Governments push to shift incentives for EV output from subsidies to regulation

By IM Staff
Published: Tuesday, 09 July 2019

Global governments are shifting their focus from incentives toward electric-vehicle production to legislation that will push the changeover from internal-combustion vehicles, and China is leading the way.

Regulations on carbon emissions are becoming stricter across the world and will contribute to the rise in electric vehicle (EV) production in the coming decades, sources said in June at Fastmarkets’ 11th Lithium Supply & Markets Conference in Santiago, Chile.

At the same time, government funding for automotive manufacturers’ EV efforts is fading, with the most obvious example being in China, sources said.

"Chinese subsidies have so far been equal to, or surpassed, production costs, but from next year… they will be minimal to none," the chief executive officer for electrochemical cathode materials producer Pulead Technology Industry, Yuan Gao, said at the conference.

And subsidies will soon be a thing of the past, according to Adam Panayi, managing director at research firm Rho Motion.

"As EVs move to mass production, and while governments face fiscal constraints, subsidies cannot last long outside of China," he said. "Governments will achieve more with legislation."

Most EV producers in China will struggle to make a profit following the decline in subsidies, the principal consultant for ESK Consulting, Jaime Alée, said. For now, the companies intend to increase the EV share of the car market while generating losses most of the time.

The China 6 emissions regulation is a clear example of a government pushing for environmentally friendlier solutions in the vehicle industry via legislation. This new regulation will further cut the maximum carbon and nitrogen oxide emissions per unit and will be implemented in two phases - the first in July 2020 and the second in July 2023.

"The China 6 requirements are going to be more difficult to meet than the latest Euro 6 [regulations], which were already hard," Kevin Riddell, senior manager for consultancy LMC Automotive, said. "There’s a focus on lowering emissions all around the world, which will be nearly impossible to achieve without electrification."

Panayi added: "Internal combustion vehicles are at the top of what they can achieve in [terms of] emissions reduction."

Market participants believe that EV output will be the main driver of lithium demand in the coming decades because of lithium-ion battery usage. ESK, for example, estimates that lithium consumption will total 382,000 tonnes in 2019, rising to 1 million tonnes in 2025.

This comes at a time when the lithium market has been correcting downward, following large price spikes in 2017 and 2018 when much excitement surrounded the lithium and battery raw materials’ markets.

Fastmarkets assessed the spot price for lithium carbonate, min 99.5% Li2CO3, battery-grade, spot price, cif China, Japan and South Korea, at $11.00-12.50 per tonne on June 6. This was unchanged from May 23, but narrowed downward from $11-13 per tonne on May 16.



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