Battery Recycling

Battery recycling refers to the systematic process of collecting, sorting, dismantling, and extracting valuable materials from spent traction batteries to achieve closed-loop resource utilisation. As a crucial closed-loop segment in the new energy vehicle (NEV) industry chain, battery recycling focuses primarily on three core objectives: resource reutilisation—extracting scarce metals such as lithium, cobalt, and nickel to manufacture new batteries; environmental protection—preventing heavy metals and electrolytes from contaminating soil and water sources; and safety assurance—eliminating the inflow of retired batteries into illicit channels to prevent fire and explosion hazards.

Market Size

China is set to experience a massive wave of large-scale traction battery retirements. In 2024, the volume of recycled traction batteries in the domestic market surpassed 300,000 tonnes, representing a market value of over RM48,000,000,000. Projections indicate that retired volumes will reach 820,000 tonnes in 2025 and exceed 4,000,000 tonnes by 2028. By 2030, the domestic traction battery recycling market is anticipated to exceed RM100,000,000,000.

Current data shows that China's lithium-ion battery recycling and comprehensive utilisation industry reached RM22,200,000,000 in 2025, and is projected to climb to RM52,700,000,000 in 2026. On the global stage, the European Union has enacted legislation mandating recycling rates and carbon footprint disclosures. Meanwhile, China will formally implement its first ministerial departmental regulation, the Interim Measures for the Management of Recycling and Comprehensive Utilisation of Waste Traction Batteries from New Energy Vehicles, on 1 April 2026, marking the sector's transition from a fragmented landscape to strict regulatory oversight.

Primary Recycling Pathways

Retired batteries are categorised into two main treatment pathways based on their State of Health (SOH).

Second-life utilisation refers to repurposing batteries whose capacity has degraded to below 80% of their original rating but are not completely scrapped. These are deployed in less demanding applications such as energy storage stations, street lighting, and low-speed electric vehicles (LSEVs). Lithium iron phosphate (LFP) batteries are particularly well-suited for second-life cascading due to their long cycle life and high thermal stability. China Tower Corporation Limited has already implemented large-scale cascading utilisation of retired traction batteries for backup power at telecommunications base stations.

Regeneration and recycling involve dismantling and shredding fully scrapped batteries to extract valuable metals such as lithium, cobalt, and nickel through physical and chemical processes, converting them back into battery raw materials. In chemical recycling, hydrometallurgy represents the current mainstream technology, utilising acid solutions to leach metal ions before separation and purification, achieving recovery rates exceeding 98%. Conversely, pyrometallurgy extracts metals via high-temperature smelting, offering high processing capacity but accompanied by higher energy consumption and emissions.

Direct recycling and restoration is an advanced "upcycling" methodology. Taking LFP batteries as an example, techniques such as high-temperature solid-phase regeneration or hydrothermal repair directly replenish depleted lithium ions and restore the crystal lattice structure, returning material performance to near-new levels rather than downcycling them into low-value raw materials.

Policy and Industry Developments

The Interim Measures for the Management of Recycling and Comprehensive Utilisation of Waste Traction Batteries from New Energy Vehicles, taking effect on 1 April 2026, establish an Extended Producer Responsibility (EPR) framework. Traction battery manufacturers and NEV manufacturers bear the primary recycling responsibility for their products, requiring them to establish recycling service outlets within their sales territories and publish operational details. In cases of corporate division or dissolution, proper arrangements for recycling obligations must be made.

A digital battery passport system has been incorporated into the regulatory framework, tracking full lifecycle data—from factory production, vehicle installation, and operational usage to retirement and recycling—on a national traceability information platform to ensure that "sources are verifiable and destinations are traceable". A mandatory integrated vehicle-and-battery disposal policy is enforced for end-of-life NEVs, preventing batteries from bypassing regulatory oversight and entering unregulated grey channels.

To date, 148 domestic enterprises have been included in the Ministry of Industry and Information Technology (MIIT) "White List" as certified recycling entities, establishing tens of thousands of recycling service outlets nationwide. In May 2026, five government departments, including the MIIT, jointly launched a targeted enforcement campaign on spent traction battery recycling to crack down on illegal chop shops and underground supply chains. Industry leaders such as CATL, BYD, and GEM are building full-lifecycle value chains encompassing "battery recycling – raw material reproduction – precursor material remanufacturing – battery pack remanufacturing".

Industry Challenges

The primary challenge facing the sector is low recycling rates and raw material shortages for certified recyclers. A large volume of spent batteries is intercepted by unlicensed small workshops offering higher purchase prices. These illicit operations rely on crude manual dismantling and rudimentary smelting, causing environmental pollution and safety hazards, which in turn leaves certified recycling facilities operating at only around 30% capacity utilisation.

Underdeveloped collection channels also pose a significant constraint. A number of recycling service outlets exist merely on paper as "dormant outlets" with inadequate operational capabilities, leading to weak recycling coverage in remote and regional areas.

Technical bottlenecks remain substantial. Structural differences across diverse brands and battery pack models create hurdles for automated, high-efficiency dismantling. Additionally, the lower economic viability and complex chemistry of LFP recycling make recyclers less enthusiastic compared to ternary lithium batteries. Extended process flows and large-scale wastewater treatment in hydrometallurgical operations also require further technological breakthroughs.

Strategic Significance

Battery recycling is strategically positioned as an "urban mining" initiative essential to safeguarding national resource security. China relies on imports for over 80% of its lithium and more than 90% of its cobalt and nickel resources. Recycling retired batteries is equivalent to developing an "urban mine", significantly reducing reliance on imported virgin minerals. Establishing a green, low-carbon circular economy framework is a fundamental pillar supporting the sustainable development of the new energy vehicle industry.