From 2021 onwards, the global lithium market demand will increase significantly. On the supply side, the supply of capacity in the whole industry chain is relatively slow, and the effective supply is insufficient, which requires large-scale expansion to meet the market demand.

China's new energy vehicle sales need to rise from about 5% at the beginning of 2021 to about 20%, and the annual compound growth rate must reach more than 30%, the supply side of the new energy vehicle industry needs to be fully force, driving the rapid development of the lithium-ion battery industry, the demand for upstream lithium materials will also be significantly increased year by year.

Data source: GGII (GGII)

(1) Power battery market overview

In terms of power battery, under the influence of the rapid development of the new energy vehicle industry, the output of power battery has also seen rapid growth. At present, China has the world's largest consumer market and sales of new energy vehicles. In the past five years, China's market demand for power batteries has ranked first in the world, and the end consumption demand for power batteries in China will reach 44.10% in 2020. Even if subsidies are receding, along with the Chinese government's strong support for new energy vehicles as a whole and their ecological chain, China's lithium-ion power battery industry has a bright future.

From 2016 to 2020, China introduced a series of supportive policies for the new energy vehicle market, driving the rapid expansion of the upstream lithium-ion industry in the electric vehicle industry, with a compound annual growth rate of 24.30% over the five-year period; although the subsidies for new energy vehicle purchases will end by the end of 2022, the State Council released the New Energy Vehicle Industry Development Plan (2021-2035), which states that by 2025, the new energy vehicle industry will be able to provide more than 1.5 million new vehicles. Although the subsidies for new energy vehicle purchases will end by the end of 2022, the State Council's New Energy Vehicle Industry Development Plan (2021-2035) states that by 2025, new energy vehicle sales should reach about 20% of total new vehicle sales, and the macro policy level continues to support the positive development of the new energy market.

According to the data of China Association of Automobile Manufacturers, from 2018 to 2021, China's new energy vehicle sales have increased from 1.2 million to 3.52 million; according to the research data of Gaogong Lithium, China's power battery shipments have reached 220GWh in 2021, up 175% year-on-year.

(2) Energy storage battery market overview

In terms of energy storage battery, reviewing the development of China's energy storage lithium battery, the domestic energy storage market is in the demonstration application period from 2018 to 2020, and the business model of electric energy storage is still being explored at this stage. The construction of demonstration application projects will be accelerated.

Since 2020, as the market reform of domestic electricity market advances into deeper water, coupled with China's "double carbon" target, the electricity market trading mechanism is becoming clearer and the business model of energy storage is becoming clearer.

In July 2021, the National Development and Reform Commission and the Energy Bureau issued the Guidance on Accelerating the Development of New Energy Storage (hereinafter referred to as the "Guidance on Accelerating the Development of New Energy Storage"). In July 2021, the National Development and Reform Commission and the Energy Bureau issued the "Guiding Opinions on Accelerating the Development of New Energy Storage" (hereinafter referred to as "Guiding Opinions"), which put forward a global idea on the development of new energy storage industry.

The Guiding Opinions proposed that by 2025, the development goal of transforming new energy storage from the early stage of commercialization to large-scale development should be realized. The market environment and business model will be basically mature, the installed scale will reach more than 30 million kWh, and the new energy storage will play a significant role in promoting the process of "carbon peaking" and "carbon neutral" in the energy sector.

In February 2022, the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) issued a notice on the "14th Five-Year Plan" for the development and implementation of new energy storage (NDRC Energy [2022] No. 209). Energy storage is an important technology and basic equipment for building new power systems, an important support for achieving the goal of carbon neutral carbon peak, and an important area for generating new domestic energy industry and seizing new international strategic high ground. "Since the 13th Five-Year Plan, China's new energy storage industry as a whole is in the transition stage from R&D demonstration to the early stage of commercialization, and substantial progress has been made in technology and equipment research and development, demonstration project construction, business model exploration, and policy system construction.

Under the goal of "double carbon", it has become a general trend to promote new energy, but due to the problems of random supply, unstable power generation and difficulties in grid connection, the phenomenon of abandoning wind and water and light is still prominent in China. According to the National Energy Administration, China's "three abandoned" power will reach 51.96 billion kWh in 2020. In the context of China's increasing development of new energy industry, the development of new energy storage technology has become more and more important.

According to the statistics of Zhongguancun Energy Storage Industry Technology Alliance, from 2017 to 2021, China's energy storage lithium battery shipments grew year by year, reaching 48GWh in 2021, up 196.30% year-on-year, and in 2025, China's projected energy storage lithium battery shipments will exceed 180GWh, and the energy storage lithium battery market has officially entered a period of accelerated development. With the increase of policy support for new energy storage, the establishment of commercialization mechanism of power market, clear business model of energy storage and the continuous decrease of lithium battery cost, the shipment of energy storage battery will continue to rise.