EV/Lithium, page-993

...as I indicated recently, my expectation was for the last bastion of support for EV to give way -i.e China's domestic EV growth. Demand growth is stalling in the biggest global EV market, leading to inventory build up in EV and lithium.
...this is probably why lithium price is moving backwards and has more room to the downside.


The major demand factor for lithium minerals remains the global EV industry, but by far and away the largest consumer within this industry is China. Morgan Stanley notes that pure-EV sales in China fell to 551k units in July, a 2% rise on an annual basis, but a worrying 10% fall compared to June.


Exhibit 1: Pure China EV sales were 10% softer MoM in July'24 Source: Refinitiv, Morgan Stanley Research (Source:“DataDig: China EV sales – Cracks in the road ahead?”,  Morgan Stanley Research, 14 August 2024)

Chinese EV sales are being negatively impacted outside of China due to lower global EV adoption, increasing competition from internal combustion engine (ICE) manufacturers, and rising protectionism fears.

The latter reason relates to potential tariff hikes and from EU and US regulators retaliating against perceived Chinese dumping of EVs into those markets. Chinese EV manufacturers have enjoyed substantial government subsidies and aid over the last decade, and this has left several overseas markets for Chinese EVs mulling strategies to protect their own EV manufacturers.

Chinese EV manufacturers are resorting to “aggressive channel-stuffing”, says Morgan Stanley, which the broker believes “could lead to an increase in inventories and a slower start to 3Q sales." As a result, the broker's China Autos team suggest "downside risks to China EV sales moving forward.”