[SMM Analysis] Yahua Group Deepens Cooperation with Tesla, Having a Positive Impact on Its Performance

Recently, Yahua Group disclosed an announcement stating that its wholly-owned subsidiary, Yahua Lithium Industry (Ya'an) Co., Ltd. (hereinafter referred to as "Ya'an Lithium") signed a "Production Pricing Agreement" with the American company Tesla. The agreement stipulates that from 2025 to 2027, Tesla will purchase lithium carbonate products from Ya'an Lithium. If both parties agree, the term of the aforementioned agreement can be extended to December 31, 2028.

In fact, this is not the first cooperation between Yahua Group and Tesla. Their cooperative projects are listed in the table below:

Yahua Group entered the lithium industry in 2013 by partially owning State Lithium. Currently, it owns four lithium industry companies: State Lithium, Blossom Lithium, Ya'an Lithium, and Lithium Industry Technology. In terms of upstream lithium resource extraction, the company set foot in the lithium mining business in 2022 and engaged in lithium ore exploration, mine construction, and ROM beneficiation in 2023. The Kamativi lithium mine in Zimbabwe, which began mining in 2023, has 18.22 million mt of ore resources in the drilled exploration area based on historical data, with an average lithium oxide grade of 1.25%, equivalent to approximately 227,800 mt of lithium oxide resources. With the construction of Phase I and Phase II, the company will achieve over 350,000 mt/year self-owned lithium concentrates, with lithium ore self-sufficiency rate exceeding 60%.

In terms of midstream lithium salt product processing, the company mainly engages in the research, production, and sales of lithium products. The main products include battery-grade lithium hydroxide and battery-grade lithium carbonate, which are widely used in consumer, NEV, and energy storage fields. Ya'an Lithium's Phase II 30,000-mt lithium hydroxide project was completed and put into operation in 2023. As of the end of 2023, the company had a total lithium salt capacity of 73,000 mt, with the main product capacities being 63,000 mt of lithium hydroxide and 6,000 mt of lithium carbonate. Meanwhile, it launched the construction of high-grade lithium salt production line project Phase III in 2023.

Zimbabwe Kamativi Mine Construction Site

(Source: Yahua Group 2023 Annual Report)

Kamativi Mining Company's Spodumene Mining and Processing Project (Phase One) Commissioning Ceremony

(Source: Yahua Group 2023 Annual Report)

Yahua Group stated that the signing of the agreement is further recognition by Tesla of its lithium salt product quality and its sustainable development capabilities in the lithium industry. It can enhance the stability of the company's development in the lithium industry and strengthen the long-term cooperative relationship with Tesla. The commissioning of lithium carbonate facility will help fully release and smoothly sell lithium carbonate products of the company. With the effective implementation of the agreement, it is expected to have a positive impact on the company's performance from 2025 to 2027.

From battery-grade lithium hydroxide products to current lithium carbonate products, the cooperation between Yahua Group and Tesla continues to expand. This cooperation is of great significance to Yahua Group, as it not only ensures a stable sales channel for its products but also enhances its market position and reputation, especially in the NEV battery raw material market. It can improve market competitiveness of the company and further enhance its operating performance.

In addition to commercial significance, this cooperation also plays a positive role in promoting and guiding the development and technological progress of the new energy industry. Since the beginning of this year, lithium carbonate prices have continued to be sluggish. According to SMM, on June 25, the price of battery-grade lithium carbonate was 91,648 yuan/mt, down 1,302 yuan/mt from the previous day. However, according to market observations, the demand for lithium ore and lithium salts will continue to grow with the development of the industry in the future. For lithium product producers like Yahua, it is necessary to improve production efficiency, optimize operation management, and strengthen technological research and development while ensuring product quality. They should also seek new application fields, explore and develop new niche markets, and establish strategic cooperative relationships with downstream customers to ensure stable sales channels and market share to cope with future market changes.