Recently, China's new energy vehicle market has entered a phase of adjustment, which has had a certain impact on the expected demand for lithium carbonate. According to institutional statistics, in January, retail sales of new energy passenger vehicles in China fell by about 20% year-on-year, with a significant month-on-month adjustment. This is mainly due to seasonal factors around the Spring Festival, and terminal demand is temporarily under pressure. From the perspective of the industrial chain operation, there has been a phased mismatch between battery output and vehicle loading volume: the production scheduling of leading battery enterprises is relatively stable, partly supported by export orders and energy storage orders, as well as the concentrated delivery effect before the adjustment of the value-added tax rebate policy; however, the real demand for batteries in the domestic passenger vehicle sector currently shows a characteristic of phased slowdown. If domestic new energy vehicle sales remain in the adjustment range, it may affect the consumption rhythm of upstream lithium carbonate in the short term, and may also intensify short-term fluctuations in industrial chain inventory and prices. Nevertheless, with the implementation and effectiveness of relevant consumption promotion policies in the first year of the "15th Five-Year Plan", market demand is expected to gradually stabilize and recover.
Geopolitical conflicts continue to impact the global automotive industry chain through logistics and trade links. After the Spring Festival, shipping prices on major routes have generally risen, and several container shipowners have announced that they will increase freight rates on routes to Europe, the Mediterranean, etc., starting from March. Against the backdrop of escalating U.S.-Iran tensions, market concerns about rising supply chain costs have intensified. Looking back at the period of sharp increases in shipping prices in 2021, the gross profit margins of parts and components companies with a relatively high proportion of overseas revenue were under significant pressure. Currently, China's auto parts companies have a more sound overseas layout, but those with high export dependence and insufficient local supporting facilities still face the pressure of rising costs and narrowing profit margins. This will then be transmitted to vehicle costs and terminal demand, indirectly affecting the demand expectations for power batteries and lithium carbonate.
The Middle East is an important incremental market for large-scale energy storage and renewable energy supporting projects in the future. According to CESA data, in 2025, the scale of new energy storage export orders and cooperation of Chinese enterprises reached 353GWh, a year-on-year increase of 94%, of which the Middle East accounted for 12%. The escalation of geopolitical conflicts in the Middle East will push up regional risk premiums, delay the progress of project approval, financing and construction, postpone the realization of potential energy storage demand, and suppress market sentiment and order rhythm in the short and medium term.
Although the demand side is facing the above pressures in the short term, from a long-term perspective, the core logic supporting the price of lithium carbonate has not yet been disproven.
First, low inventories provide price elasticity. According to SMM data, after the Spring Festival, domestic social inventories of lithium carbonate have continued to decline, dropping to around 100,000 tons, the lowest level since July 2024. Low inventories mean that the industrial chain has a thin buffer. Once there is a marginal improvement in demand, the price elasticity may still be significant.
Second, the industrial logic of new energy vehicles remains unchanged. From the technical perspective, China still maintains a leading position in the power battery and vehicle industry chains, and the power capacity per vehicle continues to increase. From the perspective of demand structure, the sales volume of new energy vehicles in Europe, the sales volume of new energy commercial vehicles in China, and the demand for energy storage batteries still maintain a relatively high growth rate, which can partially offset the periodic weakness in domestic passenger vehicle demand. Electrification and energy storage remain long-term directions, and the medium and long-term demand curve for lithium carbonate has not changed due to short-term fluctuations.
Third, uncertainties on the supply side will persist for a long time. Against the backdrop of the normalization of geopolitical conflicts, in addition to the sudden changes in Zimbabwe's export policies, uncertainties in major lithium resource countries regarding environmental protection, resource nationalism, and export controls will persist for a long time. The commissioning pace of new projects and trade flows may be repeatedly disrupted. If the supply side shrinks or uncertainties rise, it will still provide support for the price of lithium carbonate.
To sum up, in the short term, the lithium carbonate market is facing three pressures: weak domestic demand for new energy vehicles, rising costs in the automotive industry chain due to geopolitical conflicts, and the situation in the Middle East suppressing potential demand in the energy storage sector. However, in the medium to long term, with inventories at an absolutely low level and the normalized constraints of geopolitics on the supply side, the upward cycle of lithium carbonate prices has not changed.
Looking ahead to the market outlook, if domestic new energy vehicle sales stabilize and rebound under policy and price incentives, and energy storage and export orders remain resilient, the pessimistic market expectations are expected to be repaired; if demand continues to be weak, we need to be vigilant about the lithium carbonate price fluctuating continuously at a low level in the range of 120,000 to 130,000 RMB per ton.
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