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Regulations on carbon emissions are becoming stricter and will contribute to the boost in EV production in the coming decades, sources said, Concurrently, government funding for automakers is fading away, with the most obvious example being in China, sources added.
“Chinese subsidies have so far been equal to or surpassing production costs, but from next year and going forward, they will be minimum to none,” the chief executive officer for electrochemical cathode materials producer Pulead Technology Industry, Yuan Gao, said.
“As EVs move to mass production and while governments face fiscal constraints, subsidies cannot last long outside of China,” Adam Panayi, managing director at research firm Rho Motion, said. “Governments will have more impact through legislation.”
Most EVs producers in China may struggle to make a profit following the subsidy decline, the lead consultant for ESK Consulting, Jaime Alée, said. For now, the companies aim to increase the EV share of the auto market while generating losses most of the time, Alée added.
The China 6 emission regulation is a clear example of a government pushing for environmentally friendlier solutions in the vehicle industry via its legislation. This new legislation will further cut the maximum carbon and nitrogen oxide emissions per unit and will be implemented in two phases – one in July 2020 and the other in July 2023.
“The China 6 requirements are going to be more difficult to meet than the latest Euro 6, which were already hard,” Kevin Riddell, senior manager for consultancy LMC Automotive, said. “There’s a focus on lowering emissions all around the world, which will be nearly impossible to achieve without electrification.”
“Internal combustion vehicles are at the top of what they can achieve in emission reduction,” Panayi added.
Market participants think EV output will be the main driver of lithium demand in the coming decades due to the car’s lithium-ion battery usage. ESK, for example, estimates lithium consumption will total 382,000 tonnes in 2019, rising to 1 million tonnes in 2025.
This comes at a time when the lithium market has been correcting downward, following large price spikes over 2017 and 2018 when much excitement surrounded the lithium and battery raw materials’ markets.
Fastmarkets last assessed the spot price for battery-grade lithium carbonate (99.5% Li2CO3) imported in China, Japan and Korea at $11-12.50 per tonne cif on June 6, stable since May 23 but down on the top end of the range from $11-13 per tonne on May 16.