BYD: We Consume 20% Of Global Lithium Supply - No Way!

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Includes: BYDDF, BYDDY
by: Juan Carlos Zuleta

Summary

BYD has recently said that they are talking with lithium producers in Chile to secure supplies of the key battery material because they consume 20% of global lithium supply.

This article argues that there is no way to demonstrate that BYD consumes such a percentage of global lithium supply.

It shows that, overall, BYD only consumed 8,630 tons of LCE for automotive applications in 2016 which represented 4.48% of global lithium supply.

20% consumption of lithium would have implied a quantity of LCE, an energy capacity and a market share in consumer electronics and stationary storage, which go beyond any reasonable thinking.

The article concludes that BYD’s energy capacity in 2016 was probably about 9.7 GWH which resulted in consumption of only 5% of global lithium supply.

A recent report by the Financial Times informs that BYD (OTCPK:BYDDY) (OTCPK:BYDDF), the largest EV maker in the world, “is talking to lithium producers in Chile about potential deals to secure supplies of the key battery material.” More specifically, Fred Ni, Vice-president of BYD Americas appears to have indicated at the CRU World Cooper Conference in Santiago: “We consume 20 per cent of the lithium supply in the world – that means we have a strong interest to secure stable supply of lithium.”

These surprising remarks by a top executive of the Chinese giant confirm a presumption of mine expressed in a reply to a comment on my latest Seeking Alpha piece on outsourcing and vertical integration in production of lithium batteries for EVs. Unlike Tesla (NASDAQ:TSLA), BYD does appear to be interested in following the kind of approach I suggested there. But there is another side of this story.

As I will try to show below, there is no way to demonstrate that BYD consumes 20% of global lithium supply. Don’t get me wrong if you think I am trying to diminish the importance of one of the world’s most prestigious Chinese companies in the global automotive industry. It seems as though the above-mentioned BYD executive just got carried away by his desire to highlight the relevance of his company in the lithium spectrum.

So in what follows, I proceed to review BYD’s lithium consumption in 2016 by using estimates from the best possible sources of information available. Let me start by focusing on both electric cars and electric buses.

In accordance with Table 1, in 2016, BYD vended over 100k electric cars, which amounted to 3,802 tons of Lithium Carbonate Equivalent (LCE), whereas it sold 14,903 electric buses, which resulted in 4,829 tons of LCE. Overall, BYD consumed 8,630 tons of LCE in 2016. Based on USGS data, this only represented 4.48% of global lithium supply in 2016.

Table 1

BYD: Lithium Requirements for Electric Cars and Buses

2016

[1]: InsideEVs (1), InsideEVs.com (2), InsideEVs (3), InsideEVs (4), and BYD.

[2]: EV-Sales.

[3]: Lithium requirement assumes 1 Kg of LCE per kWh (See: Seeking Alpha, and Orocobre).

Note: It is assumed throughout the article that 1 kWh = 1 kg of LCE, or 1 MWh = 1 ton of LCE.

BYD also consumes lithium for rechargeable batteries used in other products such as consumer electronics (including laptops, tablets, smartphones, power tools, and medical and defense devices), and stationary energy storage systems. However, there is no freely available information on sales of these products by major companies. How can we then demonstrate that BYD couldn’t have consumed 20% of all the lithium supplied in the world? I proceeded as follows.

  1. Use available information on sales of these two categories of products for previous years to estimate the demand (in MWh) for them in 2016 (See Table 2).
  2. Utilize USGS numbers to obtain the global supply of lithium (192,527 tons of LCE) in 2016, after multiplying 36,170 times 5.32282962.
  3. Calculate 20% of global lithium supply, that is: 38,505 tons of LCE. This implies that BYD would have produced and sold last year 38,505 MWh in consumer electronics, stationary storage and automotive applications.
  4. Subtract the amount of LCE tons consumed by BYD’s for automotive applications (i.e. 8,630 tons of LCE) from that quantity, that is: 29,875 tons of LCE. This would imply that BYD has a market share in consumer electronics and stationary storage of 58% [(29,875/51,351)*100].

Table 2

World: Energy Capacity of Lithium-ion Batteries

2012-2016

Source: Navigant Research, Advanced Battery Tracker (various issues).

Needless to say, our findings in 3) and 4) put into question the assertion by the BYD executive. For one thing, it is well known that BYD’s installed battery capacity in 2016 couldn’t have been more than 12 GWh. For another, behind are the old days when BYD had a 50% global market share in consumer electronics.

In closing, based on Figure 1, it seems reasonable to conclude that BYD’s energy capacity in 2016 was about 9.7 GWh, which implies that it would have consumed only 5% of global lithium supply. Nevertheless, it is clear that BYD has already become a major player in the lithium market, which justifies its current interest in securing a stable supply of the key battery material.

Figure 1

Expected Global Market Share of Lithium Battery Makers in 2016

Source: Statista.

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I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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