In the first half of this year there were industry sources saying that was intensively researching lithium mines and that the company was particularly interested in salt lakes in South America, according to local media.

(Image credit: CnEVPost)

NIO's investment in Australian lithium company Greenwing Resources has been a talking point in the Chinese auto industry from last night. Now, a brief response from the Chinese electric vehicle (EV) maker reveals the thinking behind it.

NIO will evaluate and make a layout for the upstream chain related to the core components of smart electric vehicles to secure long-term competitive advantage, local media outlet 36kr said in a report Monday evening, citing the company's comments on the investment.

The EV company's response did not contain any further content, although the 36kr report mentioned that in the first half of this year, some industry sources had said that NIO was intensively researching lithium mines, and that the company was particularly interested in salt lakes in South America.

NIO has previously determined that it will in-house develop batteries, so it's not surprising that it's making a layout on lithium mines, the report noted.

Greenwing announced its strategic deal with NIO on Monday, sending the Australian exchange-traded lithium miner's shares up 65.31 percent.

The company said NIO, through its wholly owned subsidiary Blue Northstar Limited, entered into a strategic financing deal with it, in which the EV maker has agreed to pay it A$12 million to subscribe for 21,818,182 Greenwing shares at a deemed issue price of A$0.55 per share.

Upon completion of the placement, NIO will hold about 12.16 percent of Greenwing and will have the right to be nominated to the company's board of directors as long as it continues to hold at least 10 percent of the shares, according to the Australian company.

In addition, NIO has a call option to acquire between 20 percent and 40 percent of the issued capital of Andes Litio, which owns the rights to the San Jorge Lithium Project in Argentina.

Greenwing will issue a detailed prospectus on the San Jorge Lithium Project to NIO, which can exercise the option within a year, with the exercise price expected to be between US$40-80 million.

The move appears to be primarily to lock in raw material supplies for NIO's future battery manufacturing.

In a conference call following the June 9 first-quarter earnings report, NIO founder, chairman and CEO William Li said the company will develop batteries in-house.

NIO has a battery team of more than 400 people to research areas including battery materials, cells, and battery management systems to fully establish battery system development and industrialization capabilities, he said at the time.

The company will put into production its battery packs in 2024, which will support 800V high-voltage fast charging, according to Li.

NIO takes stake in Australian lithium firm Greenwing, sending latter's share price soaring over 60%