Europe’s EV sector set for imminent push
The outlook for sales of new electric vehicles (EVs) in Europe is bright even while the Chinese market is depressed.
Although EV sales in China fell by 54% to 43,700 units in January from a year ago, according to the China Association of Automobile Manufacturers (Caam), we remain optimistic that European EV sales will grow at a fast pace.
We also feel that that this will remain the case for a long period while structural change unfold - namely, the need among original equipment manufacturers (OEMs) to drive EV sales to avoid penalties for carbon dioxide emissions.
Indeed, registrations of electrically charged vehicles (ECV) in Europe were 80.5% higher at 155,572 units in the fourth quarter 2019 compared with the same period in 2018, according to the European Automobile Manufacturers Association (ACEA). Sales of battery-only EVs (BEVs) grew by 76.5% and plug-in hybrid EVs (PHEV) grew by 86.4% over the same period
Germany’s BEVs sales jumped by 61% and PHEVs sales soared by 307% in January, more recent data shows, against a backdrop of a 7.3% year-on-year fall in overall auto sales, according to Krafthahrt-Bundesamt, Germany’s Federal Motor Transport Authority. Out of the 246,300 new passenger vehicles registered in January, 7,492 were BEVs and 8,639 were PHEVs.
Late last year Germany announced increased subsidies for BEVs and PHEVs. With more EVs also being introduced this year across Europe, EVs are likely to gain market share at an accelerated pace. This is indeed starting to show up in official figures (see chart).
The first batch of 1,500 of VW’s new ID.3 EV sold out within two days of being made available to UK customers last year. The first deliveries will be made in March; the waiting list is now 20,000.
Given the above, it looks as though Europe is rapidly moving into the spotlight in the EV space. Combined with Tesla’s share prices rising like a Space X rocket, this might be why lithium producers’ share prices are started to look more interesting. The Global X Lithium & Battery Tech exchange-traded fund is up 17.7% so far this year, for example.
What does this mean for lithium prices? While we are bullish on demand overall, especially once the impact of the coronavirus (2019-nCov) in China passes, the supply side still needs to be reined in following the ramp-up of new capacity over the past two years.
For the various lithium price series in our Battery Raw Materials Tracker forecast, we expect the low point to be reached in the second quarter this year, after which we expect the combination of further supply restraint and stronger demand to cause prices to firm slightly in the second half of the year, with the gradual price recovery extending into 2021.