China’s EV Standardization Plans to Boost Lithium Demand

China is working on improving standardization in its electric vehicle (EV) industry to continue to fight pollution and set guidelines that could be adopted worldwide.

The government will focus its efforts on recharging, battery design and fuel consumption, the country’s industry ministry said in a statement.

China, which saw sales of new energy vehicles (NEVs) jump 53 percent last year, will also work to promote its standards overseas to become a global leader in standardization, Reuters reported on Tuesday (March 27).

The Asian country manufactured 794,000 NEV units and sold 777,000 in 2017, the most sold in any one country. Moreover, total NEV ownership in China reached 1.8 million, more than half the global total.

Sales of electric cars worldwide are forecast to increase in the coming years, but standardization has been identified as one of the biggest challenges in the industry. China’s plans will allow carmakers to develop units to a universal standard, supporting EV adoption rates.

A few major domestic manufacturers include Warren Buffett-backed BYD (SHA:002594), SAIC Motor (SHA:600104), BAIC Motor (HKEX:1958), Great Wall Motor (HKEX:2333) and Geely Automobile (HKEX:0175).

As demand for electric cars increases, the need for lithium, a key component in EV batteries, is also expected to surge. In fact, lithium expert Joe Lowry, who recently increased his lithium demand estimate to 2025, believes faster-than-expected progress in e-transportation will be one of the factors driving demand higher.

Standardization is also expected to support the creation of safe and cost-efficient recycling facilities. In 2018, China will have to deal with an estimated 170,000 tonnes of spent EV batteries.

Earlier this month, the government, which is pushing for all-electric battery cars and plug-in hybrids to account for at least one-fifth of its overall vehicle sales by 2025, outlined plans to start electric car battery recycling programs in four regions.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.