Hong Kong-listed lithium battery stocks took a sharp downturn at Monday's market open, with CATL (H-shares) tumbling more than 4% while its A-shares declined over 3% in tandem.

A wave of selling swept through the sector, dragging down several key players including Ganfeng Lithium and Tianqi Lithium, both of which fell more than 2%. This followed a bruising prior session where Contemporary Amperex Technology Co., Limited's A and H shares both suffered steep losses, pushing its combined A+H market capitalization below the 1.5 trillion yuan threshold.

Market analysts attribute the persistent weakness in the lithium battery sector to a convergence of three pressures: demand expectations, supply dynamics, and raw material costs. On the demand side, automakers are accelerating efforts to reduce their reliance on CATL. Li Auto, for instance, has diversified its battery supply chain, with some models now switching to Sunwoda and its own in-house developed battery technology. Meanwhile, Xiaomi's newly launched Pengcheng N70 and N90 models have abandoned CATL batteries in favor of the Xiaomi Longjia battery system, with cells supplied by CALB and Sunwoda.

Adding to the bearish sentiment, J.P. Morgan released a research note highlighting that market concerns have evolved from merely slowing demand growth in 2027 to more immediate issues such as overcapacity, declining utilization rates, and a fresh round of price competition.

On the supply front, overcapacity pressures continue to mount. Industry data reveals that planned expansions for energy storage battery cells this year have already surpassed 800 GWh, with total planned capacity approaching 2 TWh—far exceeding actual global demand. Several leading battery manufacturers have confirmed that, since the second half of the year, local governments have largely halted accepting new registrations for power battery capacity expansion projects.

Raw material costs remain a heavy burden as lithium prices stay under pressure. Following an adjustment in SMM's lithium carbonate inventory calculation methodology, reported inventory levels surged by more than 90,000 tons in a single adjustment, fueling pessimistic expectations of slower destocking. This triggered a broad decline in lithium-related stocks during morning trade. J.P. Morgan also pointed out that lithium prices face near-term downside risks.