In January 2025, CATL announced a 19 GWh storage partnership with Masdar valued at US$6 billion for the Round-The-Clock solar project in Abu Dhabi, widely reported as a landmark agreement that would anchor the Chinese battery giant’s position in the Middle East’s rapidly expanding energy storage market. By mid-2026, the actual supply contracts for that same project had been split between BYD, which won 11.275 GWh, and Sungrow, which secured 7.5 GWh in May. Together they account for 18.775 GWh, nearly the entire planned storage capacity of a project that features a 5.2 GW solar PV plant paired with 19 GWh of battery storage. CATL, despite holding more than 40% of the global EV battery market in the first five months of 2026, is not among the suppliers.
The outcome illustrates two concurrent trends in the global battery industry. First, the energy storage market has become the primary growth arena for Chinese battery manufacturers facing margin compression and slowing demand growth in EV applications. Second, competition within that arena has intensified sufficiently that even a company with CATL’s scale and technical depth can lose a large, high-profile contract to competitors who move more aggressively on price and regional market development. Chinese BESS integrators held a 76% share of the global energy storage market in 2025 according to Wood Mackenzie. BYD and Sungrow together captured 87% of the Middle Eastern market in the same year. What the Masdar contract result makes visible is that market share dominance at the regional level does not protect any individual supplier from displacement.
Why Energy Storage Has Become the Priority
CATL’s gross margins for EV batteries fell approximately two percentage points to 20.6% in the first half of 2025, a decline the company attributed to price competition in the global EV market following subsidy reductions in major economies. Its energy storage business recorded a gross margin of nearly 24% over the same period. That spread of roughly three percentage points is not dramatic in absolute terms, but in an industry where the primary competitive lever is cost and scale, maintaining higher margins in a growing market while the core EV segment is under pressure makes energy storage a structural priority rather than a supplementary revenue line.
This pattern applies across the Chinese battery supplier landscape. BYD, which simultaneously operates one of the world’s largest EV businesses, has pursued energy storage aggressively enough to top the Q1 2026 global BESS shipment rankings compiled by InfoLink Consulting, the first time it has held that position. CATL dropped to eighth in the same ranking. Tesla, the US market’s dominant BESS player through its Megapack product, fell to fourth. Seven of the top ten positions are now held by Chinese integrators, a concentration that reflects manufacturing cost advantages, vertical integration across cell chemistry and pack design, and the scale of China’s domestic energy storage build-out providing a volume base that overseas competitors cannot match from their home markets alone.
The Price Dynamic and Its Regional Limits
The competitive price pressure that shifted the Masdar contract away from CATL is not specific to Abu Dhabi. BESS margins in the Middle East have declined from their historical levels as Chinese suppliers have competed more aggressively for the region’s large-scale tender pipeline. Lucas Zhang Liutong of WaterRock Energy Economics characterised the decline as material but suggested that further significant drops are unlikely, a view that reflects both the physical cost floor set by battery cell prices and the recognition that suppliers accepting contracts at unsustainable margins create downstream delivery and warranty risks that sophisticated project developers like Masdar are equipped to assess.
The Middle East’s energy storage pipeline justifies the competitive intensity. The RTC project is described by the Emirates Water and Electricity Company as the world’s first large-scale combined solar and battery storage facility, and its scale, with 19 GWh paired with 5.2 GW of solar, represents a design template that the UAE, Saudi Arabia, and other Gulf states are likely to replicate as they pursue their respective energy diversification strategies. Winning or losing contracts at this scale has consequences for reference project portfolios, local market relationships, and future tender evaluations that extend beyond the immediate contract margin.
The Localisation Requirement
Yale Zhang of Automotive Foresight identified cost as the decisive factor in the BYD and Sungrow wins, noting that energy storage systems require lower energy density than EV batteries but higher safety within budget constraints, and that even affluent Middle Eastern buyers will manage procurement costs rigorously. But the cost dimension is not purely about cell price per kilowatt-hour. Tender evaluations in the Gulf increasingly weight local assembly, technology transfer, and workforce training requirements, as UAE industrial policy under national development frameworks creates preferences for suppliers who commit to in-country value creation.
This creates a secondary competitive dynamic within what appears to be a purely price-driven market. Chinese BESS manufacturers investing in local assembly facilities and training programmes can differentiate themselves in tender scoring in ways that pure price competition does not capture. The companies positioned to do this are those with the balance sheet strength to accept the capital cost of establishing regional manufacturing or assembly presence in advance of securing contracts, rather than as a condition attached to individual awards. For the top-tier Chinese suppliers, the investment case for Gulf localisation is becoming more compelling as the region’s storage procurement pipeline grows and the preference signals from procuring authorities become more explicit.
The broader demand driver behind all of this is structural. Battery energy storage demand has surged in response to energy price volatility attributable to geopolitical disruptions and the rapid growth of AI data centre power consumption. These drivers are not transient: the TEN-T corridor infrastructure requirements, global renewable energy targets, and data centre buildout trajectories all point to a sustained decade-scale expansion in grid-scale storage procurement. The Chinese BESS industry’s 76% global market share and the distribution of that share increasingly toward BYD and Sungrow at the expense of CATL in at least one significant contract suggest that the competitive dynamics within the Chinese supplier group are becoming as consequential to the market’s evolution as the competition between Chinese suppliers collectively and the rest of the world.
