- Continued chip shortage, pandemic outbreak hit auto market
- Russia-Ukraine war impacts battery metals supply chain
- New energy vehicle sales to reach 5 million in CY’22
- ‘Dual carbon’ policy accelerating electric transformation of industry
Judging from trends in the first quarter of this calendar year (Q1CY’22), China’s automobile industry – a key pillar of the country’s GDP growth – has maintained a stable performance. However, a series of uncertain factors weigh on the industry, for example, the “core shortage” (semiconductor) crisis that has lasted for nearly two years now. The rapid rise in the prices of bulk commodities such as raw materials for power batteries has cast a shadow over the global auto industry.
Fu Bingfeng, executive vice president and secretary-general of the China Association of Automobile Manufacturers (CAAM) has observed that due to soaring manufacturing costs, many car companies have raised sales prices since the beginning of this year, especially new energy vehicle (NEV) products which, in turn, affected sales. With the recent COVID-19 outbreak, the downward pressure in the market has further increased.
CAAM data show that in Mar’22, production and sales stood at 2.241 million and 2.234 million, up 23.4% and 28.4% month-on-month, but down 9.1% and 11.7% year-on-year. From Jan-Mar this year, the production and sales of automobiles stood at 6.484 million and 6.509 million respectively, a y-o-y increase of 2% and 0.2%.
Pandemic impact
Previously, many car companies had stopped production due to “lack of cores”, including Volkswagen, Toyota, Nissan, Ford, Suzuki, Volvo, etc. Despite having the largest auto market in the world, China’s automakers source only 5% of their chip requirements from domestic companies. Since the beginning of 2022, several auto dealers have reported that due to the low inventory level of models on sale, new models are currently locked in by deposit to retain customers, resulting in greater delivery pressure.
“Affected by the epidemic, the production capacity and efficiency of car manufacturers have been reduced, and some car companies have even reduced or stopped production. This, to a large extent, has caused the production and sales of cars in March to be lower than the same period last year,” Bingfeng said.
Due to the increase in consumer demand for products, and the impact of the epidemic on consumers’ ability and confidence in purchasing cars, it is temporarily impossible to achieve smooth product transactions, resulting in a significant lack of consumption momentum, CAAM has pointed out.
Battery supply chain
However, while automobile production and sales in China declined in Mar, from the trend of the whole first quarter, the industry still maintained steady growth. The performance of the independent brands is particularly bright. Data show that self-owned brands sold a total of 904,000 vehicles in Mar, an increase of 42.1% m-o-m and a y-o-y increase of 21.5%, accounting for 48.5% of the total passenger car sales.
CAAM has also announced the installed capacity of China’s power batteries in the first quarter of this year. The total installed capacity of power batteries in China was 21.4 GWh in Mar, an increase of 138% on-year and 56.6% m-o-m, showing rapid growth. The total loading of ternary lithium batteries was 8.2 GWh, an increase of 61.2% on the year.
Although data reveal that the installed capacity of power batteries is doubling, the escalation of the conflict between Russia and Ukraine has affected the supply of non-ferrous metals including aluminium, nickel and copper. This may have a huge impact on the global new energy vehicle industry.
Nickel, as an upstream key raw material for electric vehicle power battery manufacturing, is mainly used in the manufacture of ternary cathode materials in power batteries, and ternary power batteries account for nearly half of the market share.
Due to the rapid rise in the prices of raw materials for power batteries, manufacturing costs of car companies in electric vehicles have soared which is reflected in the production numbers of automakers. The rise in power battery prices and NEVs caused by the increase in raw material prices is expected to be reflected in the second quarter. At the same time, the installed capacity of power batteries will fluctuate again and growth may be relatively slow.
‘Dual carbon’ and NEVs
Amid the core chip shortage, soaring raw material prices and local pandemic outbreaks, the global auto industry has fallen into a trough. As the key indicator of the current automobile industry development, NEV sales continued to grow in Q1CY’22. In Mar, the production and sales of NEVs were 465,000 and 484,000 respectively, an 11-times increase y-o-y. The production and sales of pure electric vehicles were 376,000 and 396,000 respectively. In the first quarter, the production and sales of NEVs were 1.293 million and 1.257 million.
NEVs are the brightest spot in the automobile industry today and the market has shifted from policy-driven to market-driven development. Importantly, with the implementation of the “carbon peak, carbon neutral” goal, China’s auto sector will continue to accelerate electrification transformation. Annual production and sales of NEVs will reach 5 million in 2022, CAAM predicts.
Exports
Auto companies exported 170,000 vehicles in Mar, down 5.5% m-o-m but up 28.8% on the year. NEV exports growth was recorded at 17.4%. In Q1CY’22, China’s automakers exported 582,000 vehicles, a y-o-y increase of 58.3%. The export of passenger cars was 452,000 units, a y-o-y increase of 61.9%, while the export of commercial vehicles was 130,000 units, an increase of 47.2% on the year.
Overall, China’s auto exports maintained a relatively high growth trend, CAAM said, adding that auto exports in 2022 are expected to grow by 20% y-o-y and first quarter data show that overall exports has exceeded 20%. Epidemic outbreaks across parts of the world and geopolitical upheavals may result in growing auto exports by China.
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