Chinese electric vehicle maker Nio will invest 12 million Australian dollars ($7.8 million) to buy a 12% stake in Australian miner Greenwing Resources, the latest investment in overseas battery mineral resources by Chinese companies hoping to secure a reliable supply of materials.
Why it matters: The move also reflects growing concerns among Chinese automakers, who are moving upstream in the supply chain to secure critical battery materials amid rising supply constraints.
Details: The investment will give Blue Northstar, Nio’s wholly-owned subsidiary, a 12.2% stake in Greenwing Resources. More than 80% of the proceeds will be used to step up the mining firm’s efforts on its San Jorge Lithium Project in Catamarca province, Argentina, according to a Monday filing.
- The filing also said Nio would nominate a director to sit on Greenwing’s board. Nio also holds an offtake right, which means the company can purchase a certain share of the company’s lithium, without providing further details.
- The San Jorge Lithium Project is still at an early stage of exploration and drilling is scheduled to start later this year. Greenwing said in the filing that it will release a detailed reserve report by the end of 2023.
Context: The deal comes at a time when surging lithium prices have hit automakers hard as they struggle to secure the supply of the key EV battery component. Battery makers and material suppliers have also negotiated prices with automakers to pass the costs on to the latter, cutting vehicle margins.
- Lithium carbonate prices reached a new high of RMB 500,500 ($71,315) per ton on Sept. 16 in China, Bloomberg reported, citing figures from Asian Metal Inc, and analysts expected prices to maintain at this level at least until the end of 2022.
- Nio has been looking to bring battery development and production in-house, with plans to set up a $32.8 million research facility near its Shanghai headquarters.
- The eight-year-old EV maker reported a vehicle margin of 16.7% from April to June, down from 18.1% during the first quarter of this year and 20.3% a year earlier.
- That number for Nio’s peer Xpeng Motors declined to 10.9% from 12.2% in the previous quarter and was 1% below last year’s figure for the same period. Both companies blamed the drops mainly on rising battery costs.
- State-owned GAC Motor is another automaker connecting with mining companies to ensure a stable supply of EV batteries; in August, announcing a strategic partnership with Ganfeng Lithium, Chinese media reported. According to the plan, China’s biggest lithium compounds producer will invest in GAC’s premium EV subsidiary Aion. GAC, a state-owned carmaker and partner of Toyota and Honda, plans to begin making batteries by itself after 2025.
- Chinese EV giant BYD remains the world’s third biggest EV battery supplier as of July, following Chinese rival CATL and South Korea’s LG Energy, according to SNE Research.