Author’s note: Originally published by Blackwall Metals in China. Blackwall is an online information sharing platform aiming to connect people and facilitate information exchange in the commodity world.
2017 will be highlighted as a transformational year for the automotive business: the industry has committed to the electrification of select car models with longer term, high-volume production targets. In direct response to this macroeconomic trend, the battery manufacturing industry has committed to ramping up global production capacity, which has since expedited a deluge of investment activities downstream throughout the lithium exploration and production markets.
These days, it doesn't take much digging to uncover dozens of media headlines from the transportation industry related to the global shift to electric drive systems. Many forms of transportation are converting to electric power, including passenger vehicles, municipal bus fleets, heavy-duty vehicles, scooters and mopeds. Jaguar, Volkswagen Group, Renault-Nissan and Daimler have all announced plans to build EVs and some of these companies will build or expand their own battery manufacturing capacity. Volkswagen Group intends to build 3 million EVs a year by 2025, while LG Chem has announced that they will invest $1.6 billion in a new Poland-based battery manufacturing facility that will produce up to 100,000 EV batteries per year.
The above information illustrates simply that the battery manufacturing industry must significantly scale-up global production capacity in the next several years. Based on available delivery dates, the ramp-up of the electric vehicle market will occur in the next 24-36 months. This news has sent the battery manufacturing business into a whirlwind. Tier 1 battery manufacturers such as Panasonic, Samsung, Sony, BYD (OTCPK:BYDDF) and LG Chem have announced their intentions to remain at the forefront of the next stage of development, in order to meet anticipated demand. Battery manufacturers either deliver cells or modules to their customers, who then package or integrate the cells or modules into battery packs or final systems.
Author supplied: Tesla showroom in Boston, MA Feb 2018
Figures published by InsideEV, a credible research group, indicate that an increasing number of electric and hybrid vehicles are entering the American market. Adoption rates are steeply inclining both month- over-month and year-over-year. On a month-to-month basis, sales figures have increased from 12,000 units in January 2018 to 25,400 units in June 2018, representing a 100% increase since the beginning of the current calendar year. For the month ending in June 2018, on a year-over-year basis, sales totals have increased nearly 50% from 17,000 units to 25,000 units.
For the first six months of 2018, American sales of new energy vehicles set fresh records with a total of 124,900 units. In the same period in 2017, the sales were approximately 76,000 units, representing over 60% growth. In 2016, American car and truck sales set a record of 17.6 million units, indicating that new energy vehicle sales are hitting penetration rates of approximately 1.5% of total market share.
The growing list of new energy vehicles has been attributed to a rise in annual market growth. It is reported that currently over 30 vehicle models are in production. Eight of these models are powered purely by electric batteries and the balance of the models are hybrid. The latter group sales of less than 500 units for the month of June 2018. Since the beginning of 2018, the numbers at the bottom of monthly sales charts for new energy vehicles have steadily increased; sales of most models have doubled in this period.
There are fewer than a dozen models of vehicle that contribute meaningfully to the top of the June sales chart by posting over 500 unit sales a month. Only five of these vehicles are purely electric-battery powered, while the rest of the vehicles are plug-in hybrids. Tesla vehicles continue to top the sales figures, as three of Tesla’s (TSLA) electric vehicle models are the top-selling all electric vehicles in the USA, while Chevrolet’s Bolt ranks fourth in sales.
For the year to date, 2018 Tesla Model 3 sales have exceeded 24,000 units; Model S have passed 10,000 unitsl and Model X has sold 9,000 units, for a total of over 44,500 units. Nissan and Chevrolet are the only other automakers selling significant volumes of pure electric vehicles, amounting to about 14,400 unit sales per year to date. For the month of June, Tesla delivered over 11,200 units into the American market compared to 4,500 units in the same period last year, which represents an increase of approximately 150% year-over-year. Most of the increase in Tesla sales has resulted from the introduction of the Model 3, which has quickly become the most popular new energy vehicle in America. American monthly sales of the Tesla Model 3 have increased since the beginning of January 2018, from fewer than 2,500 units to over 6,000 units in this period.
Breaking down the 124,000 new energy vehicle sales sold in America during the first 6 months of 2018, Tesla has the highest-rated battery storage capacity per vehicle (of about 80kWh), while the Bolt is rated at 60kWh and the Leaf at 40kWh. The hybrids are rated at a much lower capacity, with the Volt at 18kWh and the Prius Prime at only 8.8kWh.
From a battery demand perspective, these figures indicate that Tesla installed over 3.5GWh of battery power in the above-described timeframe; Chevrolet installed nearly.5GWh in the same period; and Nissan installed 0.25GWh, for a total of 4.25GWh. Based on a blended average of 15KWh for the hybrid and lower-rated electric vehicles, the total installed capacity is approximately 1GWh. The total American battery demand to support 2018 new energy vehicle sales has therefore exceeded 5.25GWh.Assuming that all of these vehicles used lithium battery technologies, the total lithium carbonate equivalent demand is valued at over 6,000 T for the first six months of the year.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.