BYD will set up a joint venture with a local conglomerate to build a sodium-ion battery production base, the first time we've seen it move forward in building capacity for this alternative to lithium batteries.

Huaihai Holding Group and BYD's battery unit FinDreams signed a strategic cooperation agreement at BYD's Shenzhen headquarters on June 8.

The two parties will establish a joint venture to build a sodium-ion battery production base in Xuzhou Economic and Technological Development Zone in Jiangsu province to jointly create the world's largest supplier of sodium battery systems for micro vehicles.

Huaihai will provide its resources including markets and application scenarios, and FinDreams will provide products and services. Huaihai said it sees the tremendous economic and social value of sodium batteries and began its involvement in the industry years ago with a strategic investment in sodium-ion battery startup Natrium.

Sodium-ion batteries currently have lower energy density than lithium-ion batteries, but cost less and sodium resources are seen as more abundant and readily available. In the past two years, as lithium prices continue to rise sharply, sodium-ion batteries are highly anticipated.

However, since the beginning of this year, with the continued decline in lithium prices, sodium-ion batteries are seen as having a reduced cost advantage.

Sodium-ion's abundant resource reserves are difficult to quickly translate into cost advantages, and when the cost of lithium iron phosphate batteries is rapidly declining, automakers are hardly motivated to choose to carry sodium-ion batteries in the short term.