BYD Invests in Lithium Developer Chengxin Lithium

Shenzhen Chengxin Lithium Group Co., Ltd., a Chinese developer of lithium materials, announced on Tuesday that it plans to raise up to 3 billion yuan ($471 million) by introducing BYD as a strategic investor through a targeted stock issue.

Upon this issuance, it is expected that Shenzhen-based automaker BYD will hold more than 5% of the company’s shares. They will jointly develop and acquire lithium resources, and BYD will step up the procurement of lithium products for supply stability and cost advantages.

Chengxin Lithium was established in December 2001 and listed to the Shenzhen Stock Exchange on May 23, 2008. It produces and sells lithium materials used for new energy generation, and its core products are lithium concentrate, lithium carbonate, lithium hydroxide, lithium chloride and lithium metal. At the end of May 2021, Chengxin sold its rare earth division and decided to focus on its new energy materials business.

With new energy vehicles on the rise, car makers are perpetually facing short supply of batteries. BYD, an automotive company and also a battery dealer, arranged lithium resources earlier this year. On January 12, BYD won the 800,000-ton lithium in the 400,000-ton lithium tender launched by the mining authorities in Chile, but unfortunately, the tender was subsequently closed by the Chilean court.

Amid repeated outbreaks of COVID-19, new energy vehicles again saw high growth. Data indicated that in February, new energy passenger car sales surged 189.1% year-on-year, with penetration reaching 21.8%, leading to higher battery raw material prices.

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As for BYD, its EV series models are mainly priced between 100,000 to 200,000 yuan, and its targeted consumers are highly sensitive to price increases. BYD is again laying down from the top of the supply chain, taking a step to retain the procurement cost advantage of lithium ore, allowing profit margin for its cars.