China NEV Weakness a Threat to Lithium Bounce

By Glenn Dyer | More Articles by Glenn Dyer

A couple of leading banks have switched back to being positive about lithium with Macquarie and Morgan Stanley both upbeat once again.

That saw shares in some leading lithium groups rise – Pilbara Minerals rose more than 4%, IGO shares were up 3.6% and Core Lithium shares were up 6.7%.

But before enthusiasm gets away from everyone again, take a look at the April figures for Chinese sales of New Energy Vehicles (that’s battery powered and plug-ins). The breakdown between the two are not available but while there was a solid rise year on year, the monthly performance was a touch weak when there was no reason for it to be.

The pace of China’s new energy passenger car retail sales slowed in April from March’s rebound from February and the data will add more pressure on the belief that the slide in lithium prices has decisively stopped.

Preliminary data from the China Passenger Car Association (CPCA) showed the 529,000 NEVs sold last month, up 87% from April, 2022 (when China’s harsh Covid lockdowns were being tightened by a nervous President Xi Jinping).

The early data showed a fall of 3% from March’s 653,000 units (slowing from the 46% jump from February this year).

Sales in April 2022 slowed as the harsh social distancing, testing and other controls spread to Shanghai and all but halted activity in China’s biggest city and the home of major car producers such as Tesla.

With sales of ICE (internal combustion engine) powered cars steady up slightly month on month in April, but steady for the first four months of the year on the same period in 2022, the Chinese car industry seems to have hit a slow patch.

That China’s auto market performed largely in line with the same period last year is not a good result, considering the sporadic outbreak of Covid in the first quarter of last year and the impact of the lockdown in Shanghai in April on the sector.

The lift in April from April 2022 should have been larger and the performance in May and June this year will be examined on that basis as well because of the extent of the 2022 lockdown.

Analysts also note that there has and continues to be low level price cutting and stories of car companies adding benefits such as insurance and extra items to sell cars.

The CPCA’s preliminary figure is an improvement on the half a million April sales forecast made in a statement on April 25.

From January to April, retail sales of new energy passenger vehicles in China totalled 1.85 million units, up 37% from the first four months of 2022.

From January to April, wholesale sales of new energy passenger vehicles in China were 2.1 million units, up 42% year-on-year (which means there were around 250,000 NEVs wholesaled but not yet sold or delivered to customers).

Retail sales of all passenger vehicles in China were 1.65 million units in April, up 58% year-on-year and 4% from March.

This means that the penetration of new energy passenger vehicles at retail in April was 32% down from 34.2% in March.

From January to April, retail sales of all passenger vehicles in China totalled 5.94 million units, unchanged from the same period last year – a sure sign that consumer spending in China is nowhere near as buoyant as a lot of optimistic analysts inside and outside China thought it would be.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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