Inflation is a major factor in the global economy. So how does it affect China’s industry? Recent analyst notes offer some clues.
China’s NEV industry does not need to be concerned about high inflation or high interest rates. According to Dong Qi, a team of macroeconomic analysts at Guotai Junan Securities in a research note, the penetration of NEVs has a positive correlation with PPI (Producer Price Index).
This is because NEVs are replacing traditional internal combustion engines (ICE) because they have higher oil prices. Also, ICE vehicles are more expensive and more susceptible to variable costs.
The analyst pointed out that NEV penetration has not declined despite rising global interest rates. This is due to policy incentives.
Despite the fact that NEV purchase incentives have been decreased in China over recent years, they are still exempt from purchase tax. According to the team, traditional ICE vehicles are less affected by rising raw material prices and higher interest rates.
The cost of NEVs is 40 percent cheaper than lithium batteries, so the industry’s growth will be limited if the prices of lithium remain high.
According to the team, inflation is strongly correlated with the boom in upstream raw materials like steel, copper, and aluminum. However, lithium prices are dependent on their own capacity cycles.
According to the team, NEVs are the main source of lithium batteries, while consumer electronics have seen a marginal increase in demand.
The entire industry chain of NEVs currently accounts for approximately 1.6 percent China’s GDP. However, the team predicts that the industry’s contribution to China’s GDP will increase over time.
According to data from China’s National Bureau of Statistics, China’s CPI (Consumer Price Index), rose 2.5 percent year on year in June. This is an increase of 2.1 percent from May. According to data released by China’s National Bureau of Statistics on July 9, the country’s PPI grew 6.1 percent in June, compared with 6.4 percent in May.
According to data released July 8 by the China Passenger Car Association, 571,000 new-energy passenger vehicles were sold in China’s wholesale market. This surpasses December’s record of 505,000 units.
China’s wholesale sales penetration rate increased by 10.8 percentage points to 26.1 percent in June from 15.3 percent in June 2021.
According to the CPCA, China’s new-energy passenger vehicle sales increased by 130.8 percent in June and 47.6 per cent sequentially.