Falling sales to widen profit gap between China’s EV makers, battery suppliers

Profit trajectories between automotive assemblers and electric vehicle (EV) battery producers in China are set to diverge further due to lacklustre car sales and buoyant demand for energy-storage systems. Leading players, including China’s EV battery king Contemporary Amperex Technology Ltd (CATL), would continue to attract buying interest in their shares, spurred by improved profitability, according to analysts. They added that flat vehicle prices, coupled with a dip in new car sales, had exacerbated concerns about Chinese carmakers’ already fragile earnings outlook. “A gap between car assemblers and suppliers’ business performance is widening as the global automotive industry accelerates its pace of electrification,” said Qian Kang, who runs a vehicle circuit board factory in Zhejiang province. “But only suppliers like battery and semiconductor makers will stand to benefit from the electrification drive, while carmakers will still pass profit pressure to other vendors.” The profit margin of the automotive industry – mainly car manufacturers – on the mainland stood at 3.2 per cent in the first quarter of 2026, compared with an average of 6 per cent for downstream industrial companies, according to the China Passenger Car Association (CPCA). A rollback of subsidies for car purchases and a gradual removal of tax incentives led to a 17.4 per cent year-on-year plunge in sales on the mainland in the first quarter, CPCA data showed. Deliveries of EVs, comprising pure electric and plug-in hybrids, plummeted 21.4 per cent year on year to 1.91 million units. Sales of pure EVs on the mainland accounted for 56 per cent of the global total in the first quarter, while deliveries of plug-in hybrids represented more than three-quarters of the world’s total, according to the CPCA. At present, only a handful of the nearly 50 mainland EV makers, including BYD, the world’s largest EV builder, and Stellantis-backed Leapmotor, have managed to turn a profit amid brutal price wars. EV battery producers, which posted annualised revenue growth of 45 per cent from 2019 to 2024, would continue to see substantial sales increases up to 2030, according to the Boston Consulting Group’s global automotive supply chain research report. Batteries and EV powertrain-related components were expected to post a 13 per cent annual revenue jump, the global consultancy said in its March report. It added that a survey of some 130 automotive component supplier executives globally showed that 53 per cent expected business conditions to worsen over the next 12 months. However, CATL, which holds more than a 40 per cent share of the global EV battery market, is expected to dominate as its products and technology continue to win over car assemblers and consumers. The company, based in Ningde, eastern China’s Fujian province, also accounts for 30 per cent of the world’s energy-storage system battery market, according to Seoul-based SNE Research. CATL, the world’s bestselling power battery maker for nine years in a row, reported a net profit of 72.2 billion yuan (US$10.6 billion) last year, up 42 per cent from a year earlier. The figure is only 8 per cent less than the combined profits of China’s top four listed carmakers – BYD, Chery, Geely Auto and SAIC. Capital Securities forecast that CATL’s earnings this year could reach 91.2 billion yuan, up 26.3 per cent from 2025. On Wednesday, CATL’s A shares climbed 5.5 per cent to an all-time high of 460 yuan amid heightened expectations for its energy-storage system business. The A shares have advanced 27.7 per cent this year. Its H shares added 2.1 per cent to HK$669, bringing the year-to-date gain to 34.4 per cent. Shares of the mainland’s two largest carmakers slumped on Wednesday, with BYD sliding 2.1 per cent to HK$98.90, and Geely Auto falling 1.9 per cent to HK$22.56.