Portable energy storage for electric two wheeled vehicles, helping lithium salt break through in segmented markets

Since 2021, lithium salt projects have been coming one after another, resulting in a significant increase in China's lithium salt production capacity from 2022 to the present, with supply growth far exceeding demand growth. For example, the capacity of Lithium carbonate has increased from 639000 tons in 2022 to 770000 tons today, an increase of 20.7%, and the capacity utilization rate has decreased from about 64% in 2022 to less than 60%.

This also presents a chaotic situation, that is, although the market size is still growing rapidly, the lithium salt and electrolyte industries are indeed facing the dilemma of overcapacity. Therefore, understanding the current situation of industry demand and exploring segmented market space have become key strategies for industry enterprises to break through.

Power batteries account for over 70% of lithium battery shipments

Since 2020, driven by the high momentum of the new energy industry, China's lithium-ion battery production has rapidly jumped from 157GWh in 2020 to 750GWh in 2022, with an average annual growth rate of 118.6%.

In 2022, among the 750GWh lithium batteries produced in China, the production of power batteries was 546GWh, accounting for 72.8%. It can be seen that the rapid growth of the scale of the new energy vehicle industry has greatly supported the development of China's lithium battery industry. However, there are two sides to the matter. As the year-on-year growth rate of China's new energy vehicle production and sales decreased from nearly 100% in 2022 to about 60% in May 2023, anxiety in the lithium salt industry began to spread.

Indeed, the weakness of the main demand has indeed poured cold water on the rapid development of the lithium-ion battery industry, but the industry does not need to be overly pessimistic - the vast market provides sufficient nutrients for the expansion of downstream application fields, with both emerging markets gradually releasing and traditional demand being further stimulated, with electric two wheeled vehicles and portable energy storage being representative of them.

Lithium batteries for electric two wheeled vehicles will once again face rapid growth

In the field of electric two wheeled vehicles, lithium batteries are used in high-end models due to their longer service life and lighter weight. According to industry online statistics, the shipment volume of lithium batteries for electric two wheeled vehicles in China in 2022 was 12.2GWh, accounting for approximately 1.6% of the total production of lithium batteries. Although the market is small, there is considerable room for growth.

Similar to the substitution of Alternative fuel vehicle for traditional fuel vehicles in the automotive market, the penetration of lithium batteries into traditional lead batteries in electric two wheel yards is also ongoing. Prior to this, from 2017 to 2020, some power battery companies also faced a decline in subsidies for new energy vehicles and overcapacity in lithium-ion batteries. They shifted their development focus to the small power sector, mainly focused on electric two wheeled vehicles, achieving a breakthrough.

With the rapid rise in lithium battery prices, the application of lithium batteries in electric two wheeled vehicles is also facing difficulties. In the electric two wheeled vehicle market, the growth in penetration rate of lithium batteries is mainly driven by costs and policies, mainly the "Safety Technical Specifications for Electric Bicycles" implemented in 2019. Compared to lead-acid batteries with relatively mature technology, the cost advantage of lithium batteries no longer exists after the comprehensive price increase, which has pushed back the implementation process of lithium battery related policies in the New National Standard by 1-2 years, directly hindering the release of demand for the replacement of electric vehicles that exceed the standard.

On the other hand, the penetration rate of lithium batteries in electric two wheeled vehicles is about 20% in 2022, and there is still significant room for development. As lithium prices become more rational, the 1-2 year consolidation period of the "New National Standard" policy has been shortened, and the elimination of low-quality lithium batteries has made room for the market. The improvement in consumption level has also broadened the audience of high-end products.

In the essence of electric two wheeled vehicles, cost advantage is the ultimate principle. Therefore, it can be predicted that in the longer term, low-cost new models represented by sodium batteries will dominate the main market.

Portable energy storage also nurtures market space

For a long time, portable energy storage has been closely related to terms such as "outdoor" and "emergency", and the growth of camping, travel, and other activities directly drives the release of demand for portable energy storage. The Outdoor Sports Industry Development Plan (2022-2025) jointly issued by eight departments, including the General Administration of Sport of China, predicts that by 2025, the total scale of the domestic outdoor sports industry will exceed 3 trillion yuan, creating a broad market space for the portable energy storage market. In addition, under the global dual carbon consensus, portable energy storage, as an off grid backup, has partially replaced traditional fuel generator products and has become a major economic growth point for global consumption after the epidemic.

According to the 2023 Global Portable Energy Storage Industry Insight, from 2017 to 2021, the market size of global portable energy storage power sources increased from 120 million yuan to 11.13 billion yuan, an increase of about 93 times in four years, and a compound annual growth rate of 210.3%. The China Chemical and Physical Power Industry Association also predicts that the global market size of portable energy storage power sources will continue to grow from 11.13 billion yuan in 2021 to 88.23 billion yuan in 2026, with a compound annual growth rate of 51.3%.

In terms of product structure, with the improvement of living standards and the simultaneous improvement of portability of household appliances, the demand for outdoor activities for appliances is gradually increasing, and the demand structure is shifting towards larger capacity. Industry Online predicts that currently, the shipment volume of large capacity portable energy storage products is gradually increasing. In the global structure of portable energy storage power supply shipments, the proportion of products with a capacity of over 1000Wh in the shipment volume is increasing year by year. In 2022, the proportion of its shipment volume will increase to 16.8%. It is expected that this proportion will further increase to around 20% in 2023.

In addition to the two market segments introduced in this article, electric tools, field electric vehicles, electric ships, etc. are also growing at a high speed. From this perspective, in the current situation where mainstream demand such as automotive power batteries and large energy storage batteries is booming, lithium salt companies may wish to shift their perspective to the next level of market segmentation, relying on their scale and research and development advantages to absorb nutrients from emerging markets.