Global Energy Storage: The road to perdition

After a challenging 3Q, questions have arisen whether CATL can maintain its industry dominance. Our analysis shows that while CATL profitability has been dented, the outcome for Tier-2 players is far worse, and industry consolidation seems inevitable. The LiB industry is a game of scale: CATL is expected to ship ~1,015GWh in 2026 versus ~430GWh collectively for EVE, CALB, Gotion, REPT and Sunwoda, operating at ~85% utilization versus ~73% for Tier-2 peers. Scale and technology advantages translate into structurally higher profitability, with 2026 gross and operating margins of 22.4% and 14.5% versus 15.5% and 5.2% for peers. CATL 2026 R&D spend of RMB24.9bn is almost twice the RMB13.0bn combined for the five Tier-2 companies. CATL is the only company generating meaningful FCF: RMB36.6bn in 1H26, with RMB129.7bn net cash, while the five Tier-2 players burned RMB23.6bn of FCF and carry RMB173.6bn of net debt and ~110% net gearing. Recent margin compression has been disappointing, but we