LOS ANGELES – The burgeoning lithium industry, which produces the powerhouse metal used to make electric vehicle (EV) batteries, has entered its first major downturn, an unwelcome bruising for investors eager to help combat climate change.

Albemarle Corp, Tianqi Lithium Corp and others have been producing more lithium than automakers need. Global supply exceeds demand by about 5%, according to Canaccord data.

That comes as electric vehicle sales in China - the world's largest EV market - fell nearly a third in September amid sliding government subsidies, the third consecutive monthly decline, according to Jefferies.

A global average of prices is down more than 50% since the start of 2018, according to Benchmark Mineral Intelligence, a metals pricing provider that is hosting an EV supply chain conference this week in Los Angeles.

"Current market conditions are challenging," Luke Kissam, Albemarle's chief executive officer, said last week.

Despite the weak data, analysts and executives expect a rosy future when they look out ten years.

Benchmark's Simon Moores called the lithium oversupply an "air pocket that detracts from the building wall of demand," and noted much of the excess white metal on the market is for so-called technical grade, or the kind that goes into smaller consumer electronics such as stopwatches.

Battery-grade lithium is used primarily in EV batteries, and many automakers have high purity standards. Much of the lithium industry's capacity to produce high-quality, battery-grade lithium is locked up until 2024, Moores said.

Weather and social unrest are just two of the myriad issues that have hampered the industry, fueling worries there may not be enough of the white metal to sate automakers in the years ahead.

"The future supply of battery-quality chemicals is very much in doubt," said Joe Lowry, an independent industry analyst, who wondered how the industry can hope to produce at least 800,000 metric tons by 2025, more than double current capacity.

The popularity of future models from Volkswagen AG , Tesla and others will ultimately require massive lithium investments in the billions of dollars, said Chris Berry, an independent metals analyst.

But for now, lithium companies have reacted to the price drop by scaling back spending, a response to nervous investors pushing the industry to focus more on profitability.

"This delaying of investment will likely act as a powerful precursor for a pricing cycle in the early 2020s," said Ernie Ortiz, president of Lithium Royalty Corp, an affiliate of Waratah Capital Advisors, which buys lithium royalty rights.