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A worker checking stacks of lithium-ion battery packs at Xinwangda Electric Vehicle Battery Co.’s factory in the Jiangsu provincial capital of Nanjing on March 12, 2021. Photo: AFP

China’s booming electric car market prompts lithium producer and battery assembler to raise funds for expansion

  • Tianqi Lithium of Chengdu was given the go-ahead by its board to offer 20 per cent of its enlarged capital in an initial public offering (IPO) in Hong Kong
  • The stock sale could be as much as US$850 million, based on the US$29.5 billion market value of Tianqi’s A shares listed in Shenzhen

One of the world’s largest producers of lithium, as well as its biggest customer in the assembly of lithium-ion battery packs, have announced separate fundraising plans to expand their production amid soaring worldwide demand for the renewable energy source in the booming electric car industry.

Tianqi Lithium Corporation, based in the Sichuan provincial capital of Chengdu, was given the go-ahead by its seven-member board to offer 20 per cent of its enlarged capital in an initial public offering (IPO) in Hong Kong, reviving a plan that was shelved three years ago. Based on the 190 billion yuan (US$29.5 billion) value of Tianqi’s yuan-denominated A shares listed on the Shenzhen Stock Exchange since 2010, the Hong Kong offering could be valued at US$850 million.

Contemporary Amperex Technology (CATL), the world’s biggest assembler of lithium-ion battery packs and a Tianqi customer, said last month that it was planning to raise 58.2 billion yuan through a private share placement to finance the construction of new battery plants.

Tianqi, which may increase the volume of its IPO by 15 per cent if an overallotment option is exercised, said it plans to use the proceeds from the sale for expanding its production capacity. The company postponed a US$1 billion stock sale in Hong Kong in 2018 amid plunging lithium prices.

Crushed lithium ore produced by Talison Lithium Limited on Monday, December 21, 2009. Talison produces almost a quarter of the world's lithium. Photo: Bloomberg.

Since then, China’s market for electric vehicles has gone through an explosive growth, with no fewer than 500 assemblers rushing out models to compete in a nation where three of every five new vehicles coming on to the roads are expected to be fully electric by 2030, according to a UBS forecast. Deliveries of new-energy vehicles (NEVs), as electric cars are called in China, may jump to 6.6 million units by 2025, from 1.17 million in 2020, UBS said.

At present, lithium-ion phosphate (LFP), nickel-cobalt-aluminium (NCA) and nickel-cobalt-manganese (NCM) batteries are the main technologies adopted by the world’s major EV companies.

Workers at Xinwangda Electric Vehicle Battery Co.’s factory in the Jiangsu provincial capital of Nanjing, on March 12, 2021. Photo: AFP.

China’s demand for lithium carbonate equivalents (LCEs) have soared fivefold this year to 668,900 tonnes, from 132,900 tonnes last year, according to Haitong International’s research report in May.

“EV batteries will be in high demand, and a supply shortage can be expected if the major battery manufacturers and material suppliers do not actively expand their capacities,” said David Zhang, a researcher of automotive industries at the North China University of Technology. “Leading players have better opportunities to chase the rapid growth in the coming decade.”

The board’s confidence was bolstered by Tianqi’s shares, which jumped by 580 per cent to a record 136.25 yuan on August 31, helped by the overwhelming demand in the booming electric car industry.

The company swung to a first-half profit of 86 million yuan, compared to an interim loss of 697 million yuan a year ago. Still, it is saddled with borrowings, with a debt-to-asset ratio of 88 per cent at the end of June, according to its interim report.

While Tianqi is looking to expand, so is CATL, whose customers include BYD and Tesla. The company, based in Fujian’s Ningde city, is planning to use its proceeds from what would be one of China’s biggest add-on fundraising exercises this year to build several battery plants in Fujian, Zhejiang and Guangdong provinces, CATL said.

This article appeared in the South China Morning Post print edition as: LITHIUM firms seek funds to expand