NextFin News - CATL shares fell 10% in two trading sessions into September 16, 2026, as investors re-rated the world's largest electric-vehicle battery maker on a deteriorating demand outlook, an accelerating push by automakers to build their own cells, and margin pressure that is eroding the company's once-commanding pricing power. The selloff came even as the company reported first-half net profit of RMB 43.3 billion, up 42% year on year - a gap between strong earnings and a weakening valuation that is now the central question for anyone holding the stock.
The Move: A 10% Drop With No Earnings Trigger
The decline ran across two sessions into September 16, extending a broader slide that began after the stock's May peak. Hong Kong-listed shares hit a six-month intraday low of HK$546.5 on September 8, and Shenzhen-listed shares traded down toward the RMB 330s - roughly 30% below the May high near RMB 470. The key point is what the move is not: it is not a reaction to a bad quarter. It is a reaction to what investors believe comes after this quarter.
Three forces are converging at once. First, demand signals are softening. Lithium carbonate prices have fallen through September, and industry reports pointed to a leading battery maker trimming September output rather than riding the expected peak-season build. Second, customers are becoming competitors. Li Auto, Xiaomi, GAC, Dongfeng and Geely are all moving battery development or sourcing in-house, and the pace quickened in the first two weeks of September. Third, policy is adding cost. A consumption tax on lithium-ion batteries took effect on September 1 at 2%, rising to 4% from September 1, 2027, while next-generation chemistries - sodium-ion and solid-state - are exempt through 2028. The exemption is not a detail; it is a signal that the tax is designed to push the industry toward the technologies that today's leaders have not yet monetized at scale.
There is a fourth, quieter factor that matters for sentiment. On July 24, alongside its earnings, CATL announced a share buyback of RMB 20 billion to RMB 40 billion - the largest single repurchase program in the A-share market - at up to RMB 573 per share, with the shares to be cancelled. Shareholders approved the plan on August 12. The first progress report, covering activity through August 31, showed zero shares bought. The cap was RMB 573. The stock was in the RMB 330s. When a company says its shares are undervalued and then does not buy at a new low, investors draw their own conclusion about confidence.
The Earnings Are Strong. The Multiple Is the Problem.
CATL is not losing money - it is losing its premium. That distinction explains the entire selloff.
The first-half numbers were, on their face, excellent. Revenue reached RMB 276.9 billion, up 54.8% year on year. Net profit attributable to shareholders was RMB 43.284 billion, up 41.98% - roughly RMB 240 million a day. The second quarter alone delivered RMB 22.5 billion of net profit, up 36.5%. Energy storage, the company's second growth leg, posted revenue of RMB 53.3 billion, up 87.54%, and now accounts for more than 19% of the total. By the end of the reporting period, CATL's effective battery system capacity stood at 525 GWh, with another 764 GWh under construction, and the company said utilization was essentially saturated at 94.86%.
Yet the stock is down about 30% from its May peak. Earnings grew 42%; the share price fell 30%. Every point of that divergence is multiple compression - investors are willing to pay less for each yuan of CATL earnings than they were four months ago. The gross margin tells part of the story: it slipped to 23.93% in the first half, from 25.02% a year earlier, even as EV battery system margins came under pressure. A two-percentage-point margin slip on RMB 277 billion of revenue is real money, and the market is asking whether it is a one-off or the first sign of a trend.
This is the first-order read of the selloff, and it is the one everyone has. The second-order question is harder: why is the multiple compressing now, when the earnings are still growing? The answer is that the market is not pricing CATL's earnings anymore. It is pricing CATL's bargaining position - and that is what the automakers' in-house battery programs are attacking.
De-CATLization: The Second Round Is Different
The first wave of automaker resistance to CATL came in 2022, and it faded. In July of that year, GAC Group chairman Zeng Qinghong put the grievance plainly at the World Power Battery Conference:
"Power battery costs already account for 40% to 60% of a car. Aren't I now working for CATL?"
Automakers wanted supply security and lower prices, so they brought in second suppliers. Then lithium prices fell, the cost pressure eased, and the urgency went with it.
The 2026 round is different, because it is about control of design rather than control of supply. In the first week of September, Li Auto announced that its self-developed 5C ternary lithium battery is already installed in the L8, L6 and i8, and will roll out across its entire lineup from the second half of 2026. On September 4, it invested RMB 2.65 billion for an 8.79% stake in Sunwoda Power, bringing its total holding to 11.17% and making it the second-largest shareholder. The division of labor is revealing: Li Auto leads the cell material formula, structural design, battery pack and BMS algorithms; Sunwoda builds the cells. The automaker is taking the high-value intellectual property and leaving the manufacturing to a partner.
Xiaomi moved the same week. On September 4 it launched the Dragon Armor Battery, developed electrochemically with CALB and manufactured by Sunwoda. Xiaomi's vice president for auto, Huang Zhenyu, said the decision rested on "technical synergy, capacity assurance, and precise product interaction." CATL had supplied more than 80% of the batteries in Xiaomi's earlier models; the company's four new range-extender models use no CATL cells at all.
The cost math explains why this will not stop. Batteries account for roughly 40% of an electric vehicle's cost. At a 20% gross margin, bringing that work in-house could add about eight percentage points of gross profit to an automaker's own books. Downstream automakers are losing money in China's price war; CATL reported a gross margin of more than 26% for 2025. Profit is being redistributed across the supply chain, and every automaker with volume has an incentive to capture it.
The immediate volume impact is contained - third-party installation estimates suggest Li Auto and Xiaomi together account for roughly 13% to 17% of CATL's China installations, and total volume has not collapsed. What is being lost is high-end model share, the segment that carries the best margins and the strongest technology halo. The shift that matters is not the orders CATL loses today. It is the bargaining structure: CATL is moving from "irreplaceable" to "one important option." That change matters more to valuation than any single lost contract.
Overcapacity: An Industry Built for Demand That Has Not Arrived
While customers are insourcing, the industry's capacity is growing faster than its demand. Planned domestic power and energy-storage battery capacity now exceeds 3,000 GWh. Actual demand in 2025 was about 1,500 GWh. Utilization across the sector is generally below 60%.
At the 2026 World Power Battery Conference in Yibin, Tian Qingjun, senior vice president of Envision Group, stated the obvious conclusion: planned energy-storage cell capacity has exceeded 2 TWh, "already far beyond the real demand of the global market." When capacity is roughly double demand, pricing power belongs to buyers, not suppliers - and CATL's customers are the buyers.
The same conference produced a warning from CATL's own chairman that underscores the strain. On September 3, Robin Zeng said more than 600 new vehicle models had been launched in China during 2026 - a rate of roughly three per day - and that shortened validation cycles were raising the risk of batch-level battery failures. The remark was framed as a quality concern, but it is also a window into the competitive tempo: automakers are launching cars faster than the traditional development cycle allows, and the pressure is flowing back through the supply chain to the cell makers.
This is where the cyclical-versus-structural call has to be made, and it is the call that determines whether the selloff is a buying opportunity or a re-rating that has further to go. The demand softness - lithium prices, output trimming, a slower peak season - is cyclical. It will revert when inventories clear and the next policy stimulus arrives. The erosion of bargaining power, however, is structural. Once an automaker has designed its own pack, written its own BMS code and qualified a second supplier, it does not go back to being dependent. Once capacity is twice demand, the discipline required to restore pricing power requires competitors to stop building - and no one has an incentive to be the first to stop.
The Counter-Thesis: Why CATL Still Wins
The bear case can be wrong, and it would be wrong if CATL's technology lead and scale keep it indispensable in the segments that matter. The evidence for that view is substantial.
From January to July 2026, CATL's global power battery usage was 289.6 GWh, up 26.6% year on year, and its global share rose from 38.0% to 39.9%. BYD, ranked second, is about one-third CATL's size. In China, CATL's first-quarter share of domestic new-energy passenger-vehicle power batteries rebounded to 50.1%, returning to half the market after five years. Scale of that magnitude is not easily displaced: it buys purchasing power on raw materials, spreads R&D across more units, and gives global automakers a single supplier that can deliver anywhere.
Ratings agencies and sell-side analysts are still on the other side of the trade. Fitch upgraded CATL to 'A' with a stable outlook on June 17, expecting its global EV battery share to exceed 40% in 2026, driven by the domestic shift to higher-end models that favor its premium nickel-cobalt-manganese lineup and by global automakers' adoption of cost-competitive lithium-iron-phosphate chemistry. Fitch forecasts global battery shipments to rise more than 35% in 2026 and to sustain a roughly 20% industry compound annual growth rate through 2030, underpinned by EV adoption, e-truck electrification, energy storage demand and AI data-center investment. JPMorgan maintains an Overweight rating with a price target of RMB 480 - roughly 45% above where the stock now trades.
The answer to the counter-thesis is not that CATL loses its crown. It will remain the largest battery maker in the world for years. The answer is that scale protects share more than it protects margins. In an industry with twice the capacity it needs and customers who are designing their own cells, the largest player can still grow volume while its multiple compresses - and that is exactly what the market is pricing now. The question is not whether CATL remains number one. It is whether number one can still command a growth-stock valuation.
What Comes Next: Scenarios and Signals
The forward look splits cleanly by time horizon, and the three horizons point in different directions.
Short term (sentiment and liquidity): After a 10% two-day drop, an oversold bounce is entirely possible. The buyback cap of RMB 573 acts as a psychological anchor - if management deploys even a fraction of the RMB 20-40 billion program below RMB 350, the trust gap narrows quickly and a floor forms. Watch the next buyback progress report; a zero-bought update would extend the pressure.
Medium term (fundamentals): The second-half earnings will show whether the gross margin decline from 25.02% to 23.93% is a one-off or a trend. Energy storage growth at 87% is the offset to watch - if it keeps accelerating, it can carry the group even as power-battery margins soften.
Long term (structure): The industry is shifting from a supplier-led model to an automaker-led model. CATL survives that shift - but as a utility-scale manufacturer with a technology edge, not as a monopoly. That supports a lower multiple even if earnings keep growing.
Three specific signals would falsify the re-rating thesis. First, if CATL's China domestic installation share falls below 45% in the next two quarterly reports, de-CATLization is accelerating and the cyclical read is wrong. Second, if Li Auto and Xiaomi's combined share of CATL's China installations rises above 20%, the high-end erosion is moving faster than the current 13% to 17% estimate. Third, if the company actually buys back shares below RMB 350, management's stated view that the stock is undervalued is being put behind real money, and the floor holds.
The scenarios follow from those signals. In the base case, CATL remains the global leader with roughly 40% share but trades at a cyclical multiple - shares range-bound in the RMB 300 to RMB 400 zone. In the upside case, energy storage demand accelerates faster than expected, the buyback is deployed, and automaker insourcing proves slower than feared; the stock re-rates back toward the RMB 450 to RMB 480 analyst-target zone. In the downside case, de-CATLization accelerates, domestic share breaks below 45%, and the consumption tax bites into export margins; shares test the RMB 280 to RMB 300 zone.
Who benefits and who is exposed is clear. The beneficiaries are the automakers that successfully insource - Li Auto and Xiaomi first among them - and the second-tier cell makers that gain share as designated alternates, such as Sunwoda and CALB. The exposed are CATL shareholders who bought the growth narrative at a growth multiple, and the smaller cell makers without scale or technology who get caught in the price war between the giants.
CATL is not being defeated by a competitor. It is being outgrown by its own customers - and that is a harder problem to solve than losing a price war.
Explore more exclusive insights at nextfin.ai.
