Frankfurt (Germany): According to the data released by European authorities, showcased record high sales of Electric Vehicles (EVs) in the largest passenger automotive market, supported by government incentives. However, the challenge arises due to geopolitical tensions forcing many countries to reduce or eliminate EV subsidies in 2023. It has several risks for the upstream Lithium salts such as Lithium Carbonate and Lithium Hydroxide, i.e., identical to China. In China, as the deadline for New Energy Vehicle subsidies approached closer, EV sales have plunged, and the offers for Lithium Carbonate and Lithium Hydroxide witnessed a slowdown in Q4 2022. 

According to the European Automobile Manufacturers Association (ACEA), the registration of new Battery Electric Vehicles (BEVs) consistently grows, despite the overall EU automotive market witnessing a decline in 2022. The BEVs market share growth reached 12.1%, observing an increment of 3% yearly. In response, it sustained the market growth of essential Lithium salts such as Lithium Carbonate and Lithium Hydroxide in the domestic market. Cumulatively EV sales in Europe across all segments have surged by 36% against the persistent inflation and surging energy costs, further uplifted by the conflict in the far-east European region. Furthermore, it is anticipated that the European economy will contract by one percentage point in Q1 2023.  

Western markets are facing bigger challenges owing to macroeconomic factors and the overall outlook across the Atlantic. In the US, the high prices are likely to impact the purchasing power coupled with the aggressive US Federal Reserve policies like IRA to support the sale of EVs in the US surge the borrowing cost besides enforcing a shallow recession in 2023. As per the market experts, it has been anticipated that the US GDP growth rate is likely to contract to -0.1% in 2023.    

Therefore, in the recent dialogue between US and EU authorities at Trade and Technology council, friction over massive tax incentives for Electric Vehicles is one of the prominent areas of discussion, especially after the announcement of Biden's administration's IRA Act. In conclusion, both parties agreed to align the industrial policies besides indicating a plan to end the EV subsidies disputes.

According to the ChemAnalyst Pricing Intelligence, the Lithium salts such as Lithium Carbonate and Lithium Hydroxide have hovered at historic high levels with a bearish attitude since Q4 2022. It is anticipated that the if the EV subsidies are revoked in the EU or US by ending the consumer benefits, it has been evident that EV sales will impact the offers for Lithium Carbonate and Lithium Hydroxide. The sentiments amongst the Active Cathode Manufacturers (CAM) will consistently hover with uncertainties and conclude as a drop in offtake volumes. Therefore, the volatility over Lithium Carbonate and Lithium Hydroxide offers will soar, and the Lithium Carbonate market might align with the Goldman Sachs projections over Lithium Carbonate prices in 2023.