Chinese battery makers rush to IPO as lithium price rises · TechNode

Chinese battery makers Svolt, Sunwoda and Ganfeng are rushing to raise funds as prices of the key raw material lithium have doubled in more than a year. The country’s regulators are also introducing a range 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 lithium carbonate for batteries rose 201% in a year, rising RMB 200,000 a tonne to RMB 590,000, according to Nov. 11 data from the Shanghai Metals Market Research Institute.

  • Analysts said supply and demand were imbalanced thanks to booming EV sales from 2021. Meanwhile, a reduction in lithium salt production due to weather problems in China’s northwest Qinghai province, as well as advance orders for next year from battery and materials makers, are among them the short-term reasons for the sharp rise in lithium prices.
  • A huge run-up in lithium prices over the past few months could also create long-term structural problems such as industrial overcapacity as companies from battery makers to lithium producers rush to raise cash to expand production capacity.

Funding influx: Svolt, Sunwoda and Ganfeng are among Chinese battery makers and materials suppliers rushing to raise cash as wider EV deployment opens up opportunity to sell bonds and stocks.

  • Svolt, a battery maker backed by BMW manufacturing partner Great Wall Motor, filed for an initial public offering on Nov. 18 in the mainland market to finance the construction of three plants with a total 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 bourse. A supplier of Xpeng Motors, Sunwoda is building two facilities with a capacity of 80 GWh of batteries per year, an investment of RMB 33.3 billion (almost $4.7 billion).
  • 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 published on Wednesday. In August, China’s largest lithium compound maker announced a partnership with state-owned automaker GAC to supply raw materials and jointly develop battery technologies.

New rules: In a document released publicly on Nov. 18, two Chinese government agencies — the Ministry of Industry and Information Technology and the State Administration for Market Regulation — asked local regulators to do more in pursuing illegal activities such as hoarding and raising the prices of battery raw materials. .

  • The two agencies also jointly called on regional governments to eliminate local protectionism, build an open, fair, unified national lithium-ion battery market and help businesses deal with supply chain issues.
  • The central government has also expressed concern over “blind development” in battery manufacturing, calling on battery manufacturers and material manufacturers to expand their production capacity “in a scientific and organized manner” under the supervision of local governments (our translation).

Slimming Margins: Rising costs of battery raw materials have hurt the profitability of Chinese EV makers. Nio’s profit margin on vehicles fell from 18.1% to 16.4% in three consecutive quarters this year. Meanwhile, Xpeng Motors’ number fell from 12.2% to 9.1% in the first half of 2022.

  • Speaking to analysts on an earnings call on November 10, Nio CEO William Li expects the company’s auto margin to remain relatively stable in the current quarter, adding that a RMB 100,000 increase in lithium carbonate will reduce auto margin by 2%.

Jill Shen is a Shanghai-based technology reporter. It covers Chinese mobility, autonomous vehicles and electric cars. Contact her via email: [email protected] or Twitter: @yushan_shen More from Jill Shen

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