The electric vehicle (EV) revolution has been top of mind for battery metals investors for quite some time now, as increasing EV sales mean more demand for essential elements such as lithium and cobalt.
Despite a volatile 2022, the EV market remained in the spotlight, finishing the year strong as many had predicted, and 2023 is expected to be another strong year.
How did the EV market perform in 2023?
Last year, sales of electric vehicles exceeded 10 million. China remained the main market in 2022, accounting for around 60 percent of global electric car sales, followed by Europe and the US.
The International Energy Agency is expecting new purchases to accelerate in the second half of this year, ultimately achieving a total of 14 million in sales by the end of 2023. The agency expects that around 18 percent of all cars sold worldwide in 2023 will be electric — up from just only 2.5 percent in 2019.
“The increase in demand for electric vehicles is driving demand for batteries and related critical minerals,” the IEA says in its Global Electric Vehicle Outlook 2023. Last year, EV batteries made up about 60 percent of lithium, 30 percent of cobalt and 10 percent of nickel demand, a massive increase from 2017, when these shares were around 15 percent, 10 percent and 2 percent, respectively.
When it comes to sales of electric vehicles in the first half of the year, there were 5.8 million sales of passenger car and light duty vehicle EVs, according to Rho Motion data.
As for which companies sold the most, China’s BYD (OTC Pink:BYDDF,SZSE:002594) took the top spot, with sales almost doubling in H1 2023 compared to H1 2022.
Tesla (NASDAQ:TSLA) sold the second most EVs in 2023 year-to-date, with around a 60 percent increase in sales year-on-year.
“The EPA has modeled penetration rates of light-duty cars/trucks and medium-duty vans/pickups in order to meet the new rules,” he said. “The new proposal set out by the EPA shows an ambitious pathway for the US to reduce its greenhouse gas emissions.”
Lester further explained that the proposed CO2 emission standards across the different vehicle classes will require OEMs to significantly increase zero-emission vehicle production in the coming years. This move will require substantial investment from many parts of the EV, battery and charging supply chain.
“The proposed CO2 emission target for light-duty vehicles sees a 56 percent reduction from the 2026 target,” Lester said.
According to EPA estimates, up to 67 percent of new light duty vehicles sold in 2032 may have to be electric in order for carmakers to be compliant.
Another major trend in the EV space in the first six months of the year has been the price war in China that began with Tesla’s price cut in January 2023. As of April 2023, around 30 OEMs joined the price war through direct price cuts or giving sales coupons, according to Rho Motion.
“Although the national subsidy scheme for new energy vehicles (NEVs) was terminated in December 2022, regional subsidies are still available for consumers purchasing vehicles, including NEVs,” Lester said. “This year, falling battery raw material costs have provided headroom for OEMs to lower vehicle prices. OEMs are also trying to decrease inventory.”
What factors will move the EV market in 2023?
While some supply chain constraints still exist, light duty EV sales set a new record of 10.4 million units in 2022, a 66 percent year-on-year increase. In 2023, S&P Global Commodity Insights forecasts that EV sales will reach 13.8 million, rising to over 30 million by 2030.
“The acceleration in EV sales is gradually being reflected in car fleets across the globe but at a much slower pace, mainly due to production struggles over the last couple of years and consequently low replacement rates,” ING analysts said in a recent note.
Rho Motion also expects to see stronger sales in H2, predicting global final year sales between 13.5 and 14 million.
China will continue to be a market to keep an eye out for in the second half of the year. On July 1, the country’s China 6b emission standards officially took effect in the Asian country.
“The new regulation is set to be tighter than Euro 6 emission standards, especially for NOx,” Lester said. “Although the government has granted a six month buffer period to sell inventory, OEMs are motivated to sell the outdated models at discount prices.”
Another factor in the Chinese market Lester is keeping an eye on is the country’s ‘continued promotion of NEVs in rural areas.’
Moreover, the price cuts for internal combustion engine vehicles will eventually have an impact on NEV sales, Lester added.
Looking even further ahead, S&P Global Mobility forecasts that the electric vehicle landscape will be increasingly filled by the top automakers. The firm expects them to account for more than 70 percent of global EV production by the year 2030, compared to 10 percent in 2022.
“But despite the rapidly growing choices EV consumers have, and the unprecedented loyalty rates among EV return buyers, the industry as a whole still needs to tackle consumers’ range anxiety, particular for those without a garage or those traveling long distances,” analysts said.
Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
