J.P. Morgan: CATL July YoY Production Up >70%, Maintain Overweight
AI summary card
J.P. Morgan: CATL July YoY Production Up >70%, Maintain Overweight
The research note suggests that the recent pullback in battery stocks is mainly due to seasonal factors and inventory adjustments. CATL's production momentum is strong, with July production expected to surge more than 70% year-over-year, continuing to support its leading position in the Chinese battery supply chain.
- CATL Q226 battery production grew approximately 80% year-over-year, with July expected to grow over 70% year-over-year, significantly outperforming peers.
- Top six battery manufacturers' July production plans increased by 6% month-over-month and 64% year-over-year, showing stronger performance during the off-season compared to previous years.
- Rumors of a US ban on Chinese inverter imports have negligible impact on CATL, as its US energy storage shipment share is extremely low.
- Domestic passenger EV demand was weak in the first half of the year, but a 20% increase in average kWh per vehicle offset the decline in sales volume.
- Lithium prices are expected to oscillate at a low level within the 150,000-200,000 RMB/ton range, easing raw material cost pressure.
Report interpretation
Overview
J.P. Morgan released a research report stating that although the China Batteries & Materials sector stock has corrected 15-35% since early May due to sector rotation, lack of new catalysts, and geopolitical tensions (such as EU trade frictions and rumors of potential US bans), institutions believe this is primarily due to seasonal factors and inventory adjustments, not mid-term growth deterioration. The report maintains CATL as the preferred target for China's battery supply chain and favors CALB's production growth. Data shows July battery production plans have rebounded month-over-month, with CATL continuing to lead peers thanks to strong production momentum.
Core views
Production Side: Leading battery plants see July scheduling warmth up. According to ZE Consulting data, the top six battery producers' July production plans grew 6% month-over-month and 64% year-over-year. Although growth rate slowed from early-year highs, it still outperforms typical seasonal performance in July 2025. Among them, CATL's capacity utilization stands out, with Q226 battery production growing about 80% year-over-year, and July year-over-year growth expected to exceed 70%, far higher than the peer average of 40-50%. As a second-tier leader, CALB's production grew over 90% year-over-year YTD, exceeding its 55% sales growth target. Demand Side: Structural differentiation, higher kWh per vehicle offsets sales decline. In the first half of 2026, China passenger EV retail sales are expected to fall 13% year-over-year, underperforming expectations. However, this weakness was offset by a significant increase in average kWh per vehicle, with the first five months seeing an increase of 9kWh per vehicle, up about 20% year-over-year. Additionally, Energy Storage System (ESS) demand was strong, with most ESS production lines running at full capacity, and Chinese manufacturers' ESS battery production grew 114% year-over-year in the first five months. EV exports also remained strong, up 115% in the first five months, with European EV sales growing 38% simultaneously. Geopolitics & Raw Materials: US ban rumor impact limited, lithium price oscillating low. Regarding market concerns about Federal Communications Commission (FCC) potentially restricting Chinese inverter imports, the report believes impact on CATL is negligible, as its US exports are mainly cell modules or containers without PCS, and US energy storage business is expected to account for less than 5% of total shipments in 2026 (about 10% in 2025). Regarding raw materials, due to lithium spodumene supply tightness, July carbonate lithium production is expected to drop 3% month-over-month for the first time after Spring Festival. However, considering limited downstream demand support, lithium prices are expected to hover at the lower end of the 150,000-200,000 RMB/ton range in the coming months.
Analysis framework
The report adopts an analysis approach combining 'Price-Volume Separation' and 'Supply-Demand Framework'. First, verify industry prosperity and relative competitive advantages of leading companies (such as CATL's capacity utilization) through high-frequency tracking of monthly production data from top battery plants (from third parties like ZE Consulting). Second, decompose EV sales volume 'quantity' and 'average kWh per vehicle' from the demand side, as well as incremental growth from storage and export markets, to explain why battery production remains growing despite weak vehicle sales. Finally, conduct sensitivity analysis on specific company scope of business impact combined with price trends of raw materials (lithium, cobalt, nickel) and geopolitical events (such as US policy rumors) to derive individual stock investment conclusions.
Methodology notes
Price-Volume Separation
Decomposing total revenue or total demand into two dimensions: 'sales volume' and 'unit price/unit usage'. In this report, analyzing 'EV sales volume decline' but 'average kWh per vehicle increase 20%' explains the logic why battery demand remains robust, helping readers understand the supporting role of structural changes on total volume.
Supply-Demand Framework
Analyzing matching between supply side (battery plant scheduling, lithium mine output) and demand side (car manufacturer orders, ESS installation). The report judges that the industry is in a normalization stage after seasonal inventory adjustment, not demand collapse, by comparing June inventory reduction-led production cuts with July scheduling rebound.
Geopolitical Event Sensitivity Analysis
Evaluating differentiated impact of specific macro or policy events (such as US planned inverter import ban) on companies with different business structures. The report argues that CATL is minimally affected by this rumor by breaking down CATL's US business composition (mainly cells rather than systems with inverters), reflecting deep grasp of business details.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- CATL (300750.SS / 3750.HK)Preferred target, benefiting from strong production momentum and energy storage demand growth, minimally affected by US inverter ban rumors.
- Strengths
- Q226 production grew ~80% year-over-year, July expected >70%; US energy storage shipment share <5%; Strong cost control capabilities.
- Weaknesses
- Weak short-term domestic passenger EV sales.
- Comparison
- Production growth rate significantly better than peers (40-50%).
- Risks
- Geopolitical risk; Lithium price volatility.
- CALB (3931.HK)Second-tier leader, rapidly growing production, exceeding annual targets.
- Strengths
- YTD production grew >90% year-over-year, far exceeding 55% sales growth target.
- Weaknesses
- Weaker economies of scale compared to CATL.
- Comparison
- Fastest growth among second-tier manufacturers.
- Risks
- Intensified industry competition; Customer concentration risk.
Key data
- CATL Q226 Battery Production Year-over-Year Growth Rate~80%Significantly higher than peers
- CATL July Battery Production Expected Year-over-Year Growth Rate>70%Continuing leadership
- Top Six Battery Plants July Production Plan Month-over-Month Growth Rate6%Off-season recovery
- Top Six Battery Plants July Production Plan Year-over-Year Growth Rate64%High growth sustained
- China Passenger EV Average kWh Per Vehicle Year-over-Year Growth Rate (5M26)~20%Offsetting sales decline impact
- Chinese Manufacturers Energy Storage Battery Production Year-over-Year Growth Rate (5M26)114%Strong demand
- Expected Lithium Price Operation Range150,000-200,000 RMB/TonLow-level oscillation
Impact & implications
The research report believes that the current battery sector stock correction provides a buying opportunity, especially for leading enterprises with strong cost control capabilities and market share expansion ability. CATL's leading position is further consolidated, and its layout in energy storage and overseas markets enables it to withstand fluctuations in single markets (such as domestic passenger cars). For second-tier manufacturers like CALB, its rapidly growing production indicates that its competitiveness in niche markets is strengthening. Low operating prices of raw materials help improve battery manufacturers' gross margins, but attention should be paid to potential pressure on costs from subsequent lithium price rebounds.
Risks
- Escalation of geopolitical tensions (such as EU trade frictions, US policy restrictions).
- Unexpected large rebound in raw material prices (especially lithium prices), eroding profits.
- Domestic and global EV demand recovery below expectations.
- Intensified industry competition reigniting price wars.
What to watch
- July battery order recovery situation and stability of raw material prices.
- Arrival of August-September seasonal peak and stocking pace.
- Actual production release situation after Jiangxi mining project license approval for CATL.
- Extent of improvement in H2 domestic passenger EV demand.