08 Jul 2022 | 08:35 UTC

China lines up more measures to aid automobile consumption, to benefit metals demand

Highlights

To extend tax exemption in NEV purchases

2022 NEV sales expected to rise sharply on year

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China on July 7 issued several policy measures to aid demand for new energy vehicles, a move that follows a series of measures taken to stabilize the country's economic growth which will eventually benefit metals consumption, industry sources said July 8.

China's 17 key departments, including the National Development and Reform Commission, jointly issued the notice targeting the automobile sector, according to a statement released by the Ministry of Commerce.

As part of these policies, China will extend the tax exemption given for buying new energy vehicle, promote NEV sales in rural regions and accelerate development of the charging infrastructure.

Related infographic: China's explosive EV growth to stay on track

China's explosive EV growth to stay on track

Besides this, China will also take measures aimed at second-hand car sales and prompt auto replacement, the notice showed.

China's policies have showed favorable impact on the automobile industry, as incentive measures implemented since May boosted China's vehicle sales in June after shrinking earlier due to the pandemic.

China's passenger car retail sales reached 1.93 million units in June, up 22% from a year earlier and 42% higher from a month ago, according to preliminary statistics released by the China Passenger Car Association July 6.

Lithium chemicals

China Association of Automobile Manufacturers said it was confident China's NEV industry could achieve the sales target of 5 million units in 2022, up 47% from a year earlier.

S&P Global Commodity Insights estimated China's EV sales to reach 6.4 million units, more than double from 2021 levels.

As EV sales have been picking up, demand remains high from downstream producers that will boost consumption of lithium chemicals — the key ingredient to produce power battery, sources said. This will keep domestic prices elevated, they added.

However, there was a little change in the domestic lithium market in the week to July 8, with sources saying demand recovery still remains below expectations.

Platts assessed battery-grade lithium carbonate at Yuan 470,100/mt ($70,149/mt) July 7 on a delivered, duty-paid China basis, down Yuan 4,900/mt on the week.

Markets still remain more focused on term contracts with no significant increase in downstream demand, according to sources.

Aluminum

China's aluminum demand from automobile sector is also set to rise in the second half of this year, on the back of China's recent policy measures to prop up consumption, sources said.

China's automobile sector is a key consumer of aluminum.

Aluminum markets took a blow from the pandemic as downstream demand weakened, setting a bearish tone for the industry.