China new energy vehicle sales drop 34%

China new energy vehicle sales drop 34% (FT)

• The FT reports that according to the China Association of Automobile Manufacturers, sales of new energy vehicles (NEV), which includes hybrids and fully electric cars, sank 34.2% yoy in September.

• The news has since weighed on lithium miners, cathode manufacturers, Chinese auto OEMs and other EV related stocks.

Analysis and Comments

• Investors need to have a closer look at the EV sales data before reaching any conclusions. "Structurally” this is the best time to look at the various stocks across the battery value chain.

• Nothing massively has changed since the start of this year and data shows stabilization in monthly sales at ~80k units.

• There is a real possibility that we might see a pick up in EV sales in the remaining three months of the year in anticipation of the complete phase out of subsidies in China by next year.

• However, for more of a medium term outlook, do look at regulatory drivers for EV adoption (EV production quotas, taxes on ICVs, waiting period for a new ICV, low emission zones in cities etc etc) in China. These are powerful and would overturn any bearish thesis on EV adoption in China and globally.