Chinese car maker invests in Australian lithium miner

Highlighting auto industry concern about access to battery raw materials, a Chinese car maker has agreed to invest in an Australian lithium mining operation.

Great Wall Motor, China’s largest producer of SUVs, will pay $22 million for a 3.5% stake in Pilbara Minerals. Under the agreement, Great Wall will buy 75,000 metric tons per year of lithium-ion battery-grade lithium carbonate for the next five years. The deal gives the Chinese firm the option to buy another 75,000 metric tons annually by loaning an additional $39 million to Pilbara.

Pilbara will use the $22 million in funding to complete the construction of its Pilgangoora Lithium-Tantalum Project. The additional $39 million would help fund the construction of a phase 2 expansion at the site.

Demand for lithium carbonate and lithium hydroxide is surging worldwide because of rising demand for electric vehicles powered by lithium-ion batteries. In the U.S., the car company Tesla is ramping up production at its Gigafactory battery plant in Nevada. Co-owned with Panasonic, it’s called the world’s largest lithium-ion battery plant. Meanwhile, in China, authorities have ordered car makers to get 10% of their total sales from hybrid and electric vehicles by 2019.

The stock prices of the established lithium chemical makers Albemarle and SQM are up more than 50% this year and many other companies, including Pilbara, are trying to get into the business.

Great Wall’s investment in Pilbara, though unusual, is not unprecedented. In 2010, the Chinese electric vehicle maker BYD invested about $30 million in a lithium mine in Tibet.