CATL's competitive moat remains resilient and robust.

On September 11, Morgan Stanley released a research report highlighting that battery giant CATL's industry leadership position has not been weakened but rather further strengthened through competition.

The investment bank believes that with CATL achieving breakthrough success in European markets, while smaller competitors struggle with profitability challenges in the critical energy storage sector, and amid current solid-state battery technology being viewed as short-term market hype, CATL's leading advantages will persist. The company's valuation has become significantly attractive among peers, positioning it as the "cheapest in the industry."

**Competitive Landscape: Market Leaders Strengthening, Europe as Key Breakthrough**

According to the report's analysis, first-half 2025 data demonstrates CATL's industry position has been further consolidated. The most significant development occurred in the European electric vehicle battery market, where CATL achieved "substantial market share growth." Meanwhile, other smaller battery manufacturers' market shares remained "subdued."

This trend indicates that in one of the world's most competitive markets, CATL's technology, production capacity, and customer relationships are translating into tangible market share gains, with its globalization strategy delivering substantial results.

**Energy Storage Business: An "Asymmetric" Competition**

The report emphasizes a critical industry divergence: despite robust demand in the energy storage system (ESS) market and surging sales volumes for smaller battery manufacturers, most operate at breakeven or loss-making levels, with already thin gross margins even lower than the previous year. The bank suggests this dynamic may indicate that regardless of how aggressively these companies expand production, their energy storage operations may struggle to achieve profitability.

Behind this dynamic lies CATL's effective strategy: leveraging its substantial cost advantages and superior warranty terms based on high-quality products to actively compress market prices, squeezing competitors' profits below breakeven levels.

The report highlights that CATL provisions 3-4% of revenue for warranty reserves, while many smaller manufacturers provide "insufficient or zero" provisions. This creates significant risks in the energy storage sector where battery degradation and fire incidents occur. The bankruptcy filing of U.S. energy storage integrator Powin serves as a cautionary example, indicating potential severe warranty claim issues for low-reliability products.

**Solid-State Batteries: "Hype" Exceeds Opportunity**

Regarding the recently hyped solid-state battery concept in capital markets, Morgan Stanley offers a remarkably measured assessment, characterizing it as "more hype than opportunity." The report notes that recent gains in A-share battery supply chain stocks were primarily driven by improved liquidity and market momentum chasing, resulting in "irrational" valuation premiums for some smaller battery manufacturers relative to CATL.

The report maintains confidence that solid-state battery commercialization represents a research and development investment race based on mature materials science and engineering capabilities. In this regard, CATL will "continue leading this frontier market," while the possibility of disruptive "dark horse" competitors emerging remains "extremely small." The report bluntly states that currently announced prototype products require "substantial work over the next three years" for commercialization, equivalent to "zero revenue opportunity" at present.

**Valuation Opportunity Emerges, Capital Expenditure Trends Rational**

Regarding capital expenditure, the report forecasts CATL will maintain steady expansion of 150-200 GWh annual capacity additions from 2025 to 2027 to meet demand growth. In contrast, given current low capacity utilization rates and profitability challenges, the report suggests smaller battery manufacturers should slow capacity construction.

Ultimately, the report concludes with a point highly attractive to investors: valuation. Report data shows that following a sector rally, CATL's A-share valuation has become the "cheapest in the industry." Based on 2026 expected price-to-earnings ratio, CATL trades at only 17.5x, while some peer companies trade significantly higher.