My biggest concern is EV sales slowing down, as they are what turns around this sector wide downturn.
August sales saw 157k units compared to 172k in 2018. The first month on month drop for a long time.
While this is partially due to the general global sales slow down in auto, much of it is due to the Chinese sector and the subsidy changes there. Chinese EV sales were down 25% in August and now 34% in September. Total Chinese YOY growth to end of September is now at just 29% (global sitting at 32% til end of August). Chinese CPCA predicting similar sales to last year.
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On the positive side, battery sizes are up. According to Adamas Intelligence, average LCE per EV is up 52% in H1 2019 over same time last year largely due to the Chinese subsidy changes pushing for longer ranges and high energy densities. Also the growth of NCM 811 is up from 1% market share in Jan 2019, to 4% in June, to 13% in August due to subsidy changes with these battery chemistries improving the cost effectiveness of hard rock production over brines (hydroxide). Adamas also claims that H1 2019 lithium deployment in EV batteries was up 89% YOY. This growth is clearly slowing down in H2 2019.
US EV sales are stagnant and also dropped below 2018 levels from July onwards. Sept saw 33k unit sold compared to 44.5k same month last year.
Europe on the other hand might be the new China in terms of BEV growth with 80% YOY increase in BEV registrations to September thanks in part to Tesla. In addtional to the Tesla sucess in Europe and their threat to EU domestic sales, the major ICE producers are racing CO2 EU penalties next year to bring lots of EVs to market.
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With regards to China's slow down, two points of optimism.
1) There are now signs that the trade war with the US might have a resolution. I also can't see the Chinese giving up their EV lead at this stage.
2) Tesla Gigafactory in China (aiming ultimately at a 500k unit output) about to start domestic production of the Model 3. I expect Tesla to cement profitability with its sales in China in 2020. Model 3 production in Q3 19 was 96.1k units up from 87k units in Q2 and up from 77k unit in Q1 at its existing facilities. The new facility is near production and Tesla has a new model coming soon too.
In conclusion,
* Rapid growth in EVs in H1 2019.
* Current slow down on the back of general ICE global auto slow down and Chinese EV subsidy changes.
* Positive from subsidy changes is a push towards NCM 811 in China which helps make SC6 exporters more competitive with brine.
* Expecting Tesla Gigafactory to spur big EV growth in the new year.
* Expecting resolution of US-China trade war (Trump being re-elected is a given)
* Expecting EU auto to push heavily into EV sales to avoid EU CO2 penalties next year.
* Not expecting much from US sales.
