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Tesla, BMW’s EV battery manufacturer, CATL, doubles profits in Q2 earnings

Chinese EV battery maker CATL continues its reign as the world’s largest battery manufacturer after posting robust growth in its Q2 earnings.

As the transition to electric vehicles in the auto industry gains momentum, the need to lock up critical EV battery materials is becoming evident.

Automakers are scrambling to lock up deals with EV battery makers to ensure they have the raw materials to ramp production and hit their electric vehicles targets. For example, Volkswagen and Mercedes-Benz yesterday announced deals to source minerals from Canada.

Meanwhile, CATL is a critical supplier for leading EV makers like Tesla, BMW, and Volkswagen, to name a few. The battery supplier has now ranked number 1 in EV battery usage for the fifth straight year.

Despite concerns over economic growth in China, CATL’s earnings continue surging. Lockdowns in China due to Covid caused significant supply chain issues as factories and plants were shut down.

EV makers in China are feeling the pressure this year as a result. For example, XPeng, a leading EV producer in China, reported 7,000 less deliveries in the second quarter than its peak of 41,751 in Q4 2021.

CATL is overcoming these issues with major EV partnerships and a dominant share of the growing EV battery market. The battery manufacturer helped Tesla scale production at Gigafactory Shanghai to become the most prominent global EV factory.

The success is fueling CATL’s growth outside of China. The company first announced a $1.96 billion battery factory in Germany (to support german automakers ramping EV production), with an 8 GWh battery capacity annually. Then, earlier this month, the battery giant said it would invest $7.4 billion into a 100 GWh battery plant in Hungary, Europe’s largest.

The new investments may seem extreme, but as you will see from CATL’s Q2 earnings, the company is growing rapidly. Furthermore, more battery capacity will be needed to support the soaring demand for EVs.

CATL continues success in Q2 earnings despite industry headwinds

Even though global economic conditions are crumbling due to soaring inflation and geopolitical tension, EV sales continue picking up.

In China, EV sales rose 120% in the first half of 2022, according to the China Association of Automobile Manufacturers. In fact, most automakers are seeing an uptick in EV sales this year.

That being said, CATL continues controlling the EV battery market with 34.8% of the share in the first half of 2022, up from 28.6% last year. South Korean LG Energy Solution, which also supplies major EV makers like Tesla, GM, and Ford, earned second.

However, CATL seems to be weathering the storm better than its counterpart. For one thing, CATL’s revenue rose a massive 158% in Q2 from last year, reaching 64.29 billion yuan (about $9.36 billion).

CATL did feel some pressure on margins as battery metal prices remain elevated. Lithium prices are up 343% in the past year and look to be approaching record highs. Despite this, CATL’s net profit grew 164%, reaching over $974 million in its Q2 earnings, according to Reuters.

To help combat rising battery costs across the industry, CATL says it has entered into long-term contracts with suppliers, which will help ease costs. CATL also mentions in its Q2 earnings that it signed agreements with Ford and other automakers in the US as the new Inflation Reduction Act is likely to drive demand for EVs with new tax incentives.


Electrek’s Take

There’s no denying the need for EV batteries is critical; automakers are looking to ramp EV production, batteries, and the materials to make them as they are becoming increasingly scarce.

Battery manufacturers like CATL and LG are working to increase supply to ensure the EV rollout is successful. The largest EV battery maker in the world continues getting bigger, as its Q2 earnings show.

It’s no surprise to see CATL’s sales soar as EV makers look to lock up deals for batteries – but what is surprising is how well the company is handling the macroeconomic changes.

Despite growth concerns in its primary market, the battery manufacturer is expanding into nearly every region, which will help cushion the impacts.

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Avatar for Peter Johnson Peter Johnson

Peter Johnson is covering the auto industry’s step-by-step transformation to electric vehicles. He is an experienced investor, financial writer, and EV enthusiast. His enthusiasm for electric vehicles, primarily Tesla, is a significant reason he pursued a career in investments. If he isn’t telling you about his latest 10K findings, you can find him enjoying the outdoors or exercising