Chinese electric vehicle giant BYD and metals group Tsingshan have scrapped their plans to build lithium cathode plants in Chile, a move that could ripple through the electric vehicle (EV) battery supply chain, according to Chile’s economic development agency Corfo. Announced on May 7, 2025, the decision highlights the challenges of securing stable lithium supplies amid fluctuating global prices, a critical concern for EV manufacturers and enthusiasts.

Why the Lithium Plants Were Canceled

The decision stems from a sharp decline in global lithium prices, which has disrupted the financial viability of the projects. Corfo, Chile’s economic development agency, had selected BYD and Tsingshan in 2023 to leverage preferential lithium prices as part of a broader strategy to boost investment in Chile, the world’s second-largest lithium producer. However, as Corfo stated, “The companies selected by Corfo have been affected in their investment decisions by the global market conditions, which have shown a sharp drop in prices,” reports Reuters.

Tsingshan’s project, valued at $233 million, aimed to produce 120,000 metric tons (132,277 U.S. tons) of lithium iron phosphate (LFP) annually. BYD, the world’s leading EV manufacturer, had planned a $290 million facility to produce 50,000 metric tons (55,115 U.S. tons) per year of LFP for battery cathodes. Both companies have now withdrawn, with BYD filing its intent to exit in January 2025, and Tsingshan following suit more recently.

Impact on the EV Battery Supply Chain

Lithium is a cornerstone of EV batteries, particularly for LFP chemistries, which are prized for their cost-effectiveness and safety in electric vehicles. Chile’s role as a major lithium supplier made these plants a strategic move to process raw lithium domestically, adding value before export. The cancellation of these facilities means a potential bottleneck in LFP production, which could lead to tighter supplies and higher costs for EV manufacturers globally.

For EV owners and enthusiasts, this development might translate to slower reductions in battery prices, a key factor in making electric vehicles more affordable. The loss of 170,000 metric tons (187,392 U.S. tons) of annual LFP production capacity could also delay the expansion of EV models that rely on this chemistry, particularly in markets where BYD has a strong presence, such as China and Europe.

Chile’s Struggles with Lithium Investments

Chile has faced repeated setbacks in its push to expand lithium processing. Since 2018, multiple companies, including Chilean firm Molymet, China’s Sichuan Fulin Transportation Group, and a joint venture between South Korea’s Posco and Samsung, have abandoned similar projects. The recurring theme is the volatility of lithium prices, which erodes the economic case for large-scale investments.

Tsingshan and BYD were set to benefit from preferential lithium pricing from Chilean miner SQM through 2030, a deal designed to incentivize investment. However, Corfo noted that Tsingshan’s attempt to assign the project to a non-bidding unit of the company was deemed “not possible” by the agency, further complicating the project’s viability.

What’s Next for Chile’s Lithium Industry?

In response, Corfo has launched a new bidding process, this time with U.S. lithium producer Albemarle, targeting companies committed to lithium-related projects through 2043. Albemarle and selected investors will use an “alternative form” to determine pricing agreements, according to Corfo, aiming for more sustainable investment models.

For the EV industry, this underscores the fragility of the lithium supply chain. As demand for electric vehicles continues to grow, securing stable, cost-effective lithium sources will remain a priority. For now, EV enthusiasts watching battery technology advancements may need to brace for potential delays in cost declines as the industry navigates these challenges.