Exclusive: China's Lishen plans first European sales office for electric vehicle batteries - source

LONDON/BERLIN (Reuters) - Chinese battery maker Tianjin Lishen plans to open a sales office in Germany, its first in Europe, and is in talks to supply local auto makers with batteries used to power electric vehicles, a source at the company told Reuters.

FILE PHOTO: The visitors welcome area at the new production line of the e-Golf electric car is pictured at the Transparent Factory of German carmaker Volkswagen in Dresden, Germany March 30, 2017. REUTERS/Fabrizio Bensch/File Photo

Two sources said Volkswagen VOWG_p.DE, the world's largest car maker, and Daimler DAIGn.DE are negotiating with unlisted Tianjin Lishen Battery.

A source close to Volkswagen said the company is in advanced talks with Tianjin Lishen on lithium-ion battery supply contracts, but agreements have not yet been signed.

Asked for comment, a VW spokeswoman said “there is nothing to say at present on this topic”. Daimler declined comment. No-one at Tianjin Lishen was immediately available to comment.

Auto makers around the world have in recent months laid out bold plans for massive investments in electric vehicles (EVs), where demand is accelerating due to government moves to cut noxious fumes from fossil-fueled cars.

They are buying lithium-ion rechargeable batteries used to power electric vehicles from multiple producers to diversify their supply chains, the source at Tianjin Lishen Battery said.

Volkswagen has picked partners to provide battery cells and related technology worth around 20 billion euros ($24.5 billion), while Daimler aims for 100,000 annual EV sales by 2020.

Any new office would be located near Wolfsburg, where Volkswagen has its headquarters, the source at Tianjin said, declining to give more specific detail.

“We are considering setting up an office in Germany. It will be a sales office not a factory,” the source at Lishen said.

“We are negotiating with VW and Daimler. We have sent samples to these carmakers and are waiting for the next stage - mass production.”

Volkswagen has a goal of selling 3 million electric cars per year across the group by 2025 and to offer an electric version of each of the group’s 300 models by 2030.

Concerns about shortages of cobalt -- used to make the batteries -- from untainted sources have prompted carmakers to take steps to secure supplies for the longer term.

VW last year asked producers to submit proposals on supplying cobalt for up to 10 years from 2019.

Former VW chief executive Matthias Mueller recently said that Korean firms LG Chem 051910.KS and Samsung 005930.KS and China's Contemporary Amperex Technology Co Ltd (CATL) will provide batteries for the firm.

European auto makers typically have to source from Asia because Chinese, Korean and Japanese firms dominate the supply chain for electric vehicle batteries.

Lishen on its website lists China Electronic Technology Group (CETC), a state-owned firm managed by the central government, as its biggest shareholder.

China is aggressively promoting electric vehicles to help combat smog and to position the country as a car-making giant of the future.

Some 777,000 so-called new energy vehicles (NEVs) were sold in China in 2017, a jump of 53 percent on the year and the most sold in any one country. Beijing aims to bring annual sales to 2 million units by 2020.

Beijing is also working to promote its own standards and benchmarks for electric and plug-in electric vehicles overseas, taking advantage of economies of scale to become a global leader in standardization.

Additional reporting by Tom Daly and Edward Taylor; Writing by Pratima Desai; Editing by Veronica Brown and Adrian Croft