In January and February, insurance registrations for passenger cars in China were down more than 25 percent from a year earlier, Li Auto CEO said, citing insurance registration data.
The price of lithium carbonate, a key raw material for batteries, has fallen more than 30 percent from its high last November. In the view of the man at the helm of Li Auto (NASDAQ: LI), the trend is far from over.
Lithium carbonate is going to drop significantly in price anyway because demand is far less than expected, Li Auto founder, chairman and CEO Li Xiang said on Weibo yesterday.
Li's judgment is based on the fact that Chinese auto sales have been very weak in the first two months of the year.
In January and February, total insurance registrations for passenger cars in China were down more than 25 percent from the same period last year, Li said, citing preliminary data.
In the first two months, new energy passenger cars contributed more than 30 percent of sales, he added.
From January 2 to February 26, insurance registrations for passenger vehicles in China were 2.33 million units, with NEVs contributing 629,141 units, or 27 percent, according to data monitored by CnEVPost.
On February 22, China Passenger Car Association (CPCA) released estimated data showing that China's February retail sales of NEVs are expected to be 400,000 units.
This means that combined January and February sales of NEVs in China are expected to be 731,542 units, up 17.06 percent from 624,953 units in the same period last year.
For comparison, China's NEV growth rate in the first two months of last year was 145.08 percent year-on-year, while China's passenger vehicle retail sales were flat with the same period in 2021.
Although the Li Auto CEO believes lithium carbonate prices will continue to fall, he said in response to comments from other users on Weibo that the company's models will not be reduced in prices.
The rapid growth of China's NEV industry over the past two years has been accompanied by a parallel surge in the price of lithium carbonate.
On November 23, 2022, the price of battery-grade lithium carbonate rose to RMB 590,000 ($85,480) per ton in China, up about 14 times from RMB 41,000 per ton in June 2020.
Since then, however, lithium prices have continued to fall, with battery-grade lithium carbonate dropping below RMB 400,000 on February 28 and industrial-grade lithium carbonate prices falling below that mark earlier on February 22.
Last week, local media reported that lithium supplies could be disrupted by the shutdown of a mining center in China. But this did not deter lithium carbonate prices from continuing to fall.
Yicai reported in a February 26 article that lithium miners in Yichun, nicknamed the "lithium capital of Asia," were shutting down production to rectify. Analysts expect that a one-month shutdown would affect 13 percent of the global lithium supply.
Lithium carbonate prices have continued to fall since the beginning of the month, although not as dramatically as before.
As of today, the price of battery-grade lithium carbonate has fallen to RMB 379,000 per ton, while the price of industrial-grade lithium carbonate has fallen to RMB 349,000 per ton, down about 35 percent from its high point at the end of November.
The core terms of the partnership include that CATL will settle a portion of its power battery supply with contracted automakers at a price of RMB 200,000 per ton of lithium carbonate for the next three years.
Li Auto and NIO, when asked about this in conference calls following their fourth-quarter earnings announcement, both said that negotiations were still ongoing.
NIO had previously mentioned that an RMB 100,000 per ton drop in lithium carbonate prices would increase its gross margin by 2 percentage points.
NIO's management said in a call with analysts after the March 1 earnings announcement that they expect lithium carbonate prices to fall to RMB 200,000 per ton this year.
($1 = RMB 6.9023)