[Edaily Reporter JAEMIN SONG ] As domestic battery manufacturers accelerate the expansion of their energy storage system (ESS) businesses in response to slowing demand for electric vehicle batteries, securing profitability is emerging as a new challenge. China’s CATL, the world’s largest battery manufacturer, has also recently seen a sharp increase in revenue, but its profit growth has slowed. Analysts note that while the ESS market is growing rapidly, securing a stable profit structure is becoming just as important as expanding business scale.

According to industry sources on the 22nd, CATL reported revenue of 165.22 billion yuan and net income of 21.25 billion yuan in its recently announced third-quarter results. While revenue rose 58.6% year-over-year, net income growth was limited to 14.5%. This is the lowest growth rate in nearly two years. The gross profit margin also fell by approximately 5.1 percentage points year-over-year to 20.69%.

CATL’s third-quarter ESS battery sales volume increased by approximately 60% year-over-year, accounting for about 25% of total battery sales. However, unlike the revenue growth driven by expanded sales, cost burdens also increased. From January through September of this year, CATL’s revenue rose 56.2% year-over-year, while cost of goods sold increased by 61.6%.

Analysts attribute the slowdown in profitability to intensifying competition in the Chinese electric vehicle market, along with changes in product mix and tax burdens. The U.S. Wall Street Journal (WSJ), citing an analysis by the U.S. investment bank Jefferies, reported that the expanding share of ESS system sales, increased R&D expenses, and inventory write-downs weighed on profit margins. During its earnings call, CATL also cited changes in product mix, consumption taxes, and reduced export tax rebates as factors affecting unit profitability.

Behind CATL’s expansion of its ESS business lies a rapidly growing global market. According to market research firm SNE Research, global ESS battery shipments in the first half of this year reached 461.3 gigawatt-hours (GWh), a 71% increase compared to the same period last year. However, the benefits of this market growth are concentrated among Chinese companies. CATL ranked first with a market share of 27.1%, while the combined market share of the top three Chinese companies—including EVE and Hi-Tium—reached 47.5%. In contrast, LG Energy Solution and SAMSUNG SDI CO.,LTD. held market shares of just 2.6% and 1.4%, respectively.

The three major South Korean battery companies are also targeting the growing ESS market as a new growth opportunity. LG Energy Solution is expanding its supply of lithium iron phosphate (LFP)-based ESS batteries, primarily through its local production facilities in North America. SAMSUNG SDI CO.,LTD. is broadening its business scope to include ESS batteries, uninterruptible power supplies (UPS) for data centers, and battery backup units (BBUs). SK On is also pushing to expand its ESS business by leveraging its existing electric vehicle battery production facilities.

In the North American market in particular, tariffs on Chinese-made batteries and supply chain regulations are helping domestic companies strengthen their foothold. In the first half of this year, LG Energy Solution’s market share in the North American ESS market rose significantly to 13.6% from 4.2% in the same period last year. Although SAMSUNG SDI CO.,LTD.’s market share fell to 6.1%, the combined market share of the two companies rose from 13.9% to 19.7%.

However, the price competitiveness of Chinese companies remains a challenge. Observers point out that for Korean companies to convert the orders secured in the North American market into stable profits, they must increase the utilization rates of their local production facilities and reduce cost burdens. A battery industry official stated, “Although the ESS market is growing, price competition with Chinese companies is difficult to avoid,” adding, “Ultimately, what matters is how stably they can secure volume and maintain profitability.”