The power battery recycling industry advances into the "deep water zone"

How to build a green, standardized, and efficient recycling system for power batteries has become a pressing issue for the industry.

Currently, China’s annual production of new energy vehicles has surpassed 16 million, with explosive growth in capacity and scale. Correspondingly, the power batteries, which are the “heart” of new energy vehicles, are entering a phase of large-scale retirement. Data shows that in 2024, the total amount of retired power batteries in China is expected to reach about 400,000 tons, with the total retirement amount soaring to 1.5 million tons by 2030, and the recycling market scale is expected to exceed 100 billion yuan.

According to the “China Energy News,” in the face of the wave of retired power batteries, formal recycling companies are experiencing idle capacity, while “small workshops” are growing wildly, highlighting issues with limited recycling utilization. China’s power battery recycling industry is undergoing growing pains. Therefore, how to establish a green, standardized, and efficient recycling system has become an urgent problem to be solved by the industry.

Bad Money Drives Out Good

The wave of retired power batteries represents a huge market opportunity but also tests the carrying capacity of the existing recycling system.

Currently, China’s power battery recycling industry shows a mismatch between supply and demand: on one hand, formal enterprises are “starving,” with a utilization rate of less than 20%; on the other hand, a large number of retired batteries flow into unregulated channels, with about 75% of used power batteries not entering the formal recycling network.

Formal enterprises cannot compete with “small workshops,” and the core issue lies in the imbalance of economic accounts. Zhou Xiaohang, senior manager of the Clean Power Project at the Natural Resources Defense Council, pointed out in an interview with “China Energy News” that formal enterprises have to bear compliance costs for environmental protection, safety, taxes, and traceability system construction, resulting in a high operational threshold. In contrast, “small workshops” can almost evade all environmental and safety investments, leading to extremely low operating costs.

Currently, market trading orders are not standardized, and companies or platforms with waste battery resources often sell scrapped batteries through bidding, with batteries going to the highest bidder. “Due to the extremely low costs, under the ‘winner takes all’ model, ‘small workshops’ can acquire more scrapped batteries,” Zhou Xiaohang admitted. “The ‘winner takes all’ model treats power batteries as ordinary commodities, ignoring their environmental hazards and resource value, which leads to bad money driving out good.”

Moreover, the low entry barriers to the industry are also a significant reason for the chaos. As of September 2025, the number of battery recycling-related companies in China surged to 190,000, far exceeding the actual processing demand. Although the Ministry of Industry and Information Technology has released five batches of a “white list” of 156 enterprises that meet industry standards, some “white list” companies have issues such as being “nominally valid” and lacking actual recycling capabilities, which undermines industry standards.

Industry insiders believe that the urgent task in power battery recycling is to strengthen regulation and legal construction. Zhou Xiaohang suggests establishing a cross-departmental collaborative regulatory mechanism. “Simply relying on the Ministry of Industry and Information Technology cannot achieve full-chain supervision. It is recommended that the Ministry of Industry and Information Technology (industrial management), the State Administration for Market Regulation (market order), the Ministry of Ecology and Environment (hazardous waste supervision), and public security and tax departments establish mechanisms for information sharing and joint law enforcement. Environmental protection departments can investigate pollution at illegal dismantling sites, market supervision departments can revoke licenses, tax departments can audit tax evasion, and public security can pursue safety responsibilities, forming a regulatory synergy that significantly increases the cost of violations, thereby reversing the market’s adverse selection of bad money driving out good.”

Dual Game of Technology and Economy

In the early new energy vehicle market, ternary batteries were dominant. As battery module technology has continued to evolve, the proportion of lithium iron phosphate batteries among medium- and long-term retired batteries is approximately 69%, which has affected the profit logic of recycling companies and posed challenges to technology and economics.

In the past, ternary batteries contained high-value metals such as nickel and cobalt, making recycling highly profitable, with a gross margin of about 10%, making them sought after. However, as lithium iron phosphate batteries have become mainstream, the recycling industry is facing an awkward situation of unstable investment returns.

Zhou Xiaohang pointed out that the core challenge is poor economic viability. The regenerative economics of lithium iron phosphate batteries heavily rely on fluctuating lithium carbonate prices. At current price levels, the gross margin for wet recycling of lithium iron phosphate cathode materials is less than 4%. When lithium carbonate prices fall below a certain threshold, recycling faces losses. “This sharply contrasts with the approximately 10% gross margin for the recycling of ternary batteries.”

In addition to economic considerations, technical challenges are also severe. Zhou Xiaohang noted that wet recycling generates a large amount of iron phosphate waste, with limited high-value utilization pathways and high processing costs, potentially becoming a new environmental burden. At the same time, battery pack disassembly also faces issues of low efficiency and high costs.

The differences in economic viability directly impact companies’ enthusiasm for developing recycling businesses. Without effective policy guidance or technological breakthroughs, the recycling of lithium iron phosphate batteries may fall into a situation where “the more you collect, the more you lose,” making these batteries more likely to flow into workshops lacking environmental bottom lines.

In response to these challenges, industry insiders believe that the industry must adhere to innovation-driven development and strengthen key core technology breakthroughs. On one hand, for low-value-added materials such as iron phosphate slag, anode materials, electrolytes, and separators, it is essential to explore residual value and maximize resource utilization. On the other hand, the concept of easy disassembly and recyclability should be integrated into the design phase of power batteries to enhance product recyclability from the source and reduce backend processing costs.

Building a Whole Life Cycle Management System

Power battery recycling is not just backend processing; it is a systemic engineering project that spans the entire life cycle. Currently, cascade utilization, as one of the important destinations for retired batteries, is facing the dilemma of narrowing application scenarios and lacking standards.

In the early stages, battery specifications were inconsistent, and data was missing, making the quality and safety of cascade-utilized batteries difficult to guarantee. In recent years, national requirements for the use of cascade batteries have become stricter, clearly prohibiting electric bicycles from using cascade batteries and restricting large-capacity energy storage systems from using cascade batteries. These restrictions reflect market concerns about the safety of cascade batteries and compel the industry to improve standards and data tracking systems.

Zhou Xiaohang believes that a significant issue facing cascade utilization is the lack of unified standards. Different power battery companies have considerable differences in battery specifications, structural designs, and management systems, leading to high costs and difficulties in the disassembly, testing, and reorganization processes of retired batteries, with limited commercial profit margins. “In the short term, companies can be encouraged to explore cascade utilization models within their product systems and application scenarios, such as achieving cascade reuse within the same brand or technical system to reduce testing and adaptation costs. However, in the long term, there is an urgent need to supplement a data tracking system for key technical indicators, particularly for systematic assessments of battery health status, energy density, cycle life, etc., to provide a reliable technical and regulatory foundation for cascade utilization.”

To achieve this goal, breaking down data silos is a prerequisite. Currently, the data exchange channels between vehicle, battery, and recycling companies have not been fully established, and the “past and present” of batteries is a muddled account. In this context, the construction of a “battery passport” and a whole life cycle data management system is particularly urgent.

Zhou Xiaohang stated that the “Interim Measures for the Recycling and Comprehensive Utilization Management of Waste Power Batteries from New Energy Vehicles,” released at the beginning of the year, has clearly established a traceability information platform, aiming to break down data silos. The “battery passport” essentially serves as a carrier for the data platform, allowing each battery’s data information to be traceable. “This can transparently display the flow of scrapped batteries and responsible units, playing an important role in regulation, resource management, and problem tracing. By making information transparent, we can avoid some of the chaos that existed in the industry in the past.”

China’s power battery recycling industry is entering the “deep water zone.” Through the coordinated promotion of legal regulation, technological innovation, and data empowerment, the wave of retirements can be transformed into a green development dividend, building a virtuous green recycling system for power batteries.

Text by: Reporter Su Nan

Produced by: China Energy News (cnenergy)

Edited by: Yan Zhiqiang