SHANGHAI/HONG KONG –CATL reported a 23.6% decrease in first quarter profit Friday. It is struggling with rising raw material costs, and a resurgence COVID-19 (China)).

CATL’s clients included Tesla (NASDAQ;), Volkswagen (ETR (:) and BMW. A filing to the Shenzhen Stock Exchange revealed that CATL booked a net profit in excess of 1.49 Billion Yuan (226.69 Million).

It was 1.95 billion Yuan less profit than a year ago, but a huge jump in revenue to 48.68 million yuan (from 19.17 billion last year).

The prices of key metals like lithium almost doubled over the past three months. This weighed on CATL’s profit margins, prompting them to increase battery prices for March.

Others have also reported lower March quarter earnings due to rising raw materials costs and disruptions in supply chains. LG Energy Solution Ltd in South Korea (LGES), reported earlier this week a 24% drop in quarterly profits.

CATL, like its competitors is increasing production and mineral sourcing in order to satisfy growing demand for electric cars.

The company announced earlier in the month that it has secured exploration rights to a lithium-rich deposit in central China’s Jiangxi province. It also established a joint venture for nickel mining in Indonesia.

Wood Mackenzie, a consulting firm says CATL has the potential to triple its cell production capacity by 2025.

CUT POSSIBLE

CATL’s electric vehicle batteries saw a decrease in gross profits to 22%, from 26.56% last year.

Ningde, Fujian-based company was able to stay ahead of the competition in its domestic market. 51% of the nickel-cobalt-manganese (NCM) batteries and 49% of the lithium phosphate (LFP) batteries installed in China’s electric vehicles in the first three months were from CATL, according to China Automotive Battery Research Institute.

According to the institute, BYD offers 1.6% NCM battery and 34% LFP battery, while LG Energy has its name on just 6% NCM batteries.

($1 = 6.5852 renminbi)