Shaanxi J&R Optimum Energy Co Ltd is setting its sights beyond its main business of making firefighting equipment, betting that it can achieve strong earnings in the new-energy vehicle industry.
The listed company, which started as a firefighting equipment manufacturer, used acquisitions to make inroads into the lithium-ion automotive battery and electric vehicle industry.
It has acquired a 19.9 percent stake in Altura Mining Ltd, an Australian supplier of lithium raw materials, for A$41.6 million ($30.69 million), the company said.
"The company did so to meet the growing demand for lithium-ion batteries. We believe the acquisition of Altura will ensure that we have a safe place in the upstream part of the value chain," the company Chairman Guo Hongbao said.
Altura will supply Optimum 10 million metric tons to 15 million tons annually of spodumene, a raw mineral which is a source of lithium-ion batteries.
In China, the output of lithium-ion automotive batteries was 16.9 GWh in 2015, while the demand is projected to reach 125 GWh in 2020, according to data compiled by Sinolink Securities Co.
In addition, the company recently won a contract for 120 all-electric battery buses, worth 103 million yuan ($14.95 million), from Jinzhou Public Transportation Corp, a bus company in Liaoning province.
Li Yao, general manager of Optimum, said: "New energy vehicles will be the company's strategic focus. Based on this, we will expand into various related businesses in the future."
Industry data show there's plenty of room for growth of the industry, especially after the government issued a plan for new energy vehicles in 2012.
It proposed that the production capacity of battery electric vehicles and plug-in hybrid cars should reach 2 million in 2020 and that the cumulative output and sales exceed 5 million by then.
The output of electric vehicles was 276,000 in the first 10 months of 2016, up 98.1 percent from the same period last year, while the sales more than doubled to 258,000, data from the China Association of Automobile Manufacturers showed.
Qu Guochun, deputy director-general of the machinery industry department at the Ministry of Industry and Information Technology, said in late October that new energy vehicles lead the way in automobile development, and the government has been making efforts to make monitoring systems and improve subsidy policies.
Earlier this year, Optimum bought total ownership of a domestic electric vehicle manufacturer, signaling the transition to the newly emerging field.
Optimum reported that, because of the acquisition, its revenue exceeded 1.15 billion yuan in the first three quarters this year, triple that in the same period last year.
