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

How to build a green, standardized, and efficient recycling system for power batteries has become an urgent challenge for the industry.

Currently, China’s annual production of new energy vehicles has surpassed 16 million units, with capacity and scale growing explosively. Correspondingly, as the “heart” of new energy vehicles, power batteries will also enter a large-scale retirement phase. Data shows that in 2024, the total retired power batteries in China will be about 400,000 tons, and by 2030, the total retired amount is expected to soar to 1.5 million tons, with the recycling market potentially exceeding 100 billion yuan.

According to China Energy News, in the face of the wave of retired power batteries, issues such as idle capacity of legitimate recycling companies, the rampant growth of small workshops, and limited recycling utilization have become prominent. China’s power battery recycling industry is experiencing growing pains. Therefore, how to establish a green, standardized, and efficient recycling system has become an industry-wide urgent problem.

Bad Money Drives Out Good Money

The wave of retired power batteries presents both a huge market opportunity and a test of the existing recycling system’s capacity.

Currently, China’s power battery recycling industry shows a mismatch between supply and demand: on one hand, legitimate companies are “not fully fed,” with capacity utilization below 20%; on the other hand, a large number of retired batteries flow into unregulated channels, with about 75% of waste batteries not entering formal recycling networks.

Legitimate companies cannot compete with small workshops mainly because of economic imbalance. Zhou Xiaohang, senior manager of the Clean Power Project at the Natural Resources Conservation Association, told China Energy News that legitimate companies need to bear compliance costs related to environmental protection, safety, taxes, and traceability systems, which raise operational thresholds. In contrast, small workshops almost avoid all environmental and safety investments, resulting in extremely low operating costs.

Currently, market transaction order is still unregulated. Enterprises or platforms holding waste battery resources mostly sell scrap batteries through bidding, with batteries flowing to the highest bidder. “Because of the very low costs, in a ‘highest bid wins’ model, small workshops can acquire more scrap batteries,” Zhou Xiaohang said. “This ‘highest bid wins’ model turns power batteries into ordinary commodities, ignoring their environmental hazards and resource value, leading to bad money driving out good.”

Moreover, the low industry entry threshold is also a key reason for chaos. As of September 2025, the number of domestic battery recycling-related companies surged to 190,000, far exceeding actual processing needs. Although the Ministry of Industry and Information Technology has issued five batches of 156 ‘white list’ companies that meet industry standards, some of these companies are found to have false claims or insufficient recycling capacity, weakening industry regulation.

Experts believe that the top priority for power battery recycling is to strengthen supervision and legal construction. Zhou Xiaohang suggests establishing a cross-departmental coordinated supervision mechanism. “Relying solely on the Ministry of Industry and Information Technology for full-chain supervision is difficult. It is recommended that the Ministry of Industry and Information Technology (industry management), Market Supervision (market order), Ministry of Ecology and Environment (hazardous waste regulation), along with public security, tax authorities, and others, establish information sharing and joint law enforcement mechanisms. For illegal dismantling sites, environmental authorities can investigate pollution; market regulators can revoke licenses; tax authorities can audit tax evasion; public security can pursue safety responsibilities. This collaborative supervision will significantly increase the cost of violations and reverse the market’s ‘bad money drives out good’ trend.”

Technological and Economic Dual Challenges

In the early stage, the new energy vehicle market mainly used ternary batteries. As battery module technology iterates, the proportion of lithium iron phosphate batteries in mid- and long-term retired batteries is about 69%. This change affects the profitability logic of recycling companies and poses challenges to technical routes and economic viability.

In the past, ternary batteries contained high-value metals like nickel and cobalt, making recycling highly profitable with gross margins around 10%, making them highly sought after. However, with lithium iron phosphate batteries becoming mainstream, the recycling industry faces unstable returns.

Zhou Xiaohang points out that the core challenge is poor economic viability. The recyclability of lithium iron phosphate batteries heavily depends on fluctuating lithium carbonate prices. At current prices, the gross profit margin for wet recycling of lithium iron phosphate cathode powder is less than 4%. When lithium carbonate prices fall below a certain threshold, recycling becomes loss-making. “This is in stark contrast to the approximately 10% gross margin for ternary battery recycling.”

Besides economic issues, technical challenges are also severe. Wet recycling produces a large amount of iron phosphate waste, which currently has limited high-value utilization pathways and high processing costs, potentially becoming a new environmental burden. Additionally, disassembly of battery packs is inefficient and costly.

The economic gap directly impacts companies’ willingness to invest in recycling. Without effective policy guidance or technological breakthroughs, lithium iron phosphate battery recycling may fall into a situation of “more collection, more losses,” making these batteries more likely to flow into small workshops lacking environmental standards.

To address these challenges, industry experts believe that innovation must be prioritized, with a focus on key core technologies. On one hand, residual value should be mined from low-value materials like lithium iron phosphate slag, anodes, electrolytes, and separators to maximize resource utilization. On the other hand, designing batteries with easy disassembly and recycling in mind from the outset can improve product recyclability and reduce downstream processing costs.

Building a Full Lifecycle Management System

Power battery recycling is not just about post-processing but a systematic project spanning the entire lifecycle. Currently, second-life utilization, an important destination for retired batteries, faces challenges such as narrowing application scenarios and lack of standards.

Early on, inconsistent battery specifications and missing data made the quality and safety of second-life batteries difficult to guarantee. Recently, the national standards for second-life batteries have become stricter, explicitly banning their use in electric bicycles and limiting their application in large-capacity energy storage systems. These restrictions reflect market concerns about safety and are pushing the industry to improve standards and data tracking systems.

Zhou Xiaohang believes that a major issue in second-life utilization is the lack of unified standards. Different battery manufacturers vary greatly in specifications, structural design, and management systems, leading to high costs and difficulties in disassembly, testing, and reassembly, with limited commercial profitability. “In the short term, encouraging companies to explore second-life models within their own product systems and application scenarios—such as within the same brand or technical system—can reduce testing and adaptation costs. But in the long run, it is urgent to develop key technical indicator data tracking systems, especially for battery health, energy density, and cycle life, to provide reliable technical and regulatory support for second-life utilization.”

Achieving this requires breaking down data silos. Currently, data exchange channels among vehicle manufacturers, battery companies, and recycling enterprises are not fully connected, leaving the “life story” of batteries unclear. In this context, the construction of a “battery passport” and a full lifecycle data management system is particularly urgent.

Zhou Xiaohang states that the “Interim Measures for the Management of Recycling and Comprehensive Utilization of Waste Power Batteries for New Energy Vehicles,” issued earlier this year, has clarified the establishment of a traceability information platform aimed at breaking data silos. The “battery passport” essentially acts as a data platform, allowing each battery’s information to be traceable. “This can transparently show the flow and responsible units of scrapped batteries, playing an important role in supervision, resource management, and problem tracing. Transparency of information can prevent some chaos seen in the past industry.”

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