DRIVE I/O | China has 6 million aging EV batteries. Can it recycle them?

A dozen years after it set out to build an industry from scratch, China boasts the world’s largest number of electric vehicles. More than 6 million clean-energy cars and trucks are running on Chinese roads. 

That’s 6 million electric vehicle (EV) batteries that are going to wear out one day. The oldest electric cars are starting to retire their batteries: More than 200,000 tons of them went offline in 2020, Xinhua (in Chinese) reported in April, citing figures from the China Automotive Technology and Research Center. From 2021 to 2030, the auto industry will shed 7.05 million more tons of EV batteries—about 168 times the weight of Beijing’s Bird’s Nest Stadium, Greenpeace wrote in an October report. 

It’s either a huge mountain of toxic waste, or a gold mine of rare metals. It all depends on battery recycling.

There are no public records of how much of the 200,000-plus tons of the EV batteries retired last year got recycled, but it is widely agreed that the current recycling rate is very low. China first authorized EV battery recycling in 2018, but the first batch of licensed recyclers have found it a tough business. With high costs, limited demand, and competition from cheaper pirate recyclers, it will take more carrots and sticks for the industry to take off. The key, experts told TechNode, is likely to be stronger enforcement of rules that make carmakers responsible for disposing of end of life batteries.

Second lives for old EV batteries?

If you’ve owned a device with a rechargeable battery, you already know: They wear out. The longer you use a battery, the less charge it holds. 

EV batteries are good for eight to 10 years. By the end, they’ll store only 70% to 80% of the charge they held when new. That’s when they reach the end of their useful life in a car.

The battery pack is the most single most expensive component of an EV, accounting for about 30% of the total cost to consumers. It pushes up the cost of an 80.5 kWh battery pack in Tesla’s Model Y crossover to about $9,250, BloombergNEF estimated in a December report. The components may be still useful after batteries reach the end of their first life: A customer recently sold the used battery pack of his EV to an unnamed “highest bidder” and earned more than RMB 10,000 ($1,544), according to a Xinhua News Agency report (in Chinese) in April.

The first five companies got on the white list in July 2018. That was it until December 2020, when the Ministry of Industry and Information Technology (MIIT) certified 22 more companies to recycle EV batteries. While forging alliances with automakers, these little-known companies vary greatly in backgrounds. They are subsidiaries of big battery makers or associates of cell material suppliers, or simply units of traditional scrap recyclers.

A few of these larger players already claim to be profitable. A Shenzhen-based company called GEM is a leader in the industry, with a 10% share of the market and a client list of more than 280 domestic and foreign automakers. The company, which is also the country’s largest battery materials producer, said in its 2020 annual report (in Chinese) that the amount of batteries it recycled more than doubled from 2019, its first year to turn a profit from the practice. It didn’t disclose any numbers, however. 

Other recycling companies are still investing heavily to scale up the business. For example, Hefei-based Gotion High-tech, along with the government of the city’s Feidong district, on March 22 announced they would invest RMB 12 billion ($1.85 billion) to build a new facility for the manufacturing and recycling of raw battery materials in the capital of eastern Anhui province. The move came just two weeks after Gotion established a recycling subsidiary with a registered capital of RMB 50 million. The Volkswagen battery supplier aims to ensure annual production of 100 gigawatt hours (GWh) of batteries by 2025, with raw material sourced from used packs.

Yet many of the other white-listed recycling firms are struggling to break even, according to Yang Xulai, a professor at Hefei University and a former research lead at Gotion High-tech. One reason: Not enough spent batteries are being funnelled to proper recyclers, since owners of EV vehicles are not required to turn them over to an MIIT-licensed company. 

As a result, over half of spent batteries are probably being recycled by unsustainable, polluting practices, Bao Wei, a general manager at Zhejiang Huayou Holding Group, a recycling partner of BMW in China, told business news site Caixin (in Chinese) in January.  

Where did the batteries go? The easiest and most profitable destination is the illegal one: Unscrupulous companies, usually traditional auto scrap yards, strip the electrolyte packs of valuable raw materials like cobalt and nickel, and dump the hazardous leftovers in a nearby landfill or waterway. That’s in violation of environmental regulations but enforcement is lax.  

The licensed players thus find themselves competing against lower-cost rivals which can pay higher prices to EV owners for their waste batteries, as they are normally not subject to environmental regulations and have been disposing toxic battery wastes to landfill without proper treatment.

“This leads to a low collection volume of waste batteries for qualified recyclers, and this problem gets further exacerbated by poor consumer awareness of the importance of waste battery treatment,” Chinese and Australian researchers wrote in a paper published in May.

The three types of EV batteries 

Whether their processes are dirty or clean, recyclers consider the materials in nickel-manganese-cobalt (NMC) batteries and nickel-cobalt-aluminum (NCA) batteries the most valuable. These two types of batteries are known for enabling a long driving range with a high-energy density. However, the two current mainstream recycling techniques, which recover materials through burning or the use of strong acids, produce extensive chemical waste and greenhouse gases—and at very high expense, experts told Caixin in a January report (in Chinese).

When it comes to the third type of battery, Lithium Iron Phosphate (LFP), which offers a shorter driving range but boasts better thermal stability, the outlook is less promising. The key components are too cheap for recycling to be economical. Dismantling one ton of spent LFP batteries for key materials only generates revenue of about RMB 9,300 ($1,440), which is far from covering the cost of recycling, investment advisory firm Guangzheng Hang Seng said in a report in mid-2018.

The potential profit that can be extracted from an expired NMC or NCA battery fluctuates with the fluctuating prices of cobalt and nickel. At the metals’ current prices, the 60-kilowatt NMC811 battery used in a Tesla Model 3 might yield revenue of RMB 6,254.

Nonetheless, the recycling business could take off soon, spurred by the anticipation of a shortfall in cobalt, nickel, and batteries’ other raw materials in the coming few years. Demand for cobalt used in EV batteries will reach 980,000 tons over the decade to 2030 in China, around seven times the global output of the raw material in 2019, in Greenpeace’s estimation.

Read more: Drive I/O | How Chinese EV batteries broke through

Storage and solar power

There may be alternatives to stripping spent EV batteries for their components. Perhaps they can be converted into lower-quality batteries or used for something other than powering machines. 

MIIT in a draft guideline (in Chinese) issued in October 2020 called for recyclers, EV makers, and battery suppliers to cooperate to produce new uses for spent EV batteries. In particular, the guideline  encourages companies to repurpose old batteries for backup power systems for utility-scale projects or telecommunication base stations. One such model is BMW’s reuse of EV batteries to power the forklifts in its local factory in northern Shenyang city. Such a forward-looking policy could help “enhance overall electric grid efficiency and reliability,” wrote the regulator.

Other companies such as State Grid, the country’s largest public utility, are hoping to repurpose EV batteries for energy storage. Old packs can be reassembled into a battery energy storage system that can store solar energy power for use during periods of scarcity and provide greater flexibility for grid demand spikes.

Economic deterrent

However, this storage industry is also having trouble squeezing out profits in the face of technical and commercial challenges. Second-life batteries need to be standardized in performance and safety standards, such as charge capacity, recharge time, and longevity. But the hard reality is: Batteries from different manufacturers vary greatly in design and construction, since they are custom-designed to work with a given car model, consulting firm McKinsey wrote in a 2019 report.

Recyclers need to take battery cells apart for standardization, refurbishing, and reassembly before they can be used in energy storage. Yet the performance limits and health status of these batteries vary greatly and are often not disclosed to recyclers by battery manufacturers and carmakers, according to Bao of Zhejiang Huayou Holding.

Then there are safety concerns, which have led to large energy storage plants recently being banned from using spent EV batteries. Nonetheless, Beijing is still pushing for more trials, including battery storage programs for small-scale commercial and industrial facilities such as 5G base stations.

All these practical challenges combine to form an economic deterrent: It is simply cheaper for energy  companies to start with all-new batteries than to use retired packs, according to Zhao Guangjin, an expert with State Grid.

Whether the next stage is energy storage or recycling of materials, the transportation of spent batteries is another steep expense because both the transport vehicles and warehouses need to be customized with safety measures. 

Regulatory and business outlook

A national market foundation has been set, but the government will need to provide a mixture of carrots and sticks to help the market gain scale, Zheng Mingyang, Toxics Campaigner at Greenpeace, said in an interview with TechNode on July 14. For instance, South Korea has made it mandatory for car owners to return EV batteries to designated drop-off sites. “Such mandatory enforcement measures to end users is worth consulting,” Greenpeace wrote in its October 2020 report (our translation). 

Greenpeace has proposed incentive and punitive measures to ensure players such as automakers, battery makers, and recycling companies bear their responsibilities and develop new applications for used batteries. For instance, the government should levy higher taxes on battery makers that use original raw materials, while rewarding battery makers that use recycled materials.

Loss-making companies also need an incentive to look for the value that second-life batteries promise. Zhang Tianren, chairman of recycling company Tianneng Group and a delegate to the National People’s Congress, the Chinese parliament, in March called for stimulus policies such as subsidies and tax cuts for certified recycling companies, most of which are struggling to eke out profits. 

The vice chairman of China’s biggest battery supplier, CATL, publicly dismissed the idea as “a fake proposal” in late 2018. Huang Shilin said that the company was developing new battery types made for energy storage. In 2020, the Tesla partner sold 2.39 GWh of batteries for energy storage systems, according to its annual report. 

The Chinese government has established a policy framework that places responsibility for battery recycling on EV makers, experts warn that it’s not clear how it plans to regulate the sector. Beijing has not specified a clear target for the overall collection of waste batteries, nor a clear definition of the scope of authority among multiple central and local government agencies taking a shared responsibility, according to a paper by Chinese scientists published in May in the Journal of Environmental Engineering and Landscape Management. 

One murky legal area concerns automakers’ responsibilities. According to regulations issued in 2018, the makers are required to make their dealers buy back spent batteries from auto customers. Direct-sale companies like Tesla, Nio, and Xpeng are responsible for taking back the old batteries themselves. Unfortunately, dealers have little motivation to do so.They still face no penalties for failing to take back batteries. They are more motivated to sell cars than to take back batteries, Caixin (in Chinese) reported in January, 2019 citing Zhang Guofang, a professor at Wuhan University of Technology. 

Local governments with significant auto industries may offer a way forward. In a draft action plan (in Chinese) issued by the Guangzhou Municipal Development and Reform Commission on June 22, both domestic and foreign automakers would be required to report the establishment of recycling stations for EV batteries in the city. Meanwhile, Shanghai authorities plan to create a recycling network across the city and an online tracking system to manage the fabrication, sale, and recycling of EV batteries by the end of this year, Chinese media The Paper reported. 

For now, the major obstacle to clean reuse remains profitability. Being on the cutting edge of market creation, each stakeholder needs a little more incentive to be part of a sustainable recycling process. 

 “If there is money to be made, more companies and investments will be attracted,” (our translation) Huang Shan, an industry insider told China National Radio.