What’s Driving The Electric Vehicle, Lithium, And Battery Markets In 2019?

There has been substantial debate around electric vehicles (EVs), lithium, and batteries in 2019, generating both excitement and uncertainty among market participants. EV sales are growing rapidly as battery costs fall, automakers are introducing more electric models, and consumer preferences are evolving to favor cleaner vehicles. Yet concerns remain as global auto sales broadly decline, China EV subsidies are reduced, and substantial amounts of new lithium supply begin to come online.

In this post, we analyze each of these factors to better understand the current and future state of EVs, lithium, and battery technology.

How Strong are Electric Vehicle Sales?

Although global auto sales slowed by over 2% during the first quarter of 2019 relative to a year prior, sales of electric vehicles soared by 57%, reaching 496,000 vehicles in quarterly sales.1, 2 Over the course of 2018, 1.9 million EVs were sold worldwide with approximately 5 million total passenger EVs driving on the roads today.3 These numbers are expected to continue to grow rapidly as battery costs fall, technology advances, consumer preferences evolve, and the regulatory environment supports low emission vehicles.

As the world’s largest auto market and a key proponent of electric vehicles, China continues to play a central role in EV adoption. In Q1 2019, EV sales more than doubled from the year prior with 276,000 cars sold, representing 5% of new passenger vehicle sales.4 Going forward, EV sales in China are looking to maintain this momentum despite the phase-out of certain government subsidy programs. Starting on June 26th, China’s New Energy Vehicle subsidy program will be reduced from RMB 50,000 ($7,400) to RMB 25,000 ($3,700) for EVs with over 400 km range. Lower-range EVs will also have their subsidies reduced and, in some cases, will be fully phased out.

China EV subsidy program for electric vehicles

Despite reduced subsidies, China continues to solidify its leading position in EVs with other forms of supportive policies. For example, the New Energy Vehicle (NEV) quota system imposes credit targets for automakers. This quota system assigns a specific number of credits to an NEV model depending on metrics like electric range, energy efficiency, and rated power of fuel cell systems. Higher performance vehicles are assigned more credits, capped at six credits per vehicle.5 Automakers must meet a positive credit balance at the end of the year, or they’ll be forced to purchase credits from other automakers, reduce production of internal combustion engine (ICE) vehicles, or stop production of new models and receive a monetary fine.

What Will Drive EV Adoption?

While early adopters of EVs have been drawn to the low emissions and/or performance characteristics of high-end EVs, mainstream EV adoption will ultimately be driven by economics – the cost competitiveness of EV ownership versus ICE vehicles. It’s important to note that an EV’s price tag is primarily driven by the cost of its battery. Four years ago, batteries represented around 57% of the total price of a medium-sized EV.6 Yet by 2030, the cost is expected to fall to just 14%, setting a trajectory that should allow EVs to reach price parity with ICE vehicles by the mid-2020s.7 We believe that as EV costs fall in line with ICEs, consumers will increasingly choose electric models given their environmental benefits, lower fuel costs, improved performance, and reduced maintenance. By 2025, for example, EVs sales are expected to rise to 8.4 million vehicles or approximately 8% of total annual sales.8  Yet, when EVs become noticeably cheaper than ICE vehicles by 2030, economics should trump consumer inertia. Estimates suggest penetration rates could range from 20% to 50%.9, 10

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