China's new EV sales to stay healthy in 2022 despite COVID-19 disruptions: sources

New energy vehicle sales in China are expected to keep a healthy pace in 2022, even as automakers raised NEV prices and COVID-19 outbreaks disrupted production at major factories, industries sources told S&P Global Commodity Insights.

A sharp spike in China's COVID-19 cases from February caused supply shortages and weak production, leading to a month-on-month decline in April sales from top Chinese news energy vehicle producers, including Nio, Li Auto Inc. and Hozon Auto.

China's automakers suspended or reduced production due to supply shortages of automotive parts following the pandemic-led lockdowns in Shanghai and nearby cities.

China's passenger car retail sales are estimated at 1.1 million units in April, down 31.9% from a year earlier, China Passenger Car Association, or CPCA, said in a report earlier.

However, production capacity of vehicle makers and auto part manufacturers in Shanghai has been gradually rising after operations restarted from April 19, the Shanghai municipal government said in a press conference May 5.

China's NEV production and sales are expected to rise in May compared to April, Cui Dongshu, secretary general of CPCA, said recently.

CPCA maintained its forecast for China's NEV sales in 2022 at 5.5 million units.

It could take a while for the vehicle producers to achieve full capacity, as automotive industry has huge supply chain networks to handle, sources said.

While vehicle production and sales in May could face some pressure, operations are expected to normalize gradually in June, they added.

China's NEV producers have been forced to hike car prices due to monthslong high raw materials prices, but such hike would not dent sales as gasoline prices remain high, while certain government policies also encourage NEV sales, sources said.

Lithium demand, prices

Prices of battery metals in China have been trending lower, in view of growing production from salt lakes, softer downstream demand and government's move to keep raw material prices at "rational levels."

Downstream consumers were reluctant to place orders due to the price downtrend, with sources expecting lithium salts prices to drop further.

However, despite under pressure, lithium prices would remain at elevated levels amid high production costs and expectations of later demand recovery, sources said.

Platts assessed battery-grade lithium carbonate and hydroxide at Yuan 465,000/mt ($70,212/mt) and Yuan 470,000/mt May 5 on a DDP China basis, down 7% and 5.2%, respectively, from a month earlier, according to S&P Global data.

China has been witnessing a stellar growth in its EV industry in recent years, driven by the country's growing emphasis on decarbonization.