China’s Power Battery Recycling Sector Reforms Amid Regulatory Overhaul and Tech Upgrades

Automated processing lines run continuously inside the demonstration recycling workshop operated by Jinchi Energy Materials Co., Ltd. As a flagship industrial project under Minmetals New Energy Materials (Hunan) Co., Ltd., the intelligent recycling facility delivers closed-loop reprocessing for retired vehicle batteries, standing as a tangible example of low-carbon progress within the new energy supply chain.

China’s new energy vehicle manufacturing sector has entered a phase focused on quality improvement and efficiency gains. Against this backdrop, the recovery and comprehensive reuse of end-of-life power batteries form an indispensable link in building a full-life-cycle circular framework for electric mobility vehicles. Sustained refinement of regulatory frameworks and iterative advancement of industrial processes are driving sweeping structural shifts across the domestic battery recycling market.

Regulatory Framework Reshapes Market Operations

Data released by the China Association of Automobile Manufacturers records 16.626 million new energy vehicles manufactured and 16.49 million sold nationwide during 2025, marking year-on-year rises of 29 per cent and 28.2 per cent respectively. New energy passenger cars accounted for 47.9 per cent of total domestic light vehicle sales for the full year. Independent industrial research bodies calculate that the country will enter a period of mass battery retirement, with annual volumes of scrapped traction batteries set to exceed one million tonnes by 2030.

Robust, standardised recycling infrastructure carries mounting strategic significance. Central authorities have rolled out a sequence of supportive policy documents to guide orderly industrial expansion. The State Council recently issued the 15th Five-Year Plan Action Plan for Carbon Peaking, which mandates regulated collection and refined resource recovery for waste electrical equipment, retired vehicle batteries, decommissioned wind and solar hardware, scrapped motor vehicles and agricultural machinery.

Prior to this release, the National Development and Reform Commission published the Circular Economy Development Plan for the 15th Five-Year Period. The document promotes green construction practices across full project lifecycles, unlocks resource value from established urban mineral streams, and targets gaps in circular processing capacity for emerging industrial solid waste categories.

The Interim Measures for the Administration of Recycling and Comprehensive Utilisation of Retired Power Batteries from New Energy Vehicles entered formal implementation on 1 April this year, introducing binding rules that restructure competitive dynamics within the recycling sector. Interviews published by Securities Daily feature analysis from senior representatives of the Waste Battery Recycling and Utilisation Branch at the China Materials Recycling Association, confirming the new rules establish clear compliance benchmarks and steer the industry away from unregulated expansion toward uniform industrial standards and formalised operational procedures.

Before the regulatory update, low market entry thresholds had drawn massive capital inflows, triggering uncoordinated capacity expansion across the recycling space. Unrestrained market competition created severe mismatches between supply and demand alongside volatile raw material pricing, as countless market participants stockpiled retired batteries through aggressive bidding practices.

The updated rules address these structural flaws via two mandatory systems covering integrated vehicle-battery scrappage and full-life-cycle traceability. Institutional controls accelerate the phase-out of unlicensed processing capacity. Market operators are prohibited from purchasing or circulating untraced batteries sourced from unregistered informal workshops, with heavy administrative penalties applied to entities breaching compliance standards.

Industrial Players Accelerate Technical Capacity Building

Market participants across the battery supply chain are scaling up operational footprints to capture the current window of industrial transformation. Leading manufacturers leverage proprietary technology, national recovery permits and nationwide logistics networks to expand collection channels. GEM Co., Ltd. disclosed via investor communications that six dedicated lithium battery recycling plants have been constructed across the Pearl River Delta, Yangtze River Delta, Beijing-Tianjin-Hebei and central China regions, forming a countrywide compliant recovery network positioned close to battery producers and automotive OEMs. The layout enables timely fulfilment of statutory recycling obligations imposed on vehicle manufacturers under the new national regulatory regime.

Nanjing Wandes Environmental Technology Co., Ltd., through its wholly owned subsidiary Nanjing Wandes Green Materials Technology Co., Ltd., entered the battery recycling and end-of-life vehicle dismantling sector in March this year following acquisitions of Anhua Jiaqi Energy Technology Co., Ltd. and Wuhu Minghao New Materials Co., Ltd.

Operational representatives from Jinchi Energy told Securities Daily that the firm commissioned a 5,000-tonne annual processing demonstration recycling line back in 2019. Mature processing workflows and complete internal control systems secured its inclusion on the official white list of certified recyclers managed by the Ministry of Industry and Information Technology in 2021. The demonstration facility prioritises technical iteration, specialist workforce training and production process optimisation over short-term profit generation, building operational readiness to handle the incoming wave of mass battery retirements.

Long-term market fundamentals remain positive for power battery recycling, yet operators face consistent operational headwinds. Capacity expansion carries lower barriers than sustained profitability. Lithium iron phosphate battery recovery delivers thinner gross margins, particularly amid subdued lithium spot pricing, reducing commercial incentives for market players to secure these battery streams. Transaction frameworks remain dominated by competitive bidding processes. Formalised recyclers sustain higher overheads from environmental treatment equipment, continuous safety oversight and regulatory compliance checks.

Industrial participants are rolling out targeted operational adjustments to mitigate market pressures alongside ongoing regulatory oversight. Teams at Ganfeng Lithium Group Co., Ltd. outlined two core strategies to media outlets, including long-term supply partnerships with major manufacturers to secure consistent access to warranty replacement batteries and factory production scrap, plus fixed-price long-term supply agreements for lithium iron phosphate feedstock to mitigate volatility from bidding competition. Parallel progress in process optimisation, automated workflow deployment and scaled throughput cuts per-tonne processing expenditure across recycling operations.

Technical teams at Jinchi Energy have refined live battery crushing workflows through successive research cycles, minimising copper and aluminium impurity content within crushed black mass feedstock and streamlining subsequent hydrometallurgical separation stages.

Rapid adoption of artificial intelligence creates new pathways to cut operational overheads and boost throughput efficiency. Specialist committee members from the Energy Storage Application Branch of the China Chemical and Physical Power Industry Association explained that traditional battery health assessments required full disassembly and charge-discharge cycling tests, incurring substantial labour and time costs. Current industrial workflows leverage historical operational datasets stored within cloud-based battery management systems paired with AI algorithms and rapid electrochemical impedance spectroscopy, delivering accurate state-of-health evaluations without full module disassembly and slashing diagnostic expenditure.

Combined momentum from formalised policy frameworks, strengthened regulatory supervision and continuous technical advancement drives steady standardisation across China’s power battery recycling sector. Ongoing refinement of industrial technology systems and gradual rebalancing of supply and demand dynamics will unlock sustained green economic value from battery circular processing infrastructure, underpinning upgrades to the domestic new energy industrial ecosystem and national carbon reduction targets.