CATL, Not Talking About Solid-State Batteries

CATL’s cautious approach to solid-state batteries contrasts with the optimism of some peers. After releasing its 2025 annual report on March 9, CATL responded to the progress of solid-state batteries:

“The company’s attitude towards technology and engineering has always been very rigorous. Our products will only be introduced to the market when their comprehensive performance and safety are fully leading and truly ready for mature commercialization.”

Two years ago, CATL’s chairman, Zeng Yuqun, stated that at that time, the technology of solid-state batteries was not yet sufficient. CATL paid more attention to sodium-ion batteries using semi-solid materials and condensed-state batteries. This time, the progress has been validated in the annual report.

Following this performance release, CATL calmly stated that by optimizing upstream resource integration and expanding in areas like sodium-ion batteries, it is more confident in this lithium carbonate cycle. Institutions such as JPMorgan Chase, Nomura, and Jefferies all expressed optimism about CATL’s future development. Jefferies even set a target price of 522 yuan.

On March 11, during trading, CATL briefly returned to 400 yuan.

1. The Rise of CATL

In 2025, CATL’s revenue reached 423.7 billion yuan, a 17.0% increase year-over-year; net profit attributable to shareholders was 72.2 billion yuan, up 42.3%, both hitting record highs. Its lithium battery sales totaled 661 GWh, nearly 40% growth, including 541 GWh of power batteries with a market share of 39.2%, maintaining the global number one for nine consecutive years; energy storage batteries shipped 121 GWh, with a market share above 30%, also firmly holding the top spot globally.

As a leader, CATL demonstrates strong profitability quality, with an overall gross margin of 26.3%, about 24% for power batteries, and nearly 27% for energy storage.

This primarily stems from economies of scale. By 2025, the company’s capacity will reach 772 GWh, with a utilization rate of 96.9%. At year-end, under-construction capacity is 321 GWh. According to Dongwu Securities’ estimates, by the end of 2026, total battery capacity could exceed 1,200 GWh, with planned production over 1,100 GWh and cell shipments between 900 and 1,000 GWh, representing at least a 40% year-over-year increase.

The world’s first TWh-level battery factory is on the horizon, showcasing CATL’s advantages.

Meanwhile, although CATL’s order locking and bargaining mechanisms are somewhat controversial, their effectiveness is remarkable. According to CATL, price transmission mechanisms, cost reduction, efficiency improvements, and technological innovation together enhance their ability to absorb cost fluctuations.

By the end of 2025, the company’s contract liabilities reached 49.2 billion yuan, up 76.9% year-over-year, accounting for 11.6% of that year’s revenue—returning to double digits for the first time since 2020. Downstream customers are willing to lock in capacity through “prepayments + long-term orders,” and with the raw material price linkage mechanism established between CATL and automakers, the rebound of lithium carbonate from 59,000 yuan/ton to over 170,000 yuan/ton has had little impact on CATL.

In 2025, CATL’s R&D expenditure reached 22.15 billion yuan, with an R&D expense ratio of about 5.2%. Capital expenditures increased by approximately 36% year-over-year, with over 12 billion yuan in cash outflows for fixed asset purchases in the fourth quarter alone, and under-construction capacity of 321 GWh. Despite this, nearly half of its profits are distributed as cash dividends, demonstrating its strong industry dominance.

In January this year, CATL signed long-term procurement agreements with Rongbai Technology and Fulin Precision, with estimated procurement volumes of 3 million tons each for lithium iron phosphate cathode materials. Additionally, CATL participated in Fulin’s capital increase plan to expand capacity.

By 2025, the market share of lithium iron phosphate vehicles has surpassed 80%. As solid-state batteries approach industrialization, global automakers and battery companies are planning pilot lines and small batch plans for 2026–2028. CATL’s strategy of high profitability, high R&D investment, and high capital expenditure captures all opportunities while defending against most risks.

2. Sodium-ion is Spot, Solid-state is Futures

For CATL, sodium-ion batteries need to scale up first; solid-state batteries do not need to rush.

In 2025, CATL launched a new generation of “sodium batteries,” upgrading energy density, low-temperature performance, rate capability, and cycle life, with adoption intentions from automakers like Changan Avita. Whether at previous supplier and investor conferences or in the new annual report, CATL emphasizes that by 2026, sodium batteries will be widely used in swap stations, passenger vehicles, commercial vehicles, and energy storage.

Fluctuations in lithium resource prices affect lithium battery companies, but sodium resources are nearly non-scarce. Costs depend more on process and scale, offering better stability. For CATL, this is more than just cost considerations—pursuing solid-state batteries is ultimately about energy density, safety, and durability. End customers care more about these practical aspects than the technical route itself.

Why did BYD’s release of the second-generation Blade Battery cause such a stir domestically and internationally? Because it achieved significant breakthroughs in charging and range. From CATL’s perspective, sodium batteries currently have the capacity to achieve similar results.

The inherent manufacturing challenges of solid-state batteries are well known. Comparing sodium-ion and solid-state batteries, sodium-ion can handle short-term demands—serving energy storage, AI data centers, and industrial and commercial power reforms—by controlling costs and ensuring stable delivery. To break through the ceiling of solid-state batteries, when applications like flying platforms and humanoid robots emerge, it won’t be too late to release them.

This ultimately comes down to marginal effects—if current investments only yield a tenth of the output, their necessity diminishes. But if substantial investment in certain scenarios (excluding past R&D accumulation) can produce nine-tenths of the output, then it becomes a better choice.

A more subtle point is that the mass production process of sodium-ion batteries can, in turn, boost future valuations. If the sodium-ion system succeeds, could further validated and tested solid-state batteries break through existing limits and reshape external perceptions? This is a promising outcome worth looking forward to.

3. Facing New Challenges in Lithium Industry

Beyond technological routes, CATL also faces some controversies.

First, a second round of negotiations with upstream suppliers.

The previous lithium price rollercoaster taught all battery companies a lesson. CATL once enthusiastically bought mines, but Bolivia’s lithium salt lake project was halted due to political instability; its ceramic clay and lithium micas projects in Yichun were temporarily shut down last year. The industry realized that lithium ore is a resource—resources cannot be ignored in favor of just industry chain value.

Now, with lithium carbonate prices rising again—futures approaching 190,000 yuan/ton and spot prices oscillating around 150,000 yuan—CATL states that this round of lithium price increase is significantly weaker than the last. Through price linkage and proactive supply chain planning, customer cooperation remains stable. In fact, it has turned lithium prices from a black swan into a controllable cost factor. However, passing costs downstream remains a core controversy.

Media reports indicate that in Q4 2025, most battery companies turned losses into profits or saw significant gains. CATL’s annual net profit is around 70 billion yuan, but profit margins in the automotive industry fell to 4.1%, with only 1.8% in December.

For automakers, not producing batteries and only selling cars is like giving up the most profitable segment. Domestic industry strength provides them with the conditions to enter the supply chain. As a result, new technologies like solid-state batteries have become opportunities for many automakers to leap ahead.

This explains why CATL emphasizes in its annual report: “Only through continuous investment in R&D and maintaining technological leadership can the company remain invincible.”

“Safe ternary batteries can be made, but unsafe lithium iron phosphate cannot.” This famous saying ultimately relies on long-term R&D to realize. It aligns with regulatory expectations—“anti-involution” aims to prevent the industry from falling into a cycle of price wars and sacrificing safety. The industry should set higher standards and thresholds.

In today’s market environment, this will be the final big wave of淘汰.

Multiple institutions predict that in 2026, China’s new energy passenger vehicle sales growth will slow from over 20% in 2025 to single digits; in the first two months of 2026, BYD’s new energy sales declined by over 30%. Power batteries have moved past their infancy as an emerging industry, and CATL’s previously planned strategies are now maturing.

Regarding energy storage, CATL believes that driven by grid upgrades, industrial and commercial applications, electricity price reforms, and AI data centers, energy storage will continue to grow by over 30–40% in 2026. It aims to meet this opportunity with larger capacity dedicated energy storage cells, system solutions, and global delivery capabilities.

Additionally, mainstream lithium iron phosphate products already account for 81.2% of domestic vehicle installations in 2025, essentially dominating the market. However, their energy density ceiling and increasing energy consumption standards mean that relying on a single route offers limited safety. CATL is iterating while pushing sodium batteries to the forefront to hedge against future policy or cost shocks.

Based on this, CATL emphasizes that increased overall capital expenditure is accompanied by improved investment efficiency: “New capacity is built on deep market analysis and high-confidence order intentions.”

This reassures investors and constrains the company itself. The once fierce competition in the lithium battery sector has now become more disciplined. No longer as frantic as five years ago, but the final showdown is still brewing.