Earlier in 2018 reports from Morgan Stanley noted a looming lithium oversupply, with forecasted lithium carbonate prices going down to $7,332 per tonne by 2021. The report said that, barring EVs making it to 31% of market share by 2025 from the current 2%, prices would fall. However, relying on 2017 and early 2018 EV sales numbers isn’t the best idea, considering this timeframe had a series of difficult circumstances.
A slow start in China relative to 2018 year-end
China’s markets have been affected by government incentives for new energy vehicles NEV (pure electric and plug-in hybrids). This year China is moving further away from carrots for EV producers to sticks ensuring that quality EVs are being built. For example, as of 2018, EV subsidies now only apply to electric cars that have a rated range of over 88miles (150 km).
Factors such as Chinese New Year and retooling factories translated into January and February sales of 40,200, and 34,420, respectively. From the exponential sales of 67,778 in March, it was evident that retooling work was nearing completion as sales rose to 2.5% market share, share, up 102% from March 2017. From the China Association of Automobile Manufacturers, CAAM, sales were revised to 142,577 for the first quarter of 2018, up 154.3% year-on-year. With sales for the first half of 2018 up 112% from 2017, it is quite feasible that the market will beat CAAM’s expectations of full-year sales to increase 40% from 2017’s 777000 vehicles and hit over 1 million vehicles in 2018.
This already puts Beijing’s forecast of 2 million NEVs by 2020 as conservative. With companies already having 2.8 million vehicles of planned production capacity in their pipeline, surpassing 2 million by 2020 is quite feasible.
Post-Dieselgate reforms in Germany
In the aftermath of the Volkswagen emissions scandal which came public in September 2015, German auto manufacturers were caught with challenges to meet rising emissions standards. VW made public its strategy to move into electric cars, with 30 models planned by 2025, expected sales of 2-3 million cars. 2017 proved to be the year Germans also made the switch as PEV sales increased 126% from 2016. Diamler also changed its tactics in 2017, divesting of development in hydrogen fuel-cell vehicles and focusing on electric.
Already 2018 is proving another large leap, with March electric sales up 73% from 2017, according to Kraftfahrt-Bundesamt (KBA). Considering the German government is now mulling over incentives for battery manufacturers including exemptions from energy levies, larger increases for EVs are in the country’s future.
US Sales – Slower first quarter but picked up in Q2
While a 20% increase is significant in most industries, January and February 2018 were considered slow growth months for EVs in the US. However, the total sales to June 2018 improved significantly toat 34% half-year increase.
Tesla had been in production hell for months, with solutions such as purchasing manufacturing automation companies increasing production risk. By the last week of March, production hit 2020 vehicles, with production consistently hitting around 3000 units by mid-May and over 4000 by July. Rumors have arisen that production could hit 6000 vehicles consistently for the remainder of Q3, and targets of 7000 by the end of 2018. Total US sales increased 42% from March 2018. With the added Tesla sales later on 2018, year-end sales increases of over 50% for the US are still in the cards.
Global sales up 71% for the first 5 months of 2018
Sales hit almost 600,000 electric and plug-in hybrid sales up to May 2018. Sales for the month of May alone hit 160,000. If known numbers for June are included (78,000 for China, 22,000 for the US, etc) then over 730,000 plug-in vehicles have been sold in 2018 already. 2018 may prove to be a bumper year for EVs.
More lithium in each new EV
The larger all-electric 2016 Nissan Leaf had a 30 kwh battery, with smaller trims offering 24 kwh. By 2018 this rose to 40 kwh, and 60 kwh is expected in 2019. With each kwh of lithium requiring around 160g of lithium (850g of lithium carbonate equivalent, LCE), that is 50kg of LCE per 2019 leaf. Each year, more people choose pure EVs over HPEV or HEVs as issues relating to range anxiety and charging speeds are overcome. For sales of 5 million pure EV cars, that is 250,000 tonnes.
One-off events can significantly increase future penetration
Looking at the penetration of technologies over time, one-off events have previously significantly affected their uptake. Telephone, electricity, and gasoline car penetration were severely affected by the great depression. Clothes washer and auto sales slumped during World War Two, finally picking up after.
However, in the case of electric vehicles, 2018 may be the year that bring together a confluence of external forces: significant investment in China, dieselgate aftermath in Germany, and Tesla resolving its production hell. The graph below considers what would happen with a single jump of 85% increase in sales for 2018. Here, 31% penetration by 2025 becomes more feasible.
Early in 2018, Morgan Stanley considered that, if most of new lithium mining projects come online as prescribed, a surplus in supply would depreciate prices. This article suggests that, without considering mining project risks, there is a real possibility that electric car sales could hit 31% by 2025, and eat up all new supply. This does not even include electric bus sales, which require much more lithium per vehicle (one EV bus is about 5 teslas).