Firms Take Stakes Overseas To Fuel New-Energy Vehicle Boom

Two Chinese companies have announced separate purchases of stakes in foreign firms related to the new-energy vehicle sector, as they rush to cash in on China’s huge hunger for the vehicles and the batteries that power them.

The Sichuan-province-based Tianqi Lithium Corp. said Friday in a statement (link in Chinese) that it will pay $4.1 billion for a 24% stake in Chilean peer Sociedad Química y Minera (SQM), the world’s second-largest lithium producer.

This purchase will give Tianqi greater access to the element and boost China’s presence in the electric-car-battery supply chain.

The interest in lithium comes as Beijing is aggressively promoting electric cars — many of which use rechargeable lithium batteries — to combat air pollution and help domestic carmakers build global brands. Although the country has extensive reserves of the metal, much of the lithium used by domestic companies comes from overseas.

Tianqi said the transaction will help lift its footing in the global market, and it fits into its development strategy.

SQM currently has an annual lithium carbonate production capacity of 48,000 metric tons (52,910 tons) and is planning to expand that to 70,000 metric tons by the middle of this year and 100,000 metric tons in 2019.

Shenzhen-listed Tianqi processes a variety of raw materials for the battery industry. It’s now building the world’s biggest lithium processor in Western Australia state to produce hard rock lithium, primarily for export to China.

The company, which has a market capitalization of $9.5 billion, plans to raise at least $1 billion from a Hong Kong flotation this year, the International Financing Review reported. Part of the proceeds would be used to finance Tianqi’s investments.

Meanwhile, Shandong-province-based Weichai Power Co. Ltd., a maker of diesel engines for vehicles, marine vessels and power generators, announced Wednesday it’s paying 40 million pounds ($54.1 million) for a 20% stake in Ceres Power Holdings PLC, a British fuel cell manufacturer.

The companies are to jointly develop and launch fuel-cells systems for China’s fast-growing electric bus market, Ceres said in a statement. 

“The low-emission public transport market in China represents a major commercial opportunity,” it said. “This is being driven by the Chinese government, who is stimulating this sector through subsidies and Zero-Emission Zones, designed to reduce air pollution, carbon emissions, and road noise while increasing public health and lower operating costs.”

About 99% of the 385,000 electric buses on the roads globally are in China, a Bloomberg report said. Sales of electric buses in China amounted to 132,000 units in 2016, up from 69,000 the year before, the report added.

Contact reporter Jason Tan (jasontan@caixin.com)

Additional reporting by Reuters