Automobile Enterprises was Higher than Expected, and the Impact on Downstream Demand may Reach 15-20% in April [SMM analysis]

SHANGHAI, Apr 13 (SMM)-Recently, the pandemic in Shanghai has intensified, including the surrounding cities in Jiangsu and Zhejiang. In addition, Changchun, where the pandemic occurred earlier, had a greater impact. This round of fierce pandemic has also impacted the whole new energy industry chain. The first is the automotive industry. FAW Volkswagen in Changchun took the lead in stopping production on March 13. Tesla and SAIC Volkswagen in Shanghai also stopped production after the outbreak began. At present, there is no news about when they will resume production. 

Besides,the pandemic had a significant impact on the automobile supply chain as most of the automobile components and parts enterprises are  located in Jiangsu, Zhejiang and Shanghai. For example, NextEV announced its shutdown on April 9, which was mainly affected by the insufficient supply of components and parts. At present, vehicle manufacturers across the country have successively stopped production and reduced production amid the insufficient components and parts. 

The order volume of battery enterprise also showed a decline trend amid the huge impact on the downstream automobile enterprises. At present, some battery enterprises have reported that the pandemic has affected the annual production scheduling plan, and most battery enterprises have experienced decline in orders of April and May . 

In terms of quantity, take Tesla as an example. According to SMM data, the current weekly production capacity of the factory in Shanghai is about 17,000 new energy vehicles, and the daily production capacity is about 2500 new energy vehicles. Tesla has stopped production for 17 days since March 28. However, it is expected that the best situation is to resume production at the end of April as the pandemic in Shanghai is hard to relieve at present, which will cause a loss of production of at least about 85,000 new energy vehicles. Even if these production reduction models were Model 3 standard endurance model with 55Kwh batteries, the production suspension would reduce its demand for upstream lithium iron phosphate materials by nearly 11,000 mt and lithium salt by about 3,000 mt.  

In addition, superimposed with the impact of production suspension and reduction of other automobile enterprises, it is expected that the impact on the downstream market will reach about 15% - 20% in April, and the battery purchase volume will decrease accordingly. In April, the head battery enterprises have reduced their purchases caused by the increasing inventory to curb the high lithium prices. In addition to the impact of the pandemic, the material procurement volume of battery enterprises is expected to continue to decline, and the overall procurement volume is expected to decline by more than 15% in April and May.  

The impact of the pandemic was greater than expectations. At present, the supply of lithium has increased month-on-month, while there is more room for demand to decline. The supply and demand structure of lithium salt market has reversed, and the decline of lithium price is a foregone conclusion.