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The slowdown in China’s electric vehicle sector could have knock-on effects on the battery metals market in both the short and long run, commodities analysts at Argus Media said in a new report.
A weaker economy and lower new energy vehicle (NEV) subsidies that were introduced in 2019 led to a drop in Chinese vehicle production and sales last year.
Overall, China produced 1.24 million NEVs during the year, down 2.3 percent from the 1.27 million produced in 2018, and significantly lower than the initial production target of 1.5 million NEVs. The country sold 1.21 million NEVs last year, a 4 percent drop from 1.26 million in 2018, Argus.
China currently represents almost 60 percent of global electric vehicle (EV) sales, according to data compiled by Argus, and a weaker industry in China has disproportionate effects on the global market.
The coronavirus outbreak has put further downward pressure on the sector at the start of 2020 and is expected to continue to weigh on China’s NEV market, with domestic production and sales forecast to fall in the first quarter.
Buying interest for NEVs is expected to weaken significantly in the short term as potential buyers have opted to stay at home to prevent infections, Argus analysts predicted.
In January, China produced only 40,000 NEVs, down by 55 percent from a year earlier and by 74 percent from 149,000 units in December 2019. January sales were 44,000, down by 54 percent from a year earlier and by 73 percent from 163,000 in December. Related: Iraq On The Brink Of Civil War As Oil Revenues Evaporate
Production plants in Hubei province, the source of the virus outbreak, account for around 8-9 percent of China’s automotive output, but plants country-wide have been affected by the crisis. Several manufacturers including the 40,000 units/yr NIO, 150,000 units/yr Xiaopeng and 300,000 units/yr Lixiang plants have postponed deliveries.
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The slowdown in China would also hinder the prospects for global growth, given the country’s lead in EV production and dominance in the global marketplace. Initial forecasts for global EV sales of over 2.5 million units for 2019 (a rise of over 25 percent) already proved to be over-optimistic, and predictions for sales in 2020 will have to be revised accordingly, said Argus.
Originally, Argus had forecasted global EV sales of almost 3.2 million units for 2020: 1.95 million in China and 1.24 million in the rest of the world. However, the firm expects China to struggle to match its EV sales in 2019 with the fraught start to the year, while sales in the rest of the world are unlikely to make up the shortfall.
As a result, Argus is now forecasting global EV sales of just under 2.1 million units in 2020, a 1.4 percent drop from 2019.
The knock-on effect of this hiccup in the EV growth story is that the longer term forecast for EV sales could be over 20 percent lower by 2030 than originally estimated, or as many as 5 million units lower in absolute terms, Argus analysts estimated.
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.