BYD Co., China's largest electric car and bus manufacturer, plans to obtain supplies of lithium to guard against spiraling costs of the raw material used in vehicle batteries, amid rising pressure on automakers to lower prices.

 

Besides seeking to "get hold of lithium resources," BYD will also improve designs of its batteries to help lower costs, the company said in an e-mail to Bloomberg News. Macquarie Group estimates that the power units make up about two-thirds of the cost for BYD's E6 electric car and K9 bus.

 

The price of lithium carbonate -- a key element in lithium ion batteries -- tripled in China last year and has continued to surge in 2016, according to Asian Metals Inc., an industry consultancy.

 

Prices are rising as Chinese automakers step up production of EVs and plug-in hybrids even as domestic lithium mining capacity remains restrained.

 

EV manufacturers want to cut component costs as the central government considers a reduction of subsidies for electric buses.

 

Incentives for electric buses may be cut by an average of 32 percent, with subsidies for the largest models reduced as much as 49.5 percent, sources said. Electric passenger vehicles costing more than 350,000 yuan ($54,000) also won't be eligible for government subsidies under the proposal, which is under review by the State Council.

 

BYD declined to explain how it plans to secure access to lithium supplies. Last week, company Chairman Wang Chuanfu predicted the company may sell as many as 150,000 EVs and plug-in hybrids this year, up from 58,000 in 2015.

 

The company also is China's biggest producer of lithium iron phosphate batteries, which go into models such as the Tang and Qin SUVs. In 2011, BYD bought an 18 percent stake in Zhabuye Lithium, a lithium and boron mining company in Tibet, for 202 million yuan ($31 million).

 

The rising lithium prices have spurred big gains for explorers and miners in Australia. Pilbara Minerals plans to open a lithium mine in Western Australia in 2018. Chinese producers Sichuan Tianqi Lithium Industries Inc. and Jiangxi Ganfeng Lithium Co.'s stocks have more than doubled in the last year.

 

"Increased mining capacity and increased materials recycling should minimize the impact of raw material prices on a longer-term basis," said Janet Lewis, a Hong Kong-based analyst at Macquarie. "The pressure is primarily on the battery makers to reduce their costs."