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Analysts ''Extremely Bullish'' On China's Electric Vehicle Boom – OilPrice.com


Analysts are growing increasingly bullish on the electric vehicle (EV) market globally and in the world’s largest automotive market, China, amid an increased push from governments to cut emissions and promote green recovery from the pandemic. 

Global EV sales jumped last year while the overall passenger car market crashed during the pandemic. Over the coming decades, electric car sales will only rise, driven by government incentives and falling battery costs, analysts say. And China, the biggest auto market, is set to lead the EV sales, thanks to government targets for growing new energy vehicles (NEVs) sales, the competitive market, and the Chinese dominance in the supply chain of battery metals and materials. 

Analysts have recently issued extremely bullish estimates about China’s EV market—more bullish than the ambitious government targets for electric cars’ market penetration.  

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According to Swiss bank UBS, 60 percent of China’s new car sales in 2030 will be electric, which means that 18 million EVs will be sold that year. That would be a major increase from the expected 6.6 million EV sales in 2025, which would account for some 25 percent of all new passenger car sales in China, UBS said in a briefing about the EV market, as carried by South China Morning Post. 

UBS’s bullish forecasts exceed China’s government ambition to have EVs, hybrids, and fuel cell cars combined account for half of all car sales in 2035. 

“It is a highly competitive market with an efficient supply chain,” UBS analyst Paul Gong said, as carried by South China Morning Post. 

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UBS has been bullish on the Chinese EV market for quite some time, saying in December 2020: “As Chinese carmakers continue to roll out competitive EV models and develop a diverse ecosystem, we believe it is heading towards disrupting the current global auto industry landscape.” 

“While several Chinese companies should become strategically important, global auto companies would further rely on China supply chain and R&D, in our view,” said UBS. 

It is a common misconception that China holds most of the natural resources. In fact, 23 percent of the global supply of all battery raw materials comes from China, according to Benchmark Mineral Intelligence

However, China dominates the chemical production of battery-grade raw materials, with a whopping 80 percent of total global production. China will host a total of 101 lithium-ion battery plants that are currently planned or under construction through 2029 out of all 136 plants planned globally by that date, Benchmark Mineral Intelligence said last year. 

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China controls 80 percent of the world’s raw material refining in the lithium-ion battery supply chain, 77 percent of the world’s cell capacity, and 60 percent of the world’s component manufacturing, BNEF said in a report in September. 

HSBC Qianhai is also bullish on the Chinese EV market, expecting EVs to account for 39 percent of new car sales in 2030, but is not ruling out a bull case scenario in which the penetration could be as high as 58 percent in 2030, HSBC Qianhai analyst Yuqian Ding wrote in a note “China electric vehicles – believe the hype” carried by The Driven.

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In 2025, EVs are set to account for a third of China’s car sales, analyst company Canalys said in new research last month. EV sales are set to jump by 51 percent this year alone, Canalys forecasts, following modest 8-percent growth in 2020, driven mostly by the China-made Tesla Model 3 and the Wuling Hongguang Mini EV launched in mid-2020. 

In the long term, EV sales will rise everywhere. By 2050 they will represent the lion’s share of sales in several regions, including in China, Europe, and North America, Ram Chandrasekaran, Principal Analyst—Transportation & Mobility at Wood Mackenzie, said last month. 

According to WoodMac, sales of fossil-fuel-powered vehicles are in terminal decline, and the world likely saw peak ICE vehicle sales back in 2017, while the global stock of ICE vehicles could peak as soon as 2029. 

Promises from many legacy automakers to go all-electric, like GM by 2035, or all-electric in certain markets, like Ford in Europe by 2030, are set to intensify competition in the EV market, potentially leading to more innovation in battery designs and faster decline of battery pack costs. 

“Most automakers are a few years behind Tesla in terms of technology and efficiency. However, they can quickly outgun Tesla when it comes to manufacturing capacity and quality,” WoodMac’s Chandrasekaran said.

EV sales will undoubtedly rise, but in order to become the dominant part of overall car sales in major markets, the industry must overcome several hurdles, including an increasingly tight battery metals market, which would not help to cut battery costs as quickly as EV advocates would like. In addition, charging infrastructure, especially in large markets such as the United States, would need to expand dramatically to allay drivers’ fears about range. 

By Tsvetana Paraskova for Oilprice.com

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