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Tesla's deceleration may take time to reach SQM's lithium mines

Electric vehicle manufacturer Tesla Inc. reported deliveries of 88,400 vehicles in the first quarter, up 40% year over year. That was well ahead of the 13.3% decline experienced by U.S. auto sales overall in the quarter, including a 38.1% slump in March, as outlined in Panjiva's research of April 6, likely helped by consumers switching to new drivetrains.

The company's outlook is clouded by the impact of the coronavirus outbreak, which could drag on sales as well as cut manufacturing at both Tesla and its suppliers. Indeed, it has decided to close its factories through at least May 4, CNBC reports, as well as cutting wage costs.

The upstream impact to battery suppliers may occur quickly. U.S. imports of automotive lithium ion batteries had already been in decline as a result of the shift to domestic manufacturing by Tesla and others. There was a 49.4% year-over-year drop in imports in January and February combined, Panjiva's data shows. That included a switch in supplies with imports from South Korea down by 74.0% while shipments from Japan increased by 49.6%.

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Further upstream the drag to demand for lithium oxide and carbonate may take longer to feed through. Chilean exports of lithium had been steadily increasing, with a 1.5% year-over-year increase in January following a 37.8% surge in the fourth quarter of 2019, despite the efforts of Sociedad Quimica y Minera de Chile SA to limit supplies.

Exporters had become more reliant on exports to China, which represented 31.5% of the total in the fourth quarter and surged 387% higher in January 2020. Shipments to the EU also surged 33x higher, though January a year earlier was unusually low. Exports to South Korea and Japan, meanwhile, declined while still representing 49.0% of the total in the fourth quarter.

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Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.