Morgan Stanley Says CATL Poised to Gain as China's Anti-Involution Drive Shifts to Capacity Discipline

Deep News
09/13

Morgan Stanley has released a research report indicating that China's "anti-involution" campaign in the battery sector is entering a new phase, where approvals for capacity expansion will become increasingly tied to utilization rates. This shift is expected to benefit industry frontrunners, with CATL (03750) well-positioned to capitalize on the changing regulatory landscape.

According to media reports cited in the note, as China deepens its efforts to curb excessive competition and overcapacity in the battery industry, regulators have temporarily suspended approvals for new domestic electric vehicle battery and energy storage battery projects. This pause will remain in effect until a comprehensive industry review is conducted at the end of the year. Rather than relying solely on pricing discipline, policymakers are now pivoting toward capacity discipline, linking future expansion approvals to actual utilization rates.

Morgan Stanley believes that if these policies are enforced consistently, they could accelerate industry consolidation, improve capacity utilization, and foster a more rational competitive environment in both the EV battery and energy storage markets. CATL (03750) recorded a capacity utilization rate of 95% in the first half of 2026, significantly outpacing the Chinese industry average of 65%. As a result, companies with higher utilization rates are more likely to secure approval for future battery expansion projects, while those with lower utilization may face stricter restrictions on adding new capacity.

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