Several corporate and government sources confirmed to Reuters on Wednesday (May 7th) that Chinese electric vehicle manufacturer BYD and metal producer Tsingshan Group have scrapped their multi-million-dollar investment plans to build a lithium battery cathode materials plant in Chile, highlighting setbacks for Chinese companies in advancing their overseas industrial upgrading strategies.
BYD and Tsingshan originally pledged to invest over $500 million in Chile as part of the Chilean government’s “value chain localization” strategy, and were set to benefit from discounted lithium carbonate supply from the state-owned mining company SQM. However, due to various unfavorable factors such as the sharp drop in international lithium prices, global market instability, and local administrative delays, both projects were halted before formal contracts were signed.
Tsingshan Group stated that they have withdrawn their planned $233 million investment in a project to produce 120,000 tons of lithium iron phosphate (LFP) cathode materials annually. BYD, on the other hand, had already expressed their intention to withdraw from the project in Chile’s National Assets Department back in January. The company had planned to establish an LFP production base in Antofagasta with an annual capacity of 50,000 tons and a total investment of $290 million, but faced delays in land acquisition and increased external risks, preventing the project from moving forward.
Reports indicate that both companies were selected as strategic partners by the Chilean government in 2023 and were expected to create nearly 1,200 local jobs. However, with the fluctuating guidance of the Chinese government policies, the turbulent international lithium market, and challenges to their export-oriented business models, the vulnerability of Chinese-funded enterprises in global expansion has once again surfaced.
According to Chilean media outlet Diario Financiero, BYD had expressed doubts about investment conditions and project progress a year prior. While Yongqing Technology, a subsidiary of Tsingshan Group, had held discussions with Chile’s economic development agency CORFO regarding cooperation, they were unable to fulfill the commitments as they did not have legal personality in Chile.
Tsingshan Group is one of China’s largest private enterprises and had planned to invest $233 million in building a battery plant in Mejillones, northern Chile. Both of these projects have now been formally terminated.
Chile plays a significant role in the global lithium industry. According to data from the United States Geological Survey (USGS), Chile has the largest lithium reserves in the world, totaling up to 9.2 million metric tons. In comparison, China only has reserves of 1.5 million metric tons.
Chilean President Gabriel Boric proposed the “Lithium Industry Upgrade Strategy” in 2023, requiring foreign companies and the state-owned SQM to supply a portion of their output at preferential prices to local investors to promote the development of the domestic lithium processing industry. This presents a significant challenge for Chinese enterprises overly reliant on subsidies and a China-led model.