, cost, and supply chain resilience. For CATL, the challenge is to show that it still deserves a high premium or at least maintain a reasonable profit level through innovation and cost optimization in a competitive market.
For investors, the current downturn is the market shedding excess optimism. Once the bubble bursts, we'll see who is truly strong and who is just surviving. CATL needs to deliver tangible results to prove that the current low valuation is a fair starting point, not the end of its potential. The trend of shifting away from CATL and the resulting stock price fluctuations may continue for some time.