The Development Plan for the New Energy Vehicle Industry (2021-2035) expected to boost cobalt demand by nearly 31% YoY in 2021

SHANGHAI, Nov 10 (SMM)—On November 2, the highly-anticipated Development Plan for the New Energy Vehicle Industry (2021-2035) was unveiled, which was not only a good news for the new energy vehicle (NEV) industry, but also a boost to cobalt demand.

The Plan pointed out that by 2025 sales of new NEVs should account for about 20% of total new vehicle sales, down 5% compared with the target required in the draft for comments issued on December 3, 2019, and the average power consumption of new pure electric passenger vehicles should be reduced to 12 kwh/100 km. Subsidies for NEVs declined in 2019, and in 2020 the COVID-19 outbreak has taken a toll on the sector. Although the NEV market has been recovering gradually from the pandemic, data from China Association of Automobile Manufacturers (CAAM) showed that in the first nine months of 2020 NEV output totalled 738,000 units, down 18.7% on the year, while sales came in at 734,000 units, 17.7% lower than a year ago. 

In addition, the Plan also emphasized development of motive batteries. Battery makers are encouraged to establish and improve standard modular system of motive batteries, increase techniques and production efficiency, improve the system of battery recycling and cascade utilization, establish management system of battery transportation and storage, maintenance, safety inspection, retirement and recycling, and strengthen supervision.

It is noteworthy that the Plan said to speed up construction of charging facilities. This year, the power exchange mode has ushered in unprecedented development opportunities. NIO has introduced battery rental services, which will reduce prices by 70,000 yuan, and Geely Group has signed more than 1,000 power stations nationwide.

Expected effects of the 14th five-year plan on NEV and cobalt sectors

SMM believes that the Plan has made a more comprehensive and reasonable plan for China’s NEV market, and will boost demand for motive lithium batteries in the future. As cobalt and lithium accounted for a high proportion in battery raw materials, demand for cobalt and lithium raw materials is expected to maintain its fast growth in the coming years.

Optimistic expectations:

1. Local subsidies for NEVs will rise significantly;

2. Demand for battery replacement will increase;

3. China’s domestic NEV output may surpass Tesla.

Pessimistic expectations:

1. Subsidies for NEVs will decline;

2. Not enough policies to support the new mode of battery replacement.

SMM expects that demand for cobalt from rising NEV output to increase by nearly 31% year on year to 17,000 mt (Co content) in 2021, and by nearly 35% to 23,000 mt (Co content) in 2022.