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Chinese EV strength continues to drive lithium

Record sales of new energy vehicles in China last month has again helped explain the continuing strength in lithium prices.

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Figures from the China Passenger Car Association (CPCA) showed that wholesale sales of new energy passenger vehicles last month were about 732,000.

An early estimate – final figures will be released in a couple of days’ time – puts that up about 8% from October’s 556,000 and up about 71% from November 2021 according to the Association.

Helping drive the boom is the lack of a decision on extending some purchase subsidies for NEVs into 2023 which has seen a surge in purchases by consumers eager to get their cheaper vehicle before the price rises next year.

Earlier this month Chinese media reported that the state subsidies for new energy vehicle (NEV) purchases may be renewed in 2023, albeit on a smaller scale.

Reports emerged at the end of November that China’s policy of reducing the purchase tax levied on mainstream internal combustion engine (ICE) vehicles was expected to be extended into 2023, and that subsidies for NEVs could also be renewed, but at only 50% percent of the 2022 level.

China cut the purchase tax from 10% to 5% on 2.0-litre and smaller displacement ICE passenger cars priced at no more than 300,000 yuan ($US42,540) in June. That cut is set to expire at the end of this month.

For the NEVs, current support policies include state purchase subsidies as well as purchase tax exemptions – the former is set to expire at the end of this month, while the latter has been extended to the end of next year which should help keep sales ticking over.

It seems the looming end of the state purchase subsidies drove sales higher in October and last month and Chinese analysts reckon December will see another surge.

On top of the rise in sales because of fears about the end of subsidies, the record sales figures also show the Covid surge and restrictions across many cities and towns failed to put a dent in NEVS purchases last month.

Many of those restrictions are now being eased and this could help boost sales this month.

BYD ranked No. 1 in wholesale sales of new energy passenger vehicles in November with 229,942 units, according to the Association. That includes wholesale figures for sales of battery powered EVs and plug ins.

Tesla’s November deliveries totalled just 100,000 – the first time the deliveries from its Shanghai factory have topped that figure while the SAIC-GM-Wuling joint venture was third with 76,165 units.

That lifted sales in the first 10 months of the year to a record 5.16 million and a repeat of November’s record sales would see the total for the year surge to more than 5.8 million, a record for a 12-month period.

All those vehicles need batteries and batteries need lithium and battery makers are still chasing the metal.

Meanwhile a Bloomberg report on Monday claimed that after building capacity at the Shanghai plant to a 1.1 million units a year, Tesla will cut production from this week because of a shortfall in sales.

That is despite the record 100,000 plus deliveries in November. The news saw tesla’s shares fall sharply on Monday, more than 6% on the day.

But Reuters later reported that Tesla plans to cut production of its Model Y vehicle by 20% this month.

Reuters said there had been reports the factory is only operating at 93% of capacity which is an annual rate of one million units. That’s about what the November deliveries rate.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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