Industry Insights | From Policy Bonuses to Technological Innovation: The Electrolyte Industry Embraces Sustained Rapid Development

Electrolytes mainly include secondary lithium-ion battery electrolytes, supercapacitor electrolytes, primary lithium battery electrolytes, solvents, solutions, and additives. Electrolytes play a role in conducting electrons between the positive and negative electrodes of a battery, ensuring that lithium-ion batteries obtain relative advantages such as high voltage and high specific energy. Electrolytes are generally prepared from high-purity organic solvents, lithium electrolyte salts (lithium hexafluorophosphate), additives, and other raw materials in a certain proportion.

Among them, lithium salts are the providers of lithium ions, determining the performance of the electrolyte, making them the most important; solvents are liquids that dissolve solid, liquid, or gaseous solutes, and they have the highest quality; additives can improve and ensure various aspects of the electrolyte's performance.

Electrolytes have a wide range of downstream applications and are currently mainly used in new energy vehicles, consumer electronics, capacitors, energy storage, and other fields. Different downstream industries have different requirements for electrolytes, leading to the emergence of various types of electrolytes. For example, electrolytes for new energy vehicles require long cycle life, high and low temperature balance performance, and fast charging capabilities; energy storage electrolytes need to have high and low temperature balance performance and cost advantages; 3C digital electrolytes have high requirements for high and low temperature balance, long cycle life, fast charging, and other properties.

Source: Analysis by Frost & Sullivan

From the perspective of material morphology, electrolyte materials have gradually evolved from liquid to gel and then to solid state under the development of related technologies. The current mainstream electrolytes generally consist of lithium salts and organic solvents and are still in a liquid state, serving as carriers for ion transport in batteries. Gel electrolytes are metal lithium secondary batteries based on gel electrolytes, a type of energy storage battery that is expected to achieve high energy density. They are also a key transitional technology for solid-state applications of metal lithium secondary batteries. Solid-state electrolytes can effectively increase the density of battery cells and will replace liquid and gel electrolytes as the industry mainstream in the future.

From the perspective of downstream applications, the downstream application fields of electrolytes are showing a continuous expansion trend. Electrolyte materials are not only widely used in the capacitor field, but also as a major component of the cathode of electrolytic capacitors, they are extensively used in household appliances and various electronic products; electrolytes are also widely applied in the consumer electronics battery field. Based on the rapid development of consumer electronics such as smartphones over the past 20 years, consumer battery products are increasingly used in electronic devices like mobile phones, tablets, and laptops, driving a surge in demand for electrolyte materials. With the profound transformation of traditional energy industries and the adjustment and transformation of new energy structures, energy storage batteries have an increasingly broad market prospect. Electrolyte materials are mainly suitable for use in rechargeable batteries for storing renewable energy (such as solar energy, wind energy, etc.). Against the backdrop of vigorously developing renewable energy, energy storage batteries are driving the electrolyte industry into new development opportunities.

New energy vehicles are gaining increasing favor from more and more people. In recent years, the new energy vehicle industry has achieved leapfrog growth, and major traditional automakers have also introduced new energy vehicle business lines, further stimulating the huge market demand for power batteries. Since the gradual popularization of new energy vehicles since 2014, electrolyte materials, as the main raw material for new energy vehicle power batteries, have welcomed a new market opportunity.

Source: Analysis by Frost & Sullivan

The upstream of the electrolyte industry chain mainly consists of raw material providers such as solutes, solutions, and additives. The midstream primarily includes various electrolyte manufacturers, while the downstream covers major application areas such as new energy vehicles, energy storage, consumer electronics, and capacitors.

The upstream raw material suppliers in the electrolyte industry chain mainly include solute suppliers such as lithium hexafluorophosphate, lithium bisimide, and lithium borate oxalate, solvent suppliers such as polycarbonate (PC), ethylene carbonate (EC), dimethyl carbonate (DMC), diethyl carbonate (DEC), and ethyl methyl carbonate (EMC), as well as additive suppliers such as electrolyte stabilizers, flame retardants, overcharge additives, etc.

The midstream of the electrolyte industry chain consists of electrolyte manufacturers of various types. Enterprises prepare raw materials such as solutes, solvents, and additives in specific proportions and with corresponding technical configurations, enabling the production of various electrolytes to meet the specific requirements of downstream customers.

The downstream application areas of the electrolyte industry are continuously expanding with industrial development. Currently, they mainly include power batteries, consumer electronics batteries, energy storage batteries, and capacitors.

Based on the large-scale downstream market demand, China has the world's largest battery electrolyte market. In the past five years, compared to the global market, China's electrolyte market has also had a relatively higher annual compound growth rate. In terms of electrolyte production, China's electrolyte market increased from about 160,000 tons in 2018 to nearly 850,000 tons in 2022, with an annual compound growth rate exceeding 50% over the historical period. The proportion of the Chinese market in the global market also rose from about 70% in 2018 to over 80% in 2022. During the forecast period, it is expected that China's electrolyte market will further increase from about 1.25 million tons in 2023 to nearly 3.6 million tons in 2027, with an annual compound growth rate exceeding 30% during the forecast period.

New energy vehicle battery electrolytes are the most important component of China's electrolyte market. The growth rate of energy storage battery electrolytes has been higher than that of all other segments over the past five years and is expected to continue growing in the next five years.

Source: Analysis by Frost & Sullivan

Global battery electrolyte production increased rapidly from about 230,000 tons in 2018 to over 1 million tons in 2022, with a compound annual growth rate exceeding 45% during this period. In the future, the global electrolyte market size is expected to further increase from about 1.6 million tons in 2023 to nearly 5 million tons in 2027, with a compound annual growth rate still exceeding 30% during the forecast period.

According to downstream demand segmentation, the global new energy vehicle battery electrolyte market accounted for over 75% of the global electrolyte market size in 2022. Following closely behind were the energy storage battery electrolyte market and consumer electronics battery electrolyte market, accounting for approximately 20% and 3% of the global electrolyte market, respectively.

Source: Analysis by Frost & Sullivan

With the rapid growth of downstream industries such as new energy vehicles, energy storage, and consumer electronics, the demand for battery electrolytes is continuously increasing. Global electric vehicle sales increased from over 2 million units in 2018 to over 12 million units in 2022, with an annual compound growth rate of over 50%. It is expected that by 2027, the number will further increase to nearly 36 million units, with an annual compound growth rate of about 20% from 2023 to 2027. In addition, consumer electronics such as smartphones, tablets, laptops, smart wearables, and AR/VR devices have become necessities in people's lives, providing a stable downstream demand for the electrolyte industry.

To achieve the goal of 'carbon neutrality', countries around the world have introduced relevant policies to accelerate the development of new energy vehicles. As an important material for new energy vehicle batteries, electrolytes have broad prospects in the global market. For example, the Chinese government issued the 'New Energy Vehicle Industry Development Plan (2021-2035)' in 2020, clearly proposing to promote the high-quality development of the new energy vehicle industry. In the United States, Order No. 14037 sets a non-binding target of zero emissions in 50% of passenger vehicles and light trucks by 2030. In addition, European and Southeast Asian countries have also introduced relevant policies to promote electric vehicles and clean batteries, which are expected to greatly boost the development of the battery electrolyte industry.

Source: Analysis by Frost & Sullivan

Technological innovation has stimulated progress and iteration in the electrolyte industry. For example, new LiFSI is expected to gradually replace LiPF6 as the main lithium salt product used in electrolytes in the future. This is because LiFSI outperforms LiPF6 in terms of conductivity, thermal stability, and hydrolysis stability. At present, due to factors such as the difficulty of purification processes and high production costs, LiFSI has not yet achieved mass production. However, with improvements in the manufacturing processes and purification technologies for its main raw material metal alkoxide, as well as LiFSI and LiPF6, it is expected that combined use will become possible, complementing each other's advantages and further enhancing the performance of lithium-ion batteries.

Another major innovation in production technology is the widespread adoption of fast ion conductors. Fast ion conductors can also be referred to as solid electrolytes. Compared with liquid electrolytes, solid electrolytes have a lower reactivity than traditional electrolytes and possess the potential for rapid charging. At the same time, solid electrolytes have higher thermal stability, not only making products less flammable but also having a higher freezing point, which improves battery performance in extremely cold temperatures. In addition, solid electrolytes are less likely to form crystals on the positive electrode surface, thereby extending battery life. Based on significant breakthroughs in production technology, the performance of electrolyte materials is expected to be further iterated, driving the continuous development of the electrolyte industry.

The global and Chinese battery electrolyte markets continue to concentrate, with leading enterprises developing rapidly due to cost and production capacity advantages. At the same time, lithium-ion battery manufacturers tend to cooperate with large battery electrolyte manufacturers to ensure quality and stable supply. As a result, the encroachment of leading enterprises on small and medium-sized battery electrolyte manufacturers has accelerated market concentration.

The proportion and type of additives greatly affect the overall performance of electrolytes. As high voltage and high nickel content become trends in lithium-ion batteries, the corresponding battery electrolyte standards have also been raised, prompting manufacturers to pay more attention to enhancing their R&D capabilities. In addition, electrolyte and battery manufacturers are collaborating on developing new formulations to further improve efficiency and reduce costs during the R&D process.

The increase in domestic and international market demand has stimulated battery electrolyte market participants to seek stable raw material supply. As a result, market-leading companies have expanded their operations to the upstream of the industrial chain to ensure stable and cost-effective raw material supply. Taking hexafluoride as an example, among various electrolyte raw materials, it is one of the most important, with its price greatly affected by production progress and accounting for the largest proportion of costs. Therefore, leading companies in the battery electrolyte market attach great importance to the integration of the hexafluoride supply chain.