CATL Stock Slides 10% as Tax Changes Bite Into Battery Profits

CATL’s Hong Kong-listed shares took a hard hit Wednesday, sliding more than 10% to HK$368 — the weakest level since July 2025 — after the battery giant posted a sequential drop in third-quarter profit and pointed to shifting tax rules as a fresh drag on margins.

The Shenzhen listing fared even worse, dropping roughly 12% on the day.

For the three months through September, CATL reported net profit attributable to shareholders of 21.25 billion yuan ($3.16 billion). That is up 14.54% from a year earlier, but down 5.77% compared with the prior quarter. Revenue, meanwhile, climbed 58.58% year-on-year and 11.8% quarter-on-quarter to 165.22 billion yuan.

The problem sits in the profitability line. Gross margin slipped to 20.69% — its second straight quarterly retreat — which tells you that surging battery demand and top-line growth are not automatically translating into healthier earnings.

Q3 Snapshot: 21.25 billion yuan net profit · 165.22 billion yuan revenue · 20.69% gross margin · Shares down 10.64% in Hong Kong

What’s behind the squeeze

On the earnings call, CATL management pinned the weaker per-unit profit on three factors: a shift in product mix, a new consumption tax on lithium batteries, and cuts to battery export tax rebates.

Beijing reintroduced a consumption tax on lithium-ion batteries and related products on September 1, starting at a transitional 2% and scheduled to rise to 4% on September 1, 2027. Separately, the value-added tax export rebate for battery products was trimmed from 9% to 6% on April 1 and is set to disappear entirely on January 1, 2027.

CFO Zheng Shu explained that because the consumption tax is baked into product prices, passing the extra cost downstream is not straightforward. It requires renegotiating terms with customers, and those cost-sharing talks are still in progress.

The export rebate cut also landed unevenly. Its effect barely showed up in second-quarter sales because of the gap between when goods ship and when revenue is booked. The third quarter told a fuller story.

And there’s more to come — the consumption tax applied to just one month of the third quarter (September), but it will weigh on all of the fourth.

Analysts turn cautious

JPMorgan downgraded CATL’s Hong Kong shares to Neutral and trimmed its earnings forecasts, though it kept an Overweight rating on the A-shares, according to 21jingji. The bank worries that consumption taxes, smaller export rebates and trade barriers could combine to erode industry profitability faster than the market expects — especially with automaker customers already feeling their own margin pain.

CATL, for its part, frames some of the quarterly pressure as short-lived. Management expects new products, new technology and cost-sharing agreements with customers to support profitability over the longer haul, and said future per-unit profit will hinge on how those negotiations and higher-margin launches play out.

The company is also staying bullish on demand. It believes global power and energy-storage battery demand can grow 20% to 30% in 2027, helped along by commercial vehicle electrification, the European market and overseas storage orders.