Amidst intense industry competition and a push to reduce costs, Contemporary Amperex Technology Co., Limited (CATL), the world’s leading battery manufacturer, has scaled back on research and development (R&D) investments and shifted its cost management upstream. Despite these challenges, CATL reported substantial profits in the first half of 2024.
On July 26, CATL released its first-half 2024 results, showing total revenue of RMB 166.77 billion ($23.03 billion), a year-on-year decrease of 11.88%. Despite the decline in revenue, CATL’s net profit attributable to shareholders increased by 10.37% to RMB 22.87 billion ($3.16 billion).
The competitive landscape has been influenced by BYD’s strategy of claiming “electric is cheaper than oil,” which intensified a price war in the industry. This price competition led CATL to reduce its battery prices, passing cost pressures onto upstream suppliers. Due to its significant procurement volume, CATL secured lithium iron phosphate (LFP) materials at prices approximately 10% below the industry average.
Cost pressures along the supply chain have squeezed profits, with profit margins in sectors such as separators, electrolytes, anodes, and cathodes dropping to 10%, 5%, 0%, and -6%, respectively. Notably, copper foil costs have risen significantly, now accounting for nearly 20% of battery costs, second only to cathode materials.
Reflecting on the competitive environment, CATL reduced its R&D investment to RMB 8.59 billion ($1.19 billion) in the first half of the year, down from RMB 9.85 billion ($1.36 billion) in the same period last year. The company also decreased its R&D personnel by 846 employees, highlighting a more conservative approach to innovation.
CATL’s strategy has shifted toward maintaining market share and profitability. This adjustment includes reducing upstream costs and expenses while enhancing its profit margins. CATL’s gross profit margin for power battery systems was 26.90%, and for energy storage battery systems, it was 28.87%, both exceeding industry averages.
CATL continues to leverage vertical integration, including battery materials, recycling, and mining operations across North America, Australia, Africa, and South America. This integration enhances CATL’s bargaining power upstream and helps stabilize its supply chain costs. CATL’s upstream and downstream synergies include partnerships with Guangdong Brunp for recycling and several global mining operations for raw material supply.
In the first half of 2024, CATL’s capacity utilization rate increased to 65.33% from 60.5% last year. While CATL’s current production capacity is 323 GWh, up from 254 GWh in the same period last year, the pace of new capacity construction has slowed, with capital expenditures reduced by 25% to RMB 13.83 billion ($1.91 billion).
Domestically, CATL’s power battery installations reached 93.31 gigawatt-hours in the first half of 2024, raising its market share by 2.97 percentage points to 46.38%. In the LFP battery segment, CATL regained the top spot with a market share of 37.19%, surpassing BYD’s 35.79%.
Internationally, CATL is expanding into overseas markets, with overseas revenue reaching RMB 50.529 billion ($6.98 billion), accounting for 30.30% of total revenue. The gross profit margin for overseas operations was 29.65%. CATL has disclosed plans for six overseas factories in Germany, Hungary, Indonesia, Thailand, and the United States, in collaboration with Ford and Tesla.
Building overseas factories presents challenges, particularly in Europe, where significant investment is required. CATL’s Thuringia factory in Germany has seen substantial investment but continues to ramp up capacity. In Hungary, construction is progressing with a planned capacity of 100 GWh but requires additional funding to become fully operational.
In the U.S., CATL’s License Royalty Service (LRS) model allows partners to handle plant and equipment setup, minimizing CATL’s direct capital expenditure risks. However, CATL must support supply chain construction, posing challenges in negotiations and profit-sharing.
Despite the fierce price wars and competitive pressures, CATL remains profitable and stable. The company’s focus on expanding overseas markets is expected to drive its next growth phase, although uncertainties remain. 
