(Yicai Global) July 27 -- Gotion High-Tech’s shares plunged amid a Chinese stock market slump after the battery maker unveiled plans to build a plant to make cathode materials for lithium batteries.

Gotion [SHE:002074] closed 8.3 percent lower today at CNY51.51 (USD7.92), after earlier rising as much as 1.9 percent. The benchmark Shenzhen Component Index sank 3.7 percent.

The shares almost doubled in value from mid-May to July 23, when they reached a record high of CNY60.45 intraday, thanks to strong demand for the products made by the Hefei, Anhui-province company.

Gotion, one of China’s leading suppliers of lithium-powered batteries, said in a statement yesterday that it will invest in a project to produce cathode materials for high-end lithium batteries in Hefei in the lower reaches of Yangtze River.

Located in Lujiang county, the project is expected to generate CNY10 billion (USD1.54 billion) in annual revenue, the firm said. Gotion did not provide details of the investment amount or target customers, but said construction would begin by the end of this October and production would start in 2025.

Through the construction of this project, Lujiang will become the main production base for lithium power battery materials made by the company, Gotion added.

The project will meet rising demand for raw materials of Gotion’s affiliated power battery plants after future capacity expansion. The new plant will also enhance the company’s core competitiveness and market influence, the firm added.

Volkswagen China Investment spent about EUR1.1 billion (USD1.3 billion) in May last year to buy 26.47 percent of Gotion, becoming its largest single shareholder.

Gotion inked a deal with Volkswagen Group this month to jointly develop and produce lithium battery cells and supply them for VW’s mass-produced fossil fuel-powered vehicles. Gotion will also become the German auto giant’s standard battery cell supplier.

The pair will also collaborate with each other in the entire lifecycle and industry chain of lithium batteries from materials for cells, battery products to the recycling and reuse of batteries, according to a statement from Gotion earlier this month. 

Editor: Peter Thomas