BYD, the Chinese electric-vehicle manufacturer, has initiated preliminary discussions regarding a potential acquisition of a lithium producer in Brazil, as reported by the Financial Times on Sunday. The company has engaged in negotiations with Sigma Lithium (NASDAQ:SGML) for a possible supply agreement, according to an interview with Alexandre Baldy, BYD’s chair in Brazil.

In the interview, Baldy indicated that various discussions encompassing supply, joint ventures, and even acquisition were underway, albeit at an early stage and lacking concreteness. He also disclosed a meeting with Sigma Lithium’s CEO Ana Cabral-Gardner in Sao Paulo in December but refrained from divulging further details about the discussions. Sigma (SGML) declined to comment to the FT.

The potential maneuver by BYD unfolds against the backdrop of Sigma Lithium’s stated evaluation of strategic alternatives following proposals for its Grota do Cirilo project in Brazil, Sigma Brazil, and the parent company, in September last year. Sigma Lithium (SGML) subsequently announced its intention to list Sigma Brazil on both Nasdaq and the Singapore Stock Exchange as part of a strategic transaction.

As part of the strategic review, Sigma Lithium (SGML) has been engaged in contractual and detailed structural negotiations with finalists, with the discussions expected to extend into 2024. Furthermore, a Brazilian publication reported that Chinese battery maker CATL and automaker Volkswagen (OTCPK:VWAGY) were among the final bidders for Sigma Lithium. The potential endeavor with BYD follows the company’s recent announcement of its foray into the Indonesian market.

BYD’s move comes on the heels of the company’s record sales of 3.02 million electric vehicles in 2023, constituting a remarkable 62% growth compared to the prior year. This figure included sales of 1.6 million battery-electric vehicles and approximately 1.4 million plug-in hybrid electric vehicles.

Sigma Lithium’s Prospects