Tesla battery supplier CATL slumps as rising material costs weigh on its quarterly profit

Tesla’s main battery supplier, Contemporary Amperex Technology Co Ltd (CATL), fell after it reported a slump in profit due to rising battery material costs.

On April 29, the world’s largest maker of electric vehicle (EV) batteries released a quarterly report, with net profit falling for the first time in two years. Thursday was the first trading day after the report was released.

The company, which owns about 35% of the global EV battery market, saw first-quarter sales increase 153% year-on-year to 48.7 billion yuan, while net profit fell 23.6% to 1.49 billion yuan ($223.87 million) and underlying profit down 41% in the first quarter of 2022. CATL blamed the drop in profits on rising actual costs of battery raw materials.

Due to a continuing supply chain crisis, inflation, and strong demand, the cost of key battery materials such as lithium and nickel has more than doubled over the past year.

The Ningde, China-headquartered manufacturer’s customers include Tesla, BMW, Geely Auto, and Volkswagen. 

On Thursday, CATL said that its gross profit margins are set to improve as it will raise prices in the second quarter, while suppliers of raw materials will ramp up output to ease tightness.

CATL will also further expand overseas markets as demand from foreign clients is strong. The company is exploring possibilities to localize production for overseas automakers in their countries, said Chairman Zeng Yuqun.

The stock price of CATL fell 8.15% on Thursday to close at 376 yuan ($56.49), with a market capitalization of 876.40 billion ($131.68 billion).