Lithium’s still a hot battery metal—but how are Electric Vehicle sales going?

You’d be hard pressed to find anyone unwilling to describe 2022 as the year of lithium, as far as commodities go. 

Take Pilbara Minerals’ (ASX: PLS) record 1,000% jump in profits recorded on Friday. The bulk of that success came from the company’s spodumene lithium auctions throughout last year, which clocked record prices.

Due purely to lithium offtake from players in the battery supply chain, PLS is now a dividend paying company (as it forecasted in November).

The battery metal remains in vogue with small and large investors alike, sentiment withstanding some price easing in 2023. Its status as the hottest commodity largely remains, despite several downside spot price forecasts from major investment banks, metals traders, and commentators. 

The commodity’s price performance is not invincible. In November, Goldman Sachs and Credit Suisse both issued such analyses, which triggered a bloodbath for ASX-lithium stocks.

Also not helping lithium traders, a broad commodities rally through early 2023 has effectively stolen some of the limelight from lithium with iron ore, gold, and copper recently hitting record levels.

Decarbonisation thematic key to lithium performance

The decarbonisation thematic drives the lion’s share of interest in lithium, with the metal most commonly being associated with EV batteries. Given that lithium can only be as valuable as EV demand makes it, let’s take a look at some of the numbers. 

Australia’s Macquarie Research released a note this week looking at momentum of EV uptake around the world in 2022, with forecasts of short-term trouble ahead. But first, a quick note on materials. 

Cobalt losing out as battery types change 

Analysts highlighted that a change happened in battery markets through 2022. 

“Growth in raw materials demand is complicated by some big changes in the share of different battery types, with a move to higher nickel [containing] batteries outside China and no-nickel/no-cobalt batteries in China,” Macquarie’s team wrote. 

“The relative loser is cobalt…the large rise in battery raw materials pricing in 1H 2022 was followed by a collapse in cobalt prices to multi-year lows and a sharp correction in nickel prices.” 

“Only spot lithium prices remain near their highs but even those prices have eased in 2023. However, contract prices are likely to be higher in 2023 vs. 2022 due to the lags in translating spot prices.” 

EV growth to be slower in 2023 than last year

Looking at the global context, 2022 EV sales grew “just under 60%” beyond 2021 levels to 10.45m units, a read which also includes commercial vehicles. 

Analysts did not specify whether government low-carbon fleet initiatives are included in the commercial vehicles definition. But the bank predicts that growth will be slashed by nearly half. 

“We are projecting global growth to slow to 35% this year to around 14m vehicles,” analysts wrote. 

The US market continues to lag Europe and China, but analysts predict Biden-era policy changes will see more EVs being bought in the USA. 

December 2022 and January 2023 statistics suggest a correction in EV purchases, as subsidies were withdrawn in China, Germany, and Norway late last year. 

EV auto market share largest in Europe, China 

China and Europe are the two jurisdictions where EVs are being bought the most (compared to internal combustion engine vehicles).

In both jurisdictions, roughly 25% of all car sales through 2022 were for EVs. To anyone who follows the space, that isn’t anything new.

The global average, Macquarie notes, is now approaching 15%—but averages can be hard to love. 

Europe’s EV market share is larger because incentives for EV manufacture and purchase are stronger in Europe, particularly, than they are in either Australia, the UK, or America. 

Move over, Europe: China is the EV king, now 

The biggest thing to note about 2022 EV growth: China accounted for 59% of total EV sales, according to Macquarie’s analysts. 

Including Europe, both jurisdictions reflected 75% of all global EV sales last year.

Asia’s largest economy also exported 815Kt worth of EVs in 2022, which means it supplied roughly 65% of the global market. 

As discussed, a shift in China towards no-cobalt and no-nickel batteries led to backpedals for high cobalt and nickel prices in the first half of calendar 2022. This indicates metals traders and auto manufacturers alike are closely watching Chinese EV demand. 

Pilbara Minerals' five year charts make evident just how bullish 2022 was for the company