In April, Chinese car sales recorded their first year-on-year increase since June 2018.

Sales bounced back by 4.4 per cent to 2.07 million while production also rose by 2.3 per cent to 2.102 million for the month, the China Association of Automobile Manufacturers (CAAM) said.

Of this, China produced 80,000 new energy vehicles (NEVs) in April; up 60 per cent on March but down 22.1 per cent on April last year.

Sales followed the same trend; up month-on-month but down from a year earlier to 72,000 units.

2020 vehicle output is still weighed down by huge year-on-year declines of 79 per cent (February) and 43 per cent (March) caused by COVID-19 restrictions.

China’s world-leading car market consumes 7 per cent of its total domestic steel demand. That means this tentative production and sales rebound is good news for iron ore players.

As the “backbone of the EV market to date”, China’s apparent early economic recovery from COVID-19 will also help support the beleaguered battery supply chain.

China’s battery materials production also increased over April as demand recovered across multiple downstream sectors, but the short-term demand outlook is still weak.

Sales of battery cathode materials in the coming two months are expected to hold stable or dip “as the downstream market is nearly saturated, which is expected to provide little support to battery metals demand, according to CNIA”, Argus says.

READ: Have the next crop of battery metals producers been oversold?

As China emerges from the lockdowns, measures have been put in place to boost domestic NEV sales. In April, the government said it would extend subsidies on NEVs for two years to the end of 2022.

Provincial governments have also taken various measures to boost NEV sales, according to Argus.

The Hainan provincial government will offer a subsidy of 10,000 yuan/unit ($US1,439) to NEV buyers until December 31, following steps introduced by the Guangzhou municipal government and Sichuan province, it says.