The remarkable emergence of the new energy vehicle (NEV) market in China has ushered in unprecedented opportunities for its associated industries, notably the power battery sectorRecently published reports indicate that the recovery and recycling capacity for new energy batteries has witnessed rapid growth, reaching an impressive 825,000 tons in 2023 aloneBy the end of October 2024, China has cultivated five batches of 148 standardized enterprises, establishing over 10,000 recycling service points across 327 municipal administrative regions nationwideYet, despite this growth, challenges persist, including a lack of standardized recycling practicesHow can the battery recycling industry seize these opportunities while addressing these hurdles?

This situation is evolving toward a more diversified utilization modelSince 2016, according to regulations set by the Ministry of Industry and Information Technology, manufacturers of passenger vehicles must provide an eight-year or 120,000-kilometer warranty for core components, including batteriesAs the so-called "eight-year promise" starts to expire, a significant volume of power batteries is set to be retiredExperts from the China Electronic Energy-Saving Technology Association predict that by 2025, the amount of retired power batteries in China will reach approximately 820,000 tons, increasing to over 4 million tons by 2028, resulting in a booming market that could generate more than 280 billion yuan in industry value for battery recovery.

The path to recycling power batteries primarily involves two methodologies: hierarchical utilization and dismantling/recyclingWhen the capacity of a power battery diminishes to around 80% of its original capacity, it may no longer be suitable for electric vehicles, but it can continue to serve in applications like energy storage systems or electric toolsThis is the essence of hierarchical utilizationIn cases where battery performance further degrades, making it unsuitable for any application, dismantling processes can facilitate the extraction of valuable metals such as lithium, cobalt, and nickel, contributing to resource reuse

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Industry insiders argue that retired batteries are a vital source of upstream materials for lithium, cobalt, nickel, and moreRecycling retired batteries can alleviate production pressures on upstream resources and reduce dependency on critical minerals.

The current business models within the power battery recycling industry include third-party recovery models, battery manufacturer-led recovery models, automotive company-led alliance recovery models, and hierarchical utilization business modelsIn recent years, the Chinese government has prioritized the development of battery recycling industries, enacting a series of policies and regulations to promote market health and efficiencyAs a result, this rapidly evolving market has attracted numerous enterprisesData from Qichacha indicates that there are approximately 147,000 enterprises related to battery recycling in China.

Technological innovation serves as a driving force for industry advancementWith advanced recycling technologies, retired power batteries can be repurposed into energy storage systems and other applications, maximizing resource utilization and sparking a "second life" for these batteriesSince 2015, the Volkswagen Group has actively pursued battery recycling and repurposing projects in ChinaAlongside partners like Jiangsu Huayou, Volkswagen has initiated pilot projects for low-speed two-wheeled vehicle batteries and mobile energy storage systemsSimilarly, BYD has implemented technology to facilitate the storage and release of energy from retired batteries while exploring the recycling of battery materialsFoton Motor, via its subsidiary, collaborates with BTR New Energy to develop waste battery resources and establish a national network for retired power battery recovery, thereby enhancing the recycling process through established industrial chains.

The continuous advancement and innovation in power battery recycling technology not only provide financial benefits to recycling enterprises but also underpin the green transformation of the new energy vehicle sector

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As highlighted by Liu Lili, a researcher from Tsinghua University's School of Environment, China has achieved notable success not only in producing batteries but also in recycling technology, gradually positioning itself at the forefront globallyA dual approach combining physical and chemical (wet) methods in recycling has empowered the efficient recovery of power batteries.

However, despite the enormous quantity of waste batteries, the regulatory framework surrounding their recycling remains insufficientSome unqualified enterprises engage in crude processing of used batteries for profit, which hinders recycling rates and leads to environmental pollution and safety hazardsFu Qiang, the president of BTR New Energy, notes that "small workshops" involved in battery recycling typically invest little in environmental protections or equipment, often relying on physical cutting techniques to obtain raw materialsNot only does this result in resource wastage, but it also inflicts harm on the environmentConversely, larger companies adhering to regulatory standards invest significantly in facilities, equipment, environmental handling, and digitization, resulting in markedly higher operational costsFurthermore, regulated entities are required to pay a certain value-added tax for collecting and processing used lead-acid batteries, while small-scale operators might not face the same financial obligations, allowing them to offer higher recovery prices and leading to a phenomenon where inferior practices outcompete better ones.

Yang Lin, the secretary-general of the China Electronic Energy-Saving Technology Association, elaborates that the practice of auctioning retired power batteries to the highest bidder has created an environment where less scrupulous operators can procure batteries by offering higher prices, reinforcing the narrative that legitimate businesses cannot compete with informal operatorsFor instance, for a ternary lithium battery pack, in late June 2024, small operators offered about 22,000 yuan per ton, whereas larger enterprises provided approximately 19,000 yuan per ton

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This price discrepancy tends to divert retired power batteries towards small workshops.

While "small workshops" have been curtailed in recent months, they still control about 50% of the market, according to Cao Guoqing, deputy secretary-general of the Resource Recycling Industry Innovation AllianceAmidst this mixed landscape of recovery organizations, China's power battery recycling rate remains lowA report published by the Development Research Center in 2023 indicates that as of this year, the standard recycling rate of power batteries from new energy vehicles in China lingers below 25%.

Establishing a long-term, efficient recycling mechanism relies significantly on robust policy supportIn June 2024, the Ministry of Industry and Information Technology convened a forum focusing on the entire industrial chain of retired power battery recovery, covering areas such as design, manufacturing, service, decommissioning, and comprehensive utilizationFurther efforts are set to investigate enterprise practices and gather expert insights, aiming to accelerate the development of a long-lasting framework for battery recycling.

By August 2024, the stipulations relating to "technology, equipment, and processes" were transitioned to emphasize "integrated utilization capabilities," alongside refining standards for hierarchical utilization and regeneration enterprisesMore concrete specifications will guide enterprise layout and project siting, as well as regulate product quality, environmental protection measures, safety practices, and corporate accountability in areas such as social responsibility and vocational education.

In the medium to long term, Yang Lin emphasizes that China’s high dependency on lithium, cobalt, and nickel materials necessitates a robust development of power battery recovery and utilization industries to safeguard national resource strategies and bolster the circular economyRelevant departments should consider introducing policy measures to promote hierarchical utilization and enhance technological advancements in the recycling sector.

Experts advocate for the rapid establishment of a pertinent standard system and the refinement of existing management frameworks to elevate China’s standing within the international battery recycling landscape

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