(Yicai Global) March 21 -- Small lithium carbonate producers are being forced to the wall in China as prices of the key material used in electric car batteries slide amid a rapidly cooling new energy vehicle market, according to an industry insider.

Sinking lithium carbonate prices are causing inventory to build up and difficulty in recouping funds, with some suffering huge losses and even going bankrupt, the source told Yicai Global.

Prices of battery-grade lithium carbonate plunged by an average CNY12,500 (USD1,820) to CNY300,000 (USD43,620) a ton today from yesterday, a new low this year, according to commodity information provider Mysteel.Com. Today’s price is down over 40 percent from the record high recorded last November.

Lithium carbonate producers are trying to speed up sales, but downstream players do not dare to buy, and are instead taking a wait-and-see approach, the insider added, noting that some overseas clients have canceled orders, contributing to the decline in prices.

China ended 13 years of NEV subsidies this year, causing the NEV market to cool quickly. Retail sales of new energy passenger vehicles fell 6.3 percent in January from a year earlier, data from the China Passenger Car Association showed. The figure rose 61 percent in February, but remained below the monthly average for last year.

In the long run, the decline in prices of raw materials for the NEV industry will have a positive impact on the industry, Zhang Shunli, secretary-general of Dejishun Enterprise Information Service (Suzhou), told Yicai Global.

The profitability of midstream and downstream companies will improve as costs fall, giving more room for NEV firms to cut prices and stimulate demand for a market recovery, he said.

Editors: Dou Shicong, Futura Costaglione