Lithium, a crucial raw material for new energy vehicles, is experiencing significant market price fluctuations due to escalating geopolitical conflicts, periodic mismatches in supply and demand, and increased attention to lithium resources from countries around the world. These factors may adversely affect the development of the new energy vehicle industry. This paper adopts the TVP-VAR-DY model, which measures dynamic spillover effects by allowing for variance changes through the estimation of a stochastic Kalman filter, thereby measuring risk spillover among upstream and downstream firms in the lithium industry chain. We selected 16 listed companies and six regional financial markets as the research sample, with the sample period from 4 July 2018, to 30 June 2023. The main conclusions are as follows: Between 2018 and 2020, the overall risk spillover in the lithium industry chain demonstrated a declining trend, though it experienced a sudden surge in 2020 as a result of the COVID-19 pandemic. This increase was followed by a gradual decline as the global economy improved and market stability was restored, leading to a reduction in risk aversion. Regarding the reception of risk spillovers, upstream firms exhibited a generally consistent level of directional risk spillovers, whereas downstream firms experienced more significant fluctuations. Chinese firms exhibited a higher level of received risk spillovers compared to their international counterparts, with less variation in these spillovers. From the perspective of risk spillover effects, significant variations were observed between firms in both the upstream and downstream markets. Chinese firms exhibited a higher level of risk inflow than international firms, with more pronounced changes in risk spillovers. Upstream enterprises should enhance their market competitiveness to mitigate the adverse effects of economic uncertainty. Downstream enterprises can alleviate the rise in raw material costs resulting from market price fluctuations through strategic cooperation. Additionally, the government should increase the market supply of resources, which will contribute to the establishment of a more robust lithium industry chain system.
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