Thought I’d share some of my latest musings with the usual accompanying data, all in the spirit of ‘Understanding Lithium Demand’.
June US EV sales and the Tesla revolution
In a country where pickup trucks and large SUV gas guzzlers are part of everyday culture, many Americans are struggling to accept or come to terms with the benefits of zero emission e-mobility. However, there are signs that the revolution is underway (starting with the sedan) and EV sales are going through the roof in the good ol' USA, thanks largely to Tesla's Model 3.
June EV sales in the US grew a staggering 51% YoY and +33% on the previous month. Tesla's full battery electric vehicles (BEVs) commanded a whopping 68% share of all US EV sales, and the Model 3 continues its reign supreme as America's No.1 selling Luxury vehicle and No.1 selling sedan, outpacing its similarly sized ICE rivals. https://insideevs.com/news/357565/ev-sales-scorecard-june-2019/
By stark contrast, Nissan Motor's US sales fell 15% in June and Toyota fell 3.5%.
These latest figures would have to be sending shockwaves through the hallways of traditional Automobile company Head offices, as they scramble to balance the need for profitability with the massive investment that is required to make the transition from traditional ICE vehicle manufacturing to full e-mobility. I believe that time is quickly running out for many of them in the sense that they will quickly lose relevance in a rapidly evolving industry, unless they look beyond their short-term profits to significantly bolster their investment and further accelerate their transition process.
Tesla’s Model 3 is making rival ICE’s and Hybrids look like relics of the past in almost every aspect with its zero emissions, performance, functionality, the ability to continually improve itself via over the air software updates and most importantly safety. Btw the Model 3 just received a 5-star rating from Euro NCAP, but the good news didn’t stop there as it also received the best score in Euro NCAP history!! https://cleantechnica.com/2019/07/0...e-highest-overall-euro-ncap-score-ever-given/
The Big Hybrid Myth
Despite some analyst's and several major car companies still trying to convince the public that Hybrids are a big part of the EV landscape as they supposedly represent the best of both worlds, the fact is that Hybrids unfortunately still require fossil fuels to power them and are all based on an old design that is centered around an ICE engine with the usual countless moving parts. This approach allows traditional car companies to use existing platforms (eg. Toyota Camry Hybrid), thereby reducing costs.
However, traditional ICE designs lack the pure performance of pure BEV designs and require significant ongoing maintenance compared to the groundbreaking and relatively simple full electric platforms. Therefore, some of the major car companies including Toyota, BMW and Honda are on course to mimic the fortunes of Kodak if they continue to downplay the rise of pure e-mobility (BEVs) and continue to focus on their Hybrid technologies, as hardly anyone is going to want them within a few short years.
As the charging infrastructure for BEVs rapidly expands, battery costs continue to fall and BEVs continue to increase their range, then there will be no need for Hybrid technology in the years to come (particularly in the PV space). Furthermore, you don't see many Tesla owners complaining about 'range anxiety', so one could reasonably argue that we are pretty close to that point today.
Current statistics confirm this trend and the following 2019 stats for Passenger Electric Vehicles (PEVs) all point towards the eventual demise of PHEVs (Hybrids).
In Germany, sales for PEVs grew 65% YoY in May . In 2019, BEVs overtook PHEVs in terms of unit sales for the first time in history. The growth rate for German BEVs in May was a staggering 100% compared to PHEVs at 33%. PEVs represented 2.4% market share in Germany in May, and of that BEV's accounted for 1.4% and PHEVs represented the remaining 1.0%.
In China, the story is even more convincing. Sales for PEVs for Jan-May 2019 stood at 426,000 units, a +51% YoY growth rate. BEVs represent over three quarters of PEV sales at 325,000 units (+56.4% YoY growth). PHEVs accounted for less than a quarter of all PEV sales at 101,000 units (+35.8% YoY).
However, in May 96,000 PEVs were sold and of these 75,000 were BEVs (+17% MoM) and only 21,000 were Hybrids (-19% MoM) i.e. Hybrid sales actually declined by almost 20% in May whilst BEVs continued their rapid growth story.
Looking beyond 2019, below is a forecast for BEVs vs Hybrids vs ICE vehicles. Note the expected virtual phase-out of Hybrids by 2022 as EV battery costs continue to decline with improved technology and a major increase in production (scale), batteries become more powerful and efficient and people realise that BEVs are not only far superior in terms of performance, maintenance etc, but they also have zero emissions meaning the added environmental benefits as they turn their back on vehicles powered by fossil fuels.
The China EV revolution, Latest Battery Trends and Global EV Expectations by 2025
China - May update:
New EV sales (NEVs) in China were @104,000 units in May and accounted for a record 6.6% of all PEV sales. Impressively the market share for NEVs in China continues to grow in an environment where government subsidies for shorter range EVs have been abolished. What's even more impressive is that as of May 31st, the total number of EV chargers in China stood at 976,000 (+71% YoY).
EV Battery production for May also grew at an impressive rate, and NCM/NCA batteries that typically use Lithium Hydroxide continue to be the preferred shoice of Lithium Batteries for EVs. This bodes well for current and future suppliers of Tier 1 Battery quality spodumene.
China May EV battery production at 9.9 GWh (+35.6% MoM).
NCM/NCA type at 6.5Wh (+49.5% MoM)
LFP type at 2.3 GWh (-16.9% MoM)
LMO type at 1.1GWh (+456% MoM)
Jan-May 2019 EV Battery production at 37 GWh.
NCM/NCA at 22.9 GWh (62% share).
LFP at 12.2 GWh (33% share)
LMO at 1.8 GWh (5% share)
China - June update:
(note that only some of the June figures have been reported - still awaiting official total sales from my source):
Total NEV production at 129k units (+95% YoY)
Total EV battery installed capacity at 6.61 GWh (+131% YoY)
Battery capacity is growing faster than unit sales due to the average EV battery size for June 2019 increasing to 51.24 KWh (up from 43.30 KWh YoY)
From the latest data sets and reports it is clear that China is going full electric and earlier this week the Chairman of CATL said (at the World New Energy Vehicle Conference) that the electrification rate of China vehicles will reach over 70% in 2025. That forecast implies over 20 million EVs for China alone in 2025 i.e. based on the current annual unit volume of their domestic Auto industry.
If China continues to account for roughly half of the world’s EVs, then CATL’s statement suggests that @40m will be sold annually by 2025. However, I’d expect other populous territories including South East Asia, India, Europe, South America and North America to significantly increase their EV sales and market share by 2025 (due to a wide range of models being available and lower costs achieved through mass production), and therefore I’d expect China’s share of annual worldwide EV sales to fall slightly to @30-35% by that time. If that’s the case, then the rest of the world should be selling somewhere @35-40 million EVs in 2025, meaning annual global sales of @55-60 million EVs. This figure is broadly in line with Tony Seba’s central s-curve forecast (typical adoption rate of new technology – see below graph) and thus CATL’s forecast looks to be more plausible than what most mainstream analysts are forecasting, or should I say under-forecasting (more on that subject below).
Wright’s law (under the assumptions of Ark Invest) also support CATL’s bullish prediction and the above s-curve graph. Here’s what they recently to say:
‘The rapid growth of the EV market has caught many analysts flat footed. Four years ago, the Energy Industry Administration (EIA) among other forecasting agencies estimated that EV sales would total a few hundred thousand units in the early 2020s. After they hit 1.45 million units in 2018, the same agencies now forecast that EV sales will increase to roughly 4-4.5 million in 2023, suggesting that their growth will decelerate from 79% last year to 25% at an annual rate during the next five years. Based on Wright’s Law, ARK’s forecast for EV sales in 2023 is 26 million units, roughly six-fold higher than the consensus estimate, with growth compounding at a 78% annual rate.’
Now here’s the interesting part for AVZ. If 55-60 million EVs are sold annually and approx. 50,000 tonnes of LCE is required for every 1 million units, then the world is going to require approx. 2.75 - 3 mt of LCE for 2025 alone. That’s a massive 10-fold increase in LCE supply from 2018.
Current EV sales forecasts from mainstream analysts are too conservative
It doesn’t take much research to reveal that the majority of mainstream analysts, including those representing the likes of Bloomberg, UBS, JP Morgan, Morgan Stanley, Cannacord etc. are all providing forecasts which are far too conservative IMHO. And for them there is good reason for their apparent incompetence (mainly to do with their bonus structures and under promising / over delivering to ensure minimal risk to themselves and their clients).
However it is known that the vast majority of mainstream estimates in past years have consistently underestimated actual demand, and therefore I see absolutely no reason to trust / believe their forecasts moving forward.
Independent analysts who either have a superior knowledge of the industry and/or technology adoption rates are the only analysts that I tend to follow with any level of seriousness these days. Some of the industry heavyweights (eg. Tesla, CATL, VW etc.) are also worth listening to as it is their business to understand and react to current and future trends of their products. However, I am also wary of large companies that are slow to react to massive change.
Summary
The latest data comprehensively points towards a rapid acceleration in electrification rates IMO - meaning that the age of e-mobility is upon us already and will become the dominant form of new transportation by 2025.
Simon Moores from Benchmark Minerals tweeted last Friday that ‘We are no at 91 lithium ion battery megafactories in the pipeline to 2028’. Folks, this is massive news as this no. has already blown out from the 74 announced earlier in the year. That means that Megafactory capacity is nearing the 2000 GWh threshold (see graph below), which based on current trends will be easily broken by the end of the year.
However, expect 2000Gwh to increase to 3000Gwh, and the 2000GWh no. to be brought forward to 2023-2025 (aka the graph below) as the Megafactory pipeline continues to rapidly expand.
This is incredibly positive news for Lithium miners, particularly hard rock operations that can supply years of big quantities of Tier 1 battery quality spodumene for the growing Lithium Hydroxide market (NCM battery types).
Apart from Greenbushes, there is only one project in the world that ticks all the boxes in terms of quantity, quality and being able to go the distance. And every day she is looking more and more beautiful as a long-term investment IMHO.
GLTA and have a great week.
Cheers
Elpha
p.s. Forget to add that AVZ’s funding stars are also finally aligning IMO. Completion of Met tests due this quarter with preliminary results due any day, coinciding with the formation of the DRC government (see below link) and DRC portfolio ministry (under which the parastatal Cominiere comes under the auspices of) tasked with signing over 5% to AVZ. Then it’s go-time for the Manono project and funding with signatures will IMO ‘all of a sudden’ appear, sending the SP into orbit in the blink of an eye. https://afrique.lalibre.be/38038/el...ptera-65-membres-dont-42-proviendront-du-fcc/ (translate via Google)
AVZ Price at posting:
4.7¢ Sentiment: Buy Disclosure: Held
(20min delay)