INDUSTRY BULLETIN: Transition to Electric Vehicles in China continues to accelerate
China continues to lead the global transition towards electric vehicles (“EVs”). The rapidly accelerating pace of this transition was readily apparent to Avalon management during a recent trip to China to meet with lithium consumers in the lithium ion battery supply chain.
In early December, China announced it will extend the soon-to-expire 10% tax rebate on purchases of EVs until at least 2020. Continuing this trend, China’s Traffic Management Bureau announced that green “new energy” license plates will be implemented across the entire country by the first half of 2018, after having been introduced in a handful of cities and regions over the past two years. This new system provides a quicker path to accessing plates, which are tightly controlled and under limited availability in the country. Finally, China has also announced it will increase the percentage of the maximum loan amount to 85% for “new energy” vehicles for personal use (vs. 80% for conventional vehicles).
Plug-in electric vehicles sales surged to a record in Q3 2017, largely driven by strong demand in China, according to a report from Bloomberg New Energy Finance (BNEF). Sales of battery-electric vehicles and plug-in hybrids exceeded 287,000 units in the quarter, 63% higher than the same quarter a year ago and up 23% from Q2 2017, BNEF said. China accounted for more than half of global sales as its market for electric cars doubled amid government efforts to curb pollution.
Figure 1: BNEF, sourced from GreenCarCongress.com
Jay Jacobs, Director of Research at Global X, shared some observations on the groundswell changes occurring in the country: "China is not just focusing on electric vehicle manufacturing, but also buying up lithium projects and supporting the growth of battery producers, so they can control even more of the electric vehicle supply chain. […] Given the government's power in China to direct the economy, if they want to become the world leaders in electric vehicles, they can likely achieve it.” The article goes on to state that analysts have noted that Western companies have yet to show the same levels of interest in lithium supply, compared to their Chinese competitors.
However, it is not just outside observers noting the importance of securing the critical material supply required to meet global EV targets, as Heyi Xu, chair of Beijing Automotive Group, has simply stated, “We must secure lithium resources to prepare for the era of electric vehicles.” With all this in mind, many are closely watching the pending IPO of Contemporary Amperex Technology Co. Ltd (CATL): one of the largest players in the sector globally, who are looking to raise ~$2 billion USD, valuing the company at ~$20 billion USD.
Avalon’s President and CEO, Don Bubar, and VP, Sales and Marketing, Pierre Neatby, visited China in late November and met with both existing and emerging players in the lithium ion battery supply chain. Mr. Neatby commented that “all of these companies told Avalon unambiguously that they were planning to at least triple their production over the next four years and were actively seeking new sources of lithium supply.”
With demand growing and prices rising as automakers and governments continue to drive the shift towards EVs, there will be an ongoing global need for new supply sources of lithium to quickly meet the growing demand. Avalon’s advanced Separation Rapids Lithium Project is well-positioned to bring a new supply of high quality, sustainably-produced lithium to the global market in the near term.
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About Avalon Advanced Materials Inc. (TSX: AVL & OTCQX: AVLNF)
Avalon Advanced Materials Inc. is a Canadian mineral development company focused on technology metals and minerals. The Company has three advanced stage projects, all 100%-owned, providing investors with exposure to lithium, tin and indium, as well as rare earth elements, tantalum, niobium, and zirconium. Avalon is currently focusing on its Separation Rapids Lithium Project, Kenora, ON and its East Kemptville Tin-Indium Project, Yarmouth, NS. Social responsibility and environmental stewardship are corporate cornerstones.