As the leading player in the market of electric vehicle batteries, Contemporary Amperex Technology Co., Limited, commonly known as CATL, continues to dominate in terms of volume and market shareHowever, recent data indicates a notable decline in both metrics, raising questions about the future trajectory of the company.

On October 1, 2023, the China Automotive Power Battery Industry Innovation Alliance published the market data for SeptemberThe report highlighted significant shifts in the industry amidst the ongoing rapid growth in electric vehicle sales, particularly during the traditional peak period known as 'Golden September and Silver October'. This surge resulted in a remarkable 36.4 GWh in overall battery installations in China.

Despite maintaining its position as the industry leader, CATL has experienced some troubling developments regarding its installation volume and market share

Specifically, in September, CATL's battery installations were reported at 14.35 GWh—down 5% from the previous year's 15.12 GWhConsequently, it became the only company within the top five battery manufacturers to record a decline in this category.

Furthermore, CATL's power battery market share dipped to 39.41%, representing a decrease of over 8 percentage points year-on-year, marking the first instance this year that it has fallen below the 40% thresholdIndustry analysts suggest this drop may be linked to declining sales figures for Tesla, its largest customer, within the same timeframe.

According to the Passenger Car Association, Tesla's retail sales in China for September were reported at 43,507 units, a staggering 43.9% decrease compared to the same month last year

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Additionally, this represented a 32.7% decline from August's sales peak of 64,694 units, making Tesla the brand with the most significant drop among the top ten electric vehicle manufacturers for the month.

From January to September 2023, Tesla's cumulative sales in China reached 433,700 vehicles, reflecting a year-on-year growth of 36.4%, albeit at a slower pace than earlier in the yearIn the same timeframe, CATL’s market share fell to 42.75%. However, some industry insiders remain optimistic, suggesting that an increase in sales for the upcoming Model 3 could lead to a corresponding rise in CATL's battery installations.

Interestingly, CATL's reliance on major clients seems to be less pronounced than some competitors

Financial reports over the past two years indicate that revenue from its top three clients accounts for less than 50% of total revenue, contrasting sharply with BYD, which has a unique advantage of integrating battery production with its own vehicle manufacturingIn order for CATL to enhance its installation volume, it needs to rely on orders from automotive manufacturers.

As the year progresses, rumors have circulated regarding the potential change of battery suppliers by TeslaMany automotive manufacturers are gradually reducing their dependency on CATL, concerned about supply chain reliability and costsInstead, they are forging partnerships with second-tier suppliers such as CALB or EVE Energy.

Moreover, CATL also acknowledged in its mid-year financial report that the global market saw numerous battery enterprises launching extensive capacity expansion agendas

Several automakers are constructing their own battery production facilities to mitigate reliance on suppliersShould this influx of new capacity materialize as scheduled, a rapid increase in battery supply within the industry could intensify competition.

Currently, CATL and BYD together control over 70% of the battery market, achieving respective shares of 42.75% and 28.94%. However, both companies have seen declining market shares, which opens potential opportunities for secondary battery manufacturersIn the first half of 2023, CATL reported revenues of 189.246 billion yuan, with a net profit of 17.553 billion yuan, yielding a striking headline of '1 billion yuan per day'. Nevertheless, the company harbors its own concerns—its capacity utilization rate stands at 60.5%, down from 81.25% a year ago, and significantly lower than the record high of 95% in 2021.

Such a decline in capacity utilization for CATL reflects the overarching issue of excess capacity within the Chinese power battery sector

Data released by the Battery Alliance indicates that from January to September this year, China's cumulative production and sales of power and energy storage batteries reached 533.7 GWh, with power batteries accounting for approximately 92.1% or around 491.5 GWhDespite a cumulative sales figure of 425 GWh, the ratio of production to sales is close to 1.16; however, the battery installation volume for the same period stands at only 255.7 GWh, which is just 52% of production.

Nonetheless, CATL remains determined to expand its production capacityAs of the first half of 2023, the company had an established capacity of 254 GWh, with a utilization rate of 60.5% and an additional 100 GWh capacity under construction.

It is noteworthy that CATL's momentum in international markets remains undiminished