Chinese battery makers, facing sluggish domestic demand for electric vehicles, are turning to homes, data centres and power grids to absorb excess capacity. Global energy storage cell shipments reached about 612 gigawatt-hour in 2025, nearly double the previous year, according to Info Link Consulting. CATL sold 121 GWh, up nearly 30 per cent, with its energy storage business accounting for about 15 per cent of group revenue.

Yet the economics are complicated. CATL's energy storage revenue increased just 9 per cent in 2025, implying revenue per unit fell about 15 per cent due to abundant supply. The global lithium-ion battery industry had about 900 GWh of excess production capacity last year, per McKinsey estimates, significantly exceeding energy storage demand of 612 GWh.

Battery makers have little choice but to undercut one another on price. Despite a 15 per cent decline in revenue per unit, CATL's energy storage gross margin held steady at about 27 per cent over the past three years, nearly 3 percentage points higher than its EV battery margins. Its declining cost of production reflects benefits of being the leader in its field.

As the world's largest battery maker, CATL's cost structure is becoming increasingly difficult for rivals to replicate. The longer pressure on sector margins persists, the less attractive it becomes to build new factories for EVs or storage systems. For CATL, the industry's overcapacity problem may eventually become self-correcting.