Chinese battery makers rush to IPOs as lithium price soars · TechNode – TechNode | CarTailz

Chinese battery makers Svolt, Sunwoda and Ganfeng are rushing to raise funds as prices for key commodity lithium more than double in a year. The country’s regulators are also introducing a series of new measures in the electric vehicle battery market, including a crackdown on illegal hoarding, as high lithium prices have threatened automakers’ profit margins and could further slow EV adoption in the country.

Why it matters: The spot price of battery-grade lithium carbonate rose 201% in a year, rising by RMB200,000 per ton to RMB590,000, according to Nov. 11 figures from the Shanghai Metals Market metals research institute.

  • Analysts said supply and demand have been thrown out of balance thanks to booming electric vehicle sales since 2021. Meanwhile, a production cut of lithium salts due to weather problems in China’s northwestern Qinghai province, as well as advance orders for next year from battery and material makers, are among the near-term reasons behind skyrocketing lithium prices.
  • A huge spike in lithium prices in recent months could also create long-term structural issues like industrial overcapacity as companies from battery makers to lithium producers rush to raise cash to expand production capacity.

Funding boost: Svolt, Sunwoda and Ganfeng are among the Chinese battery makers and materials suppliers rushing to raise cash as wider EV adoption opens a window for bond and stock sales.

  • Svolt, a battery maker backed by BMW’s manufacturing partner Great Wall Motor, filed an IPO in the mainland market on Nov. 18 to fund the construction of three plants with a combined annual capacity of 106.65 gigawatt hours (GWh) of batteries.
  • On Nov. 14, Shenzhen-listed Sunwoda completed a share sale in Switzerland, raising $450 million, months after Volkswagen-backed Gotion raised $685 million on the Swiss stock exchange. Sunwoda, a supplier to Xpeng Motors, is building two plants with a capacity of 80 GWh batteries per year, an investment of 33.3 billion RMB (nearly 4.7 billion US dollars).
  • Ganfeng Lithium plans to spin off its mining subsidiary Ganfeng LiEnergy for a possible listing on the Shenzhen Stock Exchange, according to a securities filing released on Wednesday. In August, China’s largest lithium compound maker announced a partnership with state automaker GAC to supply raw materials and jointly develop battery technologies.

New rules: In a document released on Nov. 18, two Chinese government agencies — the Ministry of Industry and Information Technology and the State Administration for Market Regulation — called on local regulators to do more in their crackdown on illegal acts like hoarding and price gouging on battery raw materials.

  • The two agencies also jointly called on regional authorities to reduce local protectionism, build an open, fair and unified national lithium-ion battery market and help companies tackle supply chain issues.
  • The central government also expressed concern about “blind development” in battery manufacturing, urging battery makers and material producers to expand their production capacity “in a scientific and orderly manner” under the supervision of local governments.

slimming margins: Rising battery raw material costs have impacted the profitability of Chinese EV manufacturers. Nio’s vehicle profit margin fell from 18.1% to 16.4% for three consecutive quarters this year. Meanwhile, the figure for Xpeng Motors fell from 12.2% to 9.1% in the first half of 2022.

  • Speaking to analysts during an earnings conference call on Nov. 10, Nios CEO William Li expected the company’s vehicle margin to remain relatively stable in the current quarter, adding that a RMB100,000 increase in lithium carbonate would lift auto margin by 2 % would decrease.

Jill Shen is a technology reporter from Shanghai. She deals with Chinese mobility, autonomous vehicles and electric cars. Contact her via email: jill.shen@technode.com or Twitter: @yushan_shen More from Jill Shen

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