Author | Wang Lingfang
Editor | Qiu Kaijun
In 2022, Contemporary Amperex Technology (CATL)’s total operating income broke through the 300 billion yuan mark for the first time, reaching CNY 328.594 billion, a YoY increase of 152.07%, and achieved a net profit of CNY 30.7 billion, a YoY increase of 93%.
From a macro perspective, CATL’s data remains eye-catching, continuing to maintain high growth in revenue and profits. At the same time, CATL has also proposed a generous dividend plan, intending to distribute cash dividends of CNY 25.2 per 10 shares (tax included) to all shareholders, with a total distribution of CNY 6.155 billion in cash dividends; and to issue 8 bonus shares for every 10 shares from the capital reserve, undoubtedly boosting investor confidence.
According to SNE data, in 2022, CATL’s global power battery usage market share was 37.0%, ranking first in the world for consecutive 6 years; global energy storage battery shipment market share was 43.4%, ranking first in the world for consecutive 2 years.
In terms of products, CATL revealed in a conference call that it has signed a cylindrical product agreement with BMW, but the company believes that square-shaped batteries are still the better option.
From all aspects, such as revenue, profits, and customers, CATL’s leading position remains stable.
Gross profit YoY decrease, battery price increased for the first time
Even behind such impressive performance, CATL is still suffering from an extraordinary decrease in gross profit, resulting in profit loss.
In 2022, the gross profit margins of CATL’s power battery and energy storage battery decreased significantly from 22% and 28% in 2021 to 17%, respectively.
As can be seen, in the circumstances of a significant increase in raw material costs, CATL’s profits are also affected. The difference in gross profit margin and net profit margin levels compared to the previous years is quite significant, regardless of the absolute value or the extent of the decline.
Under the mechanism of metal linkage, the upstream cost increases ultimately spread to the price level of the battery system. In 2022, CATL ended the downward trend in the price of the battery system, and the terminal sales price appeared to have increased for the first time. In 2022, the average selling price of the power battery system increased from CNY 0.78/Wh in 2021 to CNY 0.98/Wh.
Fortunately, CATL (Contemporary Amperex Technology Co. Ltd.) has strong bargaining power in both upstream and downstream markets. The company’s profits are still within a bearable range despite the damage. It has also carried out a large-scale restoration through expansion.
CATL stated in a conference call that it expects its overall gross profit margin to be better than in 2022, as the company gains more initiative with the downturn of raw materials.
Insufficient upstream layout of lithium mines
In the 2022 annual report of CATL, the income from battery mineral resources first appeared, amounting to 4.5 billion yuan, a year-on-year increase of 116%, but accounting for only 1.37% of the revenue.
This indicates that mineral resources have not brought strong support to CATL. Even CATL’s investment in the mining sector is insufficient.
However, in recent years, CATL has deepened cooperation with high-quality suppliers in important upstream links such as positive and negative electrode materials, diaphragms, electrolytes, and equipment through investment and technology empowerment. This ensures the supply security and cost control of important raw materials and equipment.
Regarding lithium resources, CATL has made breakthrough progress in the lithium-containing porcelain clay mine project in Yichun, Jiangxi, the hard rock lithium mine project in Snowy Mountains, Sichuan, and the operation project of Bolivian salt lake.
In terms of nickel resources, CATL is actively participating in the construction of a full industry chain project from laterite nickel ore mining, smelting, ternary materials to batteries jointly invested by both parties in Indonesia. In terms of phosphate resources, CATL has also obtained a mining license for the Daping phosphate mine project in Guizhou.
CATL’s layout in some mineral resources
It is reported that CATL is also actively seeking lithium mines in Africa.
No matter what, CATL has a certain amount of resource reserves; by setting up the battery recycling system, it is also constructing a self-circulating supply chain.
Of course, with the fall in lithium prices, the difficult profit decline phase is over, and battery prices are entering a downward trajectory.
High-speed growth in production capacity and R&D
Leading scale and R&D investment are constantly consolidating CATL’s line of defense.
(1) Scale of production and sales continue to expand
By 2022, CATL’s lithium-ion battery production capacity will reach 390 GWh, output will reach 325 GWh and sales will be 289 GWh. Among them, the sales volume of power battery systems will be 242 GWh. Production capacity, output and sales have all doubled, while production and sales efficiency has also continued to improve.
CATL production capacity and output (GWh)
In addition, CATL’s under construction production capacity is still growing, from 140 GWh in 2021 to 152 GWh in 2022. This shows that CATL’s momentum in domestic and foreign production capacity layout is still strengthening.
CATL has many high-quality customers. In battery systems, overseas cooperation includes deepening global cooperation with Tesla, BMW, Daimler, Stellantis, VW, Ford, Hyundai, Honda, and other automakers. In China, it is strengthening cooperation with SAIC, Geely, NIO, Ideal, and Yutong and other automakers.
CATL is constructing the second factory in Europe in Hungary, with a planned production capacity of 100 GWh, to further improve its global strategic layout and help accelerate Europe’s electrification and energy transition.
Regarding the cooperation with Ford that people are concerned about, CATL stated that the specific way of cooperation is still under negotiation, and it is currently progressing smoothly.
CATL also revealed that the company’s overseas cooperation methods are not the only ones, and there will be new methods in the future.
In terms of energy storage batteries, CATL is also expanding the coverage of customers in various links. Overseas, it is deeply working with Tesla, Fluence, Wärtsilä, Flexgen, Sungrow, Hyosung and other global new energy industry leading customers in multiple regions and fields. Domestically, strategic cooperation agreements have been reached with China Energy Group, State Power Investment Corporation, China Huaneng, China Huadian, China Guangdong Nuclear Group, China Three Gorges Corporation, and China Energy Construction Group in the new energy field.In terms of medium-sized batteries, CATL and Ningde Times have established a joint venture to promote the development of segmented markets such as household energy storage, industrial and commercial energy storage, electric bicycles, drones, and power tools.
In addition, Ningde Times has promoted integrated innovation in multiple market application scenarios, covering fields such as smart mining, battery swapping services, light storage charging and testing, smart ports, and electric boats.
These customers and business distribution have laid the foundation for the sustained and stable development of Ningde Times.
(2) Doubling R&D Investment
Ningde Times, which is constantly expanding in scale, has not relaxed its investment in R&D. In 2022, Ningde Times’ R&D investment reached 15.5 billion yuan, a year-on-year doubling.
As of the end of 2022, Ningde Times had 16,322 R&D technical personnel, including 264 with doctoral degrees and 2,852 with master’s degrees.
Massive R&D investment has brought about technological leadership. Currently, Ningde Times has 5,518 domestic patents and 1,065 foreign patents, with a total of 10,054 domestic and foreign patent applications.
Now, Ningde Times has achieved breakthroughs in products such as sodium-ion batteries, Kirin batteries, and solid-state batteries. Ningde Times is promoting sodium-ion battery industrialization in 2023 and is also negotiating cooperation with customers on solid-state battery products.
Ningde Times also revealed that both sodium-electric and M3P will achieve mass production and delivery this year, but the quantity will depend on customer demand.
Currently, Ningde Times’ leading position remains unchanged. The large-scale production and sales volume and R&D investment have helped Ningde Times maintain its leading position in the industry and played a role in safeguarding the long-term development.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.