CATL's net profit doubled to 1.3 billion in the third quarter. Are all new energy vehicle companies working for it?

Unlike the bleak performance of automobile companies, CATL's third-quarter performance was dazzlingly good.

On October 12, CATL released its performance forecast for the first three quarters of 2018. The report showed that in the first three quarters of this year, CATL's net profit attributable to shareholders of listed companies was 2.335 billion to 2.423 billion yuan, a year-on-year decrease of 9.16% to 5.74%; the net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses was 1.954 billion to 2.032 billion yuan, a year-on-year increase of 80.57% to 87.75%.

In the third quarter, CATL's net profit attributable to shareholders of listed companies was 1.424 billion to 1.512 billion yuan, a year-on-year increase of 87.52% to 99.12%; after deducting non-recurring gains and losses, the net profit attributable to shareholders of listed companies was 1.257 billion to 1.335 billion yuan, a year-on-year increase of 119.88% to 133.48%.

CATL announced that the reason for the expected decrease in the company's net profit in the first three quarters is related to the income from the transfer of equity in the same period last year. Last year, CATL transferred the equity of Beijing Pride New Energy Battery Technology Co., Ltd. After deducting this impact, CATL's performance this year has increased significantly. Major investment institutions also unanimously believe that CATL's performance in the first three quarters exceeded expectations, and therefore gave it a "buy" or "increase holdings" rating.

On October 15, CATL's stock price rose to 69.15 yuan per share, driving up the price of several power battery-related stocks, bringing a ray of hope to the bleak auto stocks in recent years. CATL said that there are three reasons for the company's performance increase: first, the rapid development of the new energy vehicle industry has driven the growth of power battery market demand; second, the company has strengthened market development, released the production capacity of wire drawing in the early stage, and increased production and sales; third, the proportion of the company's expenses to revenue has decreased.

Ultimately, the surge in CATL's performance is related to its leading position in the industry. According to data from the China Association of Automobile Manufacturers, the cumulative production of domestic new energy vehicles from January to September was 735,000 units, a year-on-year increase of 73.0%; in the first nine months, the total installed capacity of power batteries in my country was 28.7GWh, a year-on-year increase of 103%. CATL's installed capacity was 11.7GWh, ranking first, with a market share of more than 40%.

In terms of quarterly data, according to Gaogong Lithium Battery data, CATL's lithium battery shipments in the first three quarters were 2.3GWh, 4.2GWh and 5.5GWh respectively, and its net profits were 269 million yuan, 428 million yuan and 1.3 billion yuan respectively, showing a clear upward trend.

However, in the same industry context of rising sales of new energy vehicles, vehicle manufacturers are not doing as well as CATL. The continuous increase in subsidy thresholds and the continuous decrease in subsidy amounts have led to reduced profits for vehicle manufacturers. Even BYD, JAC, BAIC and other companies with leading new energy vehicle sales can hardly rely on new energy vehicle business to support good performance.

According to industry research data, batteries account for 1/3 to 1/2 of the total cost of pure electric vehicles. The cost of batteries can play a decisive role in the selling price of an electric vehicle. Therefore, there have been claims that vehicle manufacturers are just "working" for battery manufacturers represented by CATL. Judging from the surge in profits of CATL in the first three quarters, this claim is not without reason.

Of course, vehicle manufacturers are aware of the problem, so they have been "forcing" battery manufacturers to lower prices. CATL once said that its annual R&D investment is 5%-6% of its sales, and by 2020, it will invest more than 30 billion to develop and upgrade production capacity; at the same time, some car companies are also trying every means to deeply participate in battery manufacturing, whether it is joint ventures with battery manufacturers, or investing in battery companies, or building their own battery production and R&D companies. Vehicle companies are constantly reducing the risk of their "lifeline" being controlled by others.

With the continuous development of the new energy vehicle market, CATL's performance is expected to continue to improve, but CATL is not without hidden worries. The price reduction demands of vehicle manufacturers, the covetous eyes of multinational battery manufacturers, the gap in technology levels, the instability of raw material prices and other problems are all objectively existing. CATL, which grew up in the policy "greenhouse", has achieved success outside the wall, but it still has inherent deficiencies.

As for vehicle manufacturers, competition in the new energy market is intensifying and policy support is weakening. Companies such as BAIC New Energy, which focus on low-end models, have encountered setbacks as subsidy thresholds continue to rise. It is hard to say whether they can gain a foothold in the future after full marketization.

Whether it is a battery company or an automobile manufacturer, without core technology and forward-looking strategic layout, it may only be able to "work" for others.