- China is on track to reach 2m sales of Electric Vehicles (EVs) in 2019, up from 1.1m in 2018.
- Even with this strong demand, it is unlikely that production of EVs will be a constraint in China.
- As a consequence, the demand for battery raw materials, especially lithium, is likely to increase significantly, however China already has over 50% of the world’s lithium processing plants to product battery-grade lithium product.
- The volume of EVs sold is expected to reach 50% of the market share by as soon as 2025.
Analysis & Comments
- While the growth in Chinese EV demand forecast in this article may seem high, the underlying argument looks to be sound.
- The principal difference between the Chinese market and the US/ Europe is that we are seeing a combination of strong demand (for cultural reasons), OEMs that are adding production capacity at pace, and supportive regulation.
- One mid term factor to watch is the potential emergence of a Chinese export industry, at least initially focused on entry level EVs and mass market vehicles – which echoes the historic growth of the Japanese and Korean car industries.
- Chinese battery manufacturer CATL has announced plans to build a EUR250m Li-ion battery factory in Germany to take advantage of a current lack of local producers that has left automakers dependant on Asian battery suppliers.
- Production is set to begin in 2021 with an initial capacity of 14 GWh per year, which will be expanded to 60GWh by 2026, as demand in Germany could reach 100 GWh even sooner.
- The plant is backed by a EUR 4bn order from BMW (of which EUR1.5bn are to be produced in Germany) and according to Matthias Zentgraf, CATL’s regional president for Europe, was tied to an agreement on vehicle emissions reached by the European Parliament and the EU member states on December 17th.
Analysis & Comments
- Battery transport for long distances (most battery production has historically been in Asia) is complex (they are temperature sensitive for instance).
- In addition, the absence of local sourcing potentially made European OEMs price and specification takers.
- Note however, that Auto analysts remain sceptical that the European OEM’s will aggressively ramp up EV production, despite the apparent strong demand, in order to protect their traditional ICE vehicle core.