---
endpoint: analytics
pattern: Energy
status: done
latency_ms: 203980
conversation_id: 2f09501f-b326-4199-96b7-628e2a5aed8e
citations: 11
created: 2026-05-31 22:03:38Z
---

# What are the key risks to CATL’s growth trajectory?

# Key Risks to CATL's Growth Trajectory

CATL (300750 CH / 3750 HK) is positioned by CLSA as a High-Conviction Outperform with a positive structural thesis, but the same coverage and CATL's own management commentary surface a clear set of growth risks. Synthesised from CLSA notes (Apr–Jun 2025) plus CATL's 2024 investor-relations call transcripts:

## 1. China EV demand slowdown + structural price war

The largest single risk is that CATL's home market is decelerating just as competition intensifies.

- CLSA's China auto team projects **China EV sales will slow to a ~10% CAGR through to 2030**, with OEMs "aggressively competing for market share via price cuts." [1]
- Growth is barbelling — only the premium (>Rmb300k) and mass (<Rmb100k) ends of the EV market remain underpenetrated; the middle is saturating. CATL's defence is its **72% share of China's high-end passenger EV battery market**, which yields better ASP and margin than mass-market business [2]. The risk is that if premium volumes don't scale fast enough, CATL gets dragged into the price war affecting mass-market battery suppliers.

## 2. US tariff exposure on Energy Storage Systems (ESS)

CATL's fastest-growing segment is most exposed to US trade policy:

- **~40% of CATL's ESS batteries are exported to the US** [3]. ESS = 22% of total battery shipments, EVs = 78%.
- Worst case (full loss of US ESS exposure): **c.9% of sales impacted**. Management estimates the realised earnings hit will be contained at "**low single-digit**" level on the assumption that CATL can pass through some of the tariff burden via its pricing power [4].
- The risk is two-fold: (a) tariff magnitude is still being negotiated and could exceed expectations, (b) pass-through assumption fails if US customers switch to Korean alternatives.

## 3. Solid-state battery technology race — narrowing moat

CATL is investing heavily, but the field is crowded:

- CATL targets **small-scale solid-state battery commercial production in 2027** [10]. However, **Chinese and Korean battery manufacturers have voiced similar timelines** — CLSA notes "the fact that a number of companies are confident enough to give out a timeline suggests to us that most battery manufacturers have cracked the technology barrier" [5].
- The race shifts from technology breakthrough to **cost reduction and commercial viability**. If a Korean peer (LG Energy Solution, Samsung SDI) or Chinese rival reaches lower cost first, CATL's premium positioning erodes.
- BYD has already matched CATL on superfast-charging LFP (5-minute charge, 800km range) [9], confirming competitive catch-up on existing technology.

## 4. Domestic energy-storage price competition

Management itself has flagged industry health risk:

- On the 2Q24 investor call CATL warned that **"there is excessive price competition in the domestic energy storage industry, which is not conducive to high-quality and sustainable development of the industry"** [11]. This sets up margin pressure in the ESS segment that has been the key growth driver, particularly if overseas channels (already tariff-impacted) deteriorate further.

## 5. European expansion execution risk

Europe is the next leg of growth, but the capex is sizeable and concentrated:

- CATL has three announced European plants, totalling **164GWh of capacity**: Germany (Thuringia, 14GWh, US$2.0bn, online end-2022), Hungary (Debrecen, 100GWh across three phases, US$8.2bn), and Spain (Zaragoza, 50GWh, US$4.6bn, 50:50 JV with Stellantis, end-2026 commencement) [7].
- CATL's Europe market share has already reached **38% as of 1Q25** [6], partly because Northvolt's bankruptcy removed the only domestic European competitor [6]. The risk is twofold: (a) execution delays / cost overruns on the Hungary and Spain builds, (b) European political backlash against Chinese ownership / forced JV terms (the Stellantis JV is already a tell).
- The HK listing raised US$4.6bn specifically to fund this Europe capex [11 inferred — see context]; the ample US$45bn cash balance mitigates funding risk, but capacity utilisation risk remains if European EV demand undershoots.

## 6. US sanction / geopolitical overhang

A previously-flagged tail risk that still hangs over the name:

- A CLSA snapshot table notes **"CATL could be at risk of being added to the US sanction list"** [8]. While the May 2025 view is that tariff fears are "overblown" relative to share-price reaction [3], any escalation from tariffs to outright sanctions (Entity List, IRA Foreign Entity of Concern designation) would be far more damaging than the modelled low-single-digit tariff hit.
- "Tariff noises YTD" are explicitly cited as the overhang that has depressed the stock's intrinsic-value perception ahead of the HK IPO.

## 7. Raw-material price volatility

CATL's gross margin is structurally exposed to lithium and cathode input costs. In 1Q25 the 1.3ppt YoY GP-margin improvement to 24.4% was partly an accounting reclassification effect; the underlying driver is still lithium carbonate pricing, which moves CATL's unit selling price and margin together. A renewed lithium up-cycle would not necessarily compress margin (because of pass-through), but a demand shock combined with falling lithium prices could compress the absolute revenue line.

## Risk Summary Table

| Risk | Magnitude | Time horizon | Mitigant |
|---|---|---|---|
| China EV slowdown / price war | High | Multi-year (to 2030) | Premium-segment skew, 72% high-end share [2] |
| US tariffs on ESS | Medium | Near-term (90-day extension running) | Pass-through pricing power, low-single-digit EPS hit per mgmt [3][4] |
| Solid-state race | Medium | 2027+ | US$45bn cash, leading R&D [5] |
| Domestic ESS price war | Medium | Near-term | Mgmt explicitly flagged [11] |
| Europe capex execution | Medium | 2025–2026 ramp | 38% market share, Northvolt bankruptcy removed key competitor [6][7] |
| US sanctions escalation | Tail | Indeterminate | None — binary outcome [8] |
| Raw-material volatility | Low–Med | Ongoing | Vertical integration into battery materials & resources |

The key takeaway from internal CLSA coverage: the risks are **real but priced in** — CATL was trading at 14x 26CL PE (below the 20x historical average) at the time of the May 2025 upgrade, with the analyst view that tariff fears are overdone. The risks most likely to break the thesis are (i) a faster-than-expected solid-state breakthrough by a Korean or domestic rival, and (ii) a step-change in US policy from tariffs to sanctions.

---
**Sources**
[1] CATL (Green shoots) — CLSA (10 Jun 2025) — 607961671LinqAlpha.PDF
[2] CATL (Green shoots) — CLSA (10 Jun 2025) — 607961671LinqAlpha.PDF
[3] CATL — HC O-PF (A new era) — CLSA (20 May 2025) — 607959766LinqAlpha.PDF
[4] CATL — HC O-PF (A new era) — CLSA (20 May 2025) — 607959766LinqAlpha.PDF
[5] CATL — HC O-PF (A new era) — CLSA (20 May 2025) — 607959766LinqAlpha.PDF
[6] CATL — HC O-PF (A new era) — CLSA (20 May 2025) — 607959766LinqAlpha.PDF
[7] CATL — HC O-PF (A new era) — European capacity table — CLSA (20 May 2025) — 607959766LinqAlpha.PDF
[8] CATL — HC O-PF (A new era) — Development table noting US sanction risk — CLSA (20 May 2025) — 607959766LinqAlpha.PDF
[9] CATL — O-PF (Leading the pack) — CLSA (21 Apr 2025) — 607956446LinqAlpha.PDF
[10] CATL Investor Relations Event Log — 26 Jul 2024 (300750 earnings_call)
[11] CATL Record of Investor Relations Activities — 2 Jul 2024 (300750 earnings_call)

## Citations

- [1] **607961671LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961671LinqAlpha.PDF>
- [2] **607961671LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961671LinqAlpha.PDF>
- [3] **607959766LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959766LinqAlpha.PDF>
- [4] **607959766LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959766LinqAlpha.PDF>
- [5] **607959766LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959766LinqAlpha.PDF>
- [6] **607959766LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959766LinqAlpha.PDF>
- [7] **607959766LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959766LinqAlpha.PDF>
- [8] **607959766LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959766LinqAlpha.PDF>
- [9] **607956446LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956446LinqAlpha.PDF>
- [10] **Record of Investor Relations Activities on July 2, 2024** · external
- [11] **Investor Relations Event Log - July 26, 2024** · external

