EV Battery Maker CATL's Net Income Soars by 185% in 2021 On Strong Demand for EV Batteries, But Warns of Rising Costs of Raw Materials

author: Eric Walz   

Chinese battery maker Contemporary Amperex Technology Co Ltd ("CATL") reported a net profit on Thursday representing an 185% increase over 2020. The soaring profits are a result of growing demand for its electric vehicle batteries from global automakers.

CATL is the world's biggest supplier of electric vehicle batteries and supplies electric automaker Tesla in China.

In 2021, CATL's lithium-ion battery sales were 133.4 GWh, up 184.8% year-on-year, with power battery system sales of 116.7 GWh, up 162.5% year-on-year, Bloomberg reported on Thursday. 

120 GWh is enough to power around 1.2 million electric vehicles.

CATL said on Thursday that its net income for 2021 more than doubled to 15.93 billion yuan ($2.47 billion), easily beating analyst estimates of 13.51 billion yuan ($2.1 billion). However the battery maker scrapped its dividend and reported weaker profitability at its battery systems division as it warned of surging raw-materials costs.

Prices of lithium, cobalt and nickel have jumped on supply shortages, as well as speculative trading by investors on Wall Street. 

An index of global lithium prices compiled by Benchmark Mineral Intelligence surged 280% last year and another 127% in the first quarter of 2022, as supply is squeezed by booming demand for battery-powered vehicles.

According to the Financial Post, CATL said lithium inflation has led to "great pressure on costs," adding that it's signing long-term supply agreements and striking mining deals to protect supplies.

Tesla Chief Executive Elon Musk even made a public appeal this week for new investments in lithium mining projects around the world to close what he sees as a gap between supply and demand. Musk hinted that Tesla, which is now the world's most automaker, might start mining its own lithium to address skyrocketing prices. Musk first mentioned the plans nearly two years ago.

CATL also aims to expand its partnership with Tesla and become its biggest battery supplier globally. The company is aiming to supply half of the battery cells Tesla uses for its electric vehicles and energy storage systems, a senior source at the Chinese company told Reuters in June 2021.

With the rising costs of raw materials, analysts at Bloomberg Intelligence predict that CATL's gross margin may see limited upside this year due to the skyrocketing prices of lithium and other raw materials like cobalt and nickel, which offset economies of scale from higher EV battery sales. 

Many automakers are switching to either nickel-cobalt-aluminum (NCA) or nickel-manganese-cobalt (NMC) batteries for their electric vehicles because of their higher energy density, which translates to longer range.

Although price increases help deflect some cost pressure onto automakers, CATL risks losing new orders to rival battery makers like BYD. Bloomberg Intelligence reports that CATL's 2022 first quarter market share has already fallen from its peak in Q4 2021.

CATL is Tesla's battery supplier for its vehicles built in China. But the company has also entered into strategic partnerships with Ford Motor Co, Fisker Inc, Hyundai, Mercedes-Benz, as well as Chinese automakers Great Wall Motor, Li Auto and NIO Inc, according to its annual report.

CATL has also been dealing with factory shutdowns in China, with widespread lockdowns being imposed to control the spread of new covid 19 variants. The lockdowns are disrupting supply chains.

CATL's production base in Ningde in northeastern Fujian province has moved to a so-called closed-loop operation to shield workers and production from a Covid-induced shutdowns. While the shutdowns may be temporary, the rising costs of raw materials will continue to be a factor for the world's battery makers in 2022.

In September of last year, CATL said it will put a sodium-ion battery production line into operation in 2022. The plans were shared by Meng Xiangfeng, assistant to chairman of CATL, at an industrial conference in China focused on carbon neutrality. However, the progress on the plans remains unclear. 

Sodium-ion batteries could become a viable solution for the auto industry in the future. The new sodium-ion battery chemistry could lead to widespread adoption of EVs by reducing costs significantly, making electric vehicles more affordable. Sodium-ion batteries contain no lithium, cobalt or nickel, which are the primary metals used in nickel-cobalt-aluminum (NCA), nickel-cobalt-manganese (NCM) and lithium iron phosphate (LFP) batteries. 

 CATL said its first generation sodium-ion batteries have high-energy density, fast-charging capability, excellent thermal stability, as well as excellent low-temperature performance.

In Dec 2021, CATL began phase 1 production at its new EV battery factory in China. The first phase of operations will have an annual capacity of 60 GWh and the additional 60 GWh for phase 2. 

Once completed, the plant will be the world's largest EV battery factory, with an annual production of 120 GWh. It will be more than three times the size of Tesla's gigafactory in Nevada. 

CATL is investing 17 billion yuan (US$2.6 billion) in the plant.

In March, Sichuan Contemporary Amperex Technology Limited (CATL-SC), which is a wholly-owned subsidiary of CATL, received the internationally recognized specification for carbon neutrality ("PAS 2060" certification) for its new electric vehicle battery plant in China. The recent PAS 2060 certification makes the plant the world's first zero-carbon factory in the new energy industry. 

The certification marks a significant milestone for CATL towards its carbon neutrality goals. As the world's first zero-carbon battery plant, CATL's Sichuan plant sets an example of how electric vehicle battery production can be carbon neutral.

Also this week, CATL launched its own EV battery swapping business in China via its wholly-owned subsidiary "EVOGO".

CATL launched the first four EVOGO battery swap services on April 18 in Xiamen, in China's Fujian Province, making it the world's first EVOGO city. The four EVOGO battery swap stations are located in the Siming Huli, and Haicang Districts of Xiamen. 

The number of battery swap stations in Xiamen is expected to increase to 30 by the end of the year. Each swapping station will be located within a 3-kilometer radius. 

CATL's EVOGO battery swap service allows drivers with no access to indoor parking spaces for home or at work charging to drive a battery-powered vehicle without the worry of having to find convenient charging locations.

CATL will report its full first-quarter results on April 27. 

Eric Walz

Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.