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The “#EV slowdown” that refuses to happen. People wringing their hands over US EV demand are missing the big picture. Yes, NEV includes PHEVs. It is all good for #lithium.
...this is what lithium bulls bang on, to show that EV growth is all good, so lithium all good.
...BUT
1) No one is arguing that there would be no demand for lithium, lithium demand would continue to be healthy, except that with no lithium imbalance for a few more years, because EV growth is less than previously projected/expected while lithium supply continues to flow (more, not less), lower than expected demand won't translate into higher lithium price
2) All that quoted EV demand growth is concentrated materially only in China, and that growth is underpinned by lower battery minerals price, so while lower lithium pricing is great for greater EV growth in China, the reverse isn't true i.e higher EV growth is not accompanied by higher lithium price....if that was the case, lithium price would not be moving backwards lower and ought to be rising.
3) You must understand the EV game in China- Chinese EV makers are producing large quantities of EVs to lower its per unit cost to sell cheaply in China, hence, in addition to Govt call to buy EVs, they get a huge uptake, and with that huge uptake, they can continue to churn out even more EVs to flood the EU market. With that, and the Govt's call to tone down EV battery production, excess battery inventory can be wound down over time. This could take several months before excess inventory can be exhausted and lithium demand during the interim is expected to be subdued. But just how long would this EV growth in China sustain? If the world economy shift gears to a larger slowdown or recession, that growth is not expected to sustain, so by the time excess battery inventory is required to be replenished, EV growth in China could well taper off.
4) If lithium price future is beholden to Chinese demand, then that won't be good news for lithium because we can expect China to hold down lithium price for longer, to support the EV export agenda. With US and EU auto makers backing off from full and earlier embrace of EVs, lithium demand from US/EU would drop from earlier expectation, and we saw decision being made to delay the start of battery gigafactories in US.
5) The other sad fact for lithium is that while the Chinese are the only ones getting their act together to accelerate the pace of EV model rollouts and taking the auto market by storm, the Biden tariff and Trump threat to prevent/stifle Chinese EVs from making any progress in US auto market is destroying demand for EVs and therefore lithium.
EV Growth isn't enough to translate into better pricing for lithium ahead, and that would be a major hurdle/challenge for the lithium industry. In the interim, lithium producers can only focus on producing more of it (lithium) and sell at current lower but still reasonable, albeit with lower margin and profits. So lithium producers can, in the absence of a recession, thrive reasonably well but likely to face valuation pressures because current valuations continue to retain premium attached to expected growth/recovery. That growth won't come despite EV growth in China, and when the market clear understands that, valuation premiums would vanish.
