On August 16, at the main event of the 2026 National Ecology Day held in Hulunbuir, Inner Mongolia, Wang Shancheng, Director-General of the Department of Resource Conservation and Environmental Protection of the National Development and Reform Commission (NDRC), made a statement that brought a long-established regulatory clause back into the market spotlight: "strictly implement the 'scrapping of NEVs (New Energy Vehicles) with batteries' and severely crack down on illegal and non-compliant recycling and dismantling behaviors." He also stated that the management measures for the recycling of wind power and photovoltaic equipment are being urgently formulated, and by 2030, a comprehensive closed-loop management system for the recycling of solid waste from the "new three" products (new energy vehicles, wind power, photovoltaics) will be established and improved.
The five words "scrapping with batteries" may seem ordinary, but behind them lies a reshaping of rules involving the flow of hundreds of billions of yuan in assets. This means that at the end of its life cycle, the power battery used in an NEV cannot be dismantled without authorization, privately resold, or channeled into the gray market—it must enter the statutory recycling channel together with the whole vehicle. For the entire industry, these five words convey another signal: power battery recycling is shifting from an "optional supporting link" to a "deterministic business that must be closed-loop."
01. Three Progressive Steps of a Policy Mainline
"Scrapping with batteries" is not a new concept; its formal implementation has undergone a progressive process from top-level design to institutional solidification, and then to enforcement strengthening.
The first progression occurred in February 2025. The Executive Meeting of the State Council reviewed and approved the "Action Plan for Improving the Recycling System of Power Batteries for NEVs," explicitly proposing the use of digital technologies to strengthen the monitoring of the flow of power batteries throughout their life cycle, achieving full traceability in production, sales, dismantling, and utilization. This established the institutional framework of "full-process traceability" for battery recycling at the national top-level design level for the first time.
The second progression was on January 16, 2026. Six ministries and commissions, including the Ministry of Industry and Information Technology (MIIT), the NDRC, the Ministry of Ecology and Environment (MEE), the Ministry of Transport (MOT), the Ministry of Commerce (MOFCOM), and the State Administration for Market Regulation (SAMR), jointly issued the "Interim Measures for the Management of Recycling and Comprehensive Utilization of Waste Power Batteries for NEVs," which took effect on April 1, 2026. This document formally solidified "integrated vehicle and battery scrapping" as an institutional arrangement: scrapped NEVs must be accompanied by their power batteries; if a power battery is missing, the vehicle is deemed missing. Meanwhile, a national traceability information platform and a digital ID management system for NEV power batteries were established. The full life cycle information of every battery, from production, installation, battery swapping, and maintenance to scrapping, recycling, and reuse, is included in the platform for traceable management. The measures also set administrative penalties such as orders to correct, warnings, and fines for behaviors like failing to hand over batteries as required and not fulfilling recycling responsibilities, significantly enhancing the rigid constraints of the system.
The third progression is this public reiteration on August 16. The emphasis on "strict implementation" is because 2026 coincides with the critical point of the power battery retirement wave—the institutional framework has been established, and law enforcement intensity and industrial absorption capacity need to keep pace.
Why are regulators so determined to hold the bottom line of "integrated vehicle and battery"? The answer lies in the flow management of retired batteries. A retired power battery usually retains 70% to 80% of its remaining capacity, meaning it still contains a large amount of reusable metals and energy. However, if this value flows into disordered gray channels, it could lead to a different scenario: small workshops intercepting the flow with high prices, violently dismantling and simply refurbishing them before re-entering the market, which not only causes resource waste but also poses safety hazards. Cui Dongshu, Secretary-General of the China Passenger Car Association (CPCA), once publicly stated that every battery is a small "metal mine," and the purpose of the management measures is to prevent them from flowing into unregulated small workshops.
02. The Retirement Wave Has Arrived: The Critical Point from 820,000 to 1 Million Tons
Behind the tightening policies is the rapid climb of the retirement scale curve.
China is the world's largest producer of electric vehicles and power batteries. In 2025, the production and sales of NEVs both exceeded 16 million units, with a year-on-year increase of nearly 30%. According to data from the Ministry of Public Security, the national NEV ownership has exceeded 36 million units. Based on the 5 to 8-year service cycle of power batteries, the first batch of NEVs that were centrally registered from 2018 to 2021 are now successively entering the retirement cycle.
A set of industry estimation data outlines the growth trajectory of the retirement scale: in 2025, the domestic power battery retirement volume was about 820,000 tons, with a comprehensive utilization volume of about 400,000 tons, a year-on-year growth rate of over 32%; in 2026, the theoretical retirement scale will exceed 1 million tons, equivalent to about 43 GWh; by 2030, annual retired power batteries will exceed 1 million tons, equivalent to 171 GWh—equivalent to about 3 million NEVs facing battery elimination. Research institutions further predict that around 2030, the domestic power battery recycling market size will break through 100 billion yuan, and under an optimistic estimate, it could reach 180 billion to 280 billion yuan.
If the time frame is extended to the entire "15th Five-Year Plan" period, the cumulative retirement volume will be counted in millions of tons, and the corresponding market recycling volume will cumulatively reach hundreds of billions of yuan. This is not a marginalized environmental supporting business, but a brand-new profit growth pole taking shape in the NEV industry chain.
03. "Urban Mine": Why Recycling is More Cost-Effective than Mining
The high expectations for power battery recycling stem from its outstanding recycling value—retired batteries can be described as an "urban mine" with considerable grade.
In a typical retired power battery, the lithium content is about 10 to 15 kg/ton, cobalt 5 to 8 kg/ton, and nickel 30 to 40 kg/ton. The overall content of major metals in retired batteries is about 10 times higher than the metal grade in primary ores. Taking the battery pack of an ordinary passenger car as an example, nearly 300 kg of key metal materials can be recycled through technical means. Calculated based on the price of lithium carbonate, the recycling of a single battery can create considerable economic value; compared with mining primary ores, recycling retired batteries can also bring significant carbon emission reduction benefits.
More critically, there is strategic value. China's external dependence on key metals such as lithium, cobalt, and nickel has long been high. Strengthening the recycling and utilization of power batteries can meet about 20% of the domestic NEV lithium demand, 25% of the cobalt demand, and 11% of the nickel demand annually. In other words, recycling not only reduces resource costs but also builds a safety margin for the resource supply of the industry chain. Given the current geopolitical uncertainties facing the supply of critical minerals, the weight of this "urban mine" is being re-evaluated.
The disposal of retired batteries follows two paths. The first is second-life utilization: batteries whose capacity has degraded to below 80% and are no longer suitable for vehicle propulsion are tested, reorganized, and put back into use for scenarios with lower energy density requirements, such as peak shaving and valley filling in energy storage stations and backup power for communication base stations, with costs 30% to 50% lower than new batteries. The world’s first “super zero-carbon building” in Qingdao and the Greater Bay Area’s first second-life battery energy storage station for transportation systems are both implementation cases of second-life utilization of retired batteries. The second is regenerative utilization: batteries with too low capacity for second-life utilization enter the processes of discharge, dismantling, crushing, sorting, and hydrometallurgy to extract valuable metals such as lithium, nickel, cobalt, and manganese, which are then reinvested into battery production. Currently, the recovery rates of lithium, cobalt, and nickel through hydrometallurgy by leading enterprises generally exceed 95%, and the closed loop of "recycling—regeneration—manufacturing" has been initially established.
The "Management Measures" implemented in 2026 no longer adopt the conceptual expression of "cascade utilization," explicitly stipulating that no organization or individual shall use waste power batteries directly or after processing for prohibited fields such as electric bicycles. This is a regulatory correction aimed at the previous market issue where "second-life batteries" were of mixed quality, making it difficult to distinguish between qualified and unqualified products.
04. A Tale of Two Extremes: The "Starvation" of Legitimate Enterprises and the "Exorbitant Profits" of Small Workshops
The retirement wave has arrived, yet the market presents a distinct "tale of two extremes" pattern.
On the one hand, there is idle capacity among compliant recycling enterprises. Industry estimations show that in 2026, the domestic comprehensive utilization volume of waste power batteries is expected to exceed 550,000 tons, with a formal market size of about 52.7 billion to 80 billion yuan, nearly doubling year-on-year. However, the contradiction of "large theoretical retirement volume but scarce supply in formal channels" remains prominent—a large number of retired batteries are intercepted by small workshops at higher prices. Legitimate enterprises generally face the dilemma of scarce supply and low capacity utilization rates, which is described as "starvation."
On the other hand, there is the disordered expansion of small workshops. They lack environmental protection facilities and safety qualifications, relying on violent dismantling and low-cost operations to seize the bulk cargo market, and channeling refurbished cells back into fields such as electric bicycles and backup power supplies. This "bad money drives out good" not only results in low resource utilization rates but also poses safety hazards such as fires and explosions.
The industry competition pattern thus presents clear characteristics of "monopoly at the top, pressure in the middle, and clearance at the tail." The first tier consists of leaders with full industry chain layouts, represented by CATL (Contemporary Amperex Technology Co., Limited) (and its Brunp Recycling) and GEM Co., Ltd. According to industry institution estimations, CATL's lithium battery recycling volume in 2026 will be about 210,000 tons, a year-on-year increase of over 60%; GEM's power battery recycling and dismantling volume in 2025 was about 52,600 tons, a year-on-year increase of 46%, with a 2026 target to increase to 80,000 tons. They have built a closed-loop system of "recycling—second-life utilization—material regeneration—battery manufacturing" and have already deployed recycling bases overseas. The second tier includes medium-sized compliant enterprises such as Tianqi Lithium Corporation, Huayou Cobalt, and Narada Power, focusing on segmented tracks, possessing compliant capacity but with weak bargaining power for supply sources. The third tier consists of unqualified small workshops, which are being squeezed by both policy and the market, and are gradually being cleared out.
Leading enterprises are also promoting another layer of closed loop—carbon neutrality for battery enterprises. On August 17, CATL announced that it had achieved carbon neutrality in core operations by the end of 2025, becoming the world’s only battery maker to achieve core operational carbon neutrality at a TWh-scale shipment level. Its roadmap towards 2035 covers "carbon neutrality across the entire value chain from mineral resources to finished batteries." Recycling and utilization is precisely a key link in this value chain closed loop: for every additional ton of recycled materials used, one less ton of primary ore is mined.
05. The Closed-Loop Era: From "Scrap Trading" to "High-Value Regeneration"
What "scrapping with batteries" truly changes is the underlying logic of the recycling industry.
In the past, battery recycling was more like a "scrap trading" business—following the market trends and negotiating transactions, with profitability highly dependent on the cyclical fluctuations of metal prices. However, with the implementation of the institutional system of "integrated vehicle and battery scrapping," digital IDs, and full life cycle traceability, recycling is turning into a "deterministic business": batteries have codes and digital identities right from the factory, and must enter compliant channels with the vehicle upon scrapping. The flow of every battery can be checked, traced, and held accountable. This not only compresses the living space of gray channels but also provides legitimate enterprises with stable supply expectations, making capacity investment and process upgrades have calculable returns on investment.
From a more macro perspective, this is a systematic supplementation of the circular economy in the "new three" products sector. Wind power, photovoltaics, and power batteries are known as China's "new three" export products. In the past, the industrial focus was on the manufacturing end, while the recycling end was relatively lagging. Today, the management measures for power battery recycling have been implemented first, the management measures for wind power and photovoltaic equipment recycling are being formulated, and the goal of a "full-chain closed-loop management system" by 2030 has been clearly set. It is foreseeable that in the coming years, the recycling track for the "new three" products will usher in a triple resonance of policy, capital, and industry.
Challenges are equally undeniable. Metal price fluctuations will affect the profitability stability of recycling enterprises; market norms for second-life utilization still need to be refined; overseas markets (the carbon footprint requirements of the EU's New Battery Regulation and the high recycling rate targets of the US market) are both opportunities and thresholds. But the direction is clear—when end-of-life batteries are no longer traded based purely on price but managed under full-process standard rules, the industrial narrative of NEVs officially enters the "second half": competing in performance and cost at the manufacturing end, and competing in systems and efficiency at the recycling end.
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