A $6.7B battery recycling market Is being rewired
Beijing moved from rules to enforcement, and a few companies win
On May 28, Li Lecheng, the minister who runs China’s Ministry of Industry and Information Technology (MIIT), chaired a meeting most of the industry will skim past.
A task force met for the second time and set the year’s priorities. The agenda reads like a routine update, but the timing gives it away.
One month earlier, on April 27, five departments launched a joint enforcement campaign against illegal battery recycling.
The May 28 meeting deepened a campaign that was already running. A year before, the same task force met for the first time and spent its energy on writing rules.
This time, the message was about enforcement.
The seven changes that matter
Six government departments issued the Interim Measures as Order No. 73 on the last day of 2025.
Since April 1, those measures have turned a decade of voluntary guidance into binding law, built around 7 practical changes:
Car-battery integrated scrapping: A scrapped electric vehicle has to be turned in with its battery, and a car that arrives without its pack counts as an incomplete vehicle. Battery-swap models fall under a separate framework, with specific rules still being developed.
A digital identity card for every pack: Each battery gets a unique, dynamic ID, built on a code printed on the cell, module, and pack. The ID links every stage of the battery's life into one record, from production through swapping, repair, and final recycling. Forging or destroying that code is itself an offense.
A national traceability platform: MIIT runs a system that tracks each pack across its life, and every company in the chain has to report movements to it on fixed deadlines.
Extended producer responsibility: Carmakers and battery makers must build recovery outlets matched to their sales, take back used packs, and carry the final recovery duty. They also have to design batteries that come apart.
A closed recovery channel: Used batteries can move only to licensed recyclers or to maker-run collection points, and selling them to anyone else can lead to a fine.
Closing unsafe second-life channels: The measures, together with parallel enforcement actions, shut down backdoor routes for salvaged cells, including unsafe repackaging into e-bikes. Any product made from used cells must meet the quality and safety standards of its target market.
Rules with fines attached: Companies that break the battery coding, tracking, or recovery rules can be fined up to 50,000 yuan ($7,000).
Selling batteries outside the approved channel can cost companies 10,000 to 30,000 yuan (roughly $1,400 to $4,200).
A recycler punished under the rules cannot apply for the MIIT whitelist for two years. If it is already on the list, it can be removed.
Together, the rules build a closed recovery system. Now China has to prove it can make companies follow it.
China’s two recycling systems
To see why China switched from drafting to policing, look at the two recycling economies the country has run side by side.
One is licensed. White-list recyclers hold permits, run pollution controls, report every pack into a national database, and carry the cost of all of it.
The other is informal: thousands of small collectors and backyard workshops that carry none of that cost.
The capacity numbers show it. China’s 156 approved recyclers hold nominal capacity above 4 million tonnes a year, yet run below 20% of it (Source: China Industry News).
The formal system exists, but the feedstock has not arrived yet.
That arrangement held while the volumes stayed small, and they will not stay small.
How the illegal market works
The gray market is bigger than most people think.
China has roughly 200,000 battery-recycling-related companies, depending on the database cut-off. The 156 whitelist companies represent less than 0.1% of that registered universe.
In one CCTV-reported case, a Wuhan whitelist recycler said around 80% of the scrapped NEVs it bought arrived without batteries.
A single pack resells for several thousand yuan, sometimes more than 10,000 (roughly $400 to $1,400). A workshop strips a pack for under 1,500 yuan (about $210) and pays no tax invoice. With none of the environmental cost on top, it bids 20% to 30% above the white-list price. A compliant plant spends more than 3,000 yuan a tonne (about $420) to do the same work inside pollution controls (Source: CCTV).
The highest bidder usually gets the battery, and the cost shows up elsewhere.
Investigators have found dismantling yards next to homes, with swollen and damaged cells piled in the open.
Some are repackaged as new e-bike batteries and sold anyway. The law now bans that channel. China recorded 21,000 electric-bike fires in 2023, according to Xinhua.
That is the channel the enforcement campaign is trying to shut down.
Why the missing batteries now matter
China recovered more than 400,000 tonnes of waste EV batteries in 2025, up 32.9% from the year before (Source: Xinhua).
According to industry estimates cited by 21st Century Business Herald, less than 25% of retired packs flow to whitelist recyclers. Around 75% is handled by small workshops and companies outside the formal list.
The number of retired batteries keeps rising. MIIT expects annual retired EV battery volume to exceed 1 million tonnes by 2030.
At today’s volumes, a 75% leakage rate is painful but manageable. At larger scale, it becomes a fire-safety problem and a raw-materials problem.
Why the rules now have penalties
For 7 years, the rules only encouraged compliance. Order No. 73 makes them binding and attaches penalties. Two provisions make enforcement possible.
The first is the integrated scrapping of the car and battery. A scrapped car without its pack is now incomplete, which closes the loophole the informal sector used. Before, a pack could leave a dismantling yard and reappear in a workshop with no paper trail.
The second is the digital identity card. Each pack now carries a code reported across every stage, from the factory through the vehicle, retirement, and the black mass it becomes. It records the battery’s chemistry and end-of-life history.
The logic is similar to the European Battery Passport.
A missing pack now leaves a visible hole in the regulator’s database.
Rules small workshops cannot meet
The measures came with a second, quieter tool.
Revised technical standards have raised the bar for whitelist qualification.
Qualifying recyclers must achieve recovery rates of at least 98% for nickel, cobalt, and manganese, with lithium recovery targets moving toward or exceeding 90% under updated guidance. Leading operators already surpass these levels.
It must also be based in a designated industrial park, hold certified quality systems, and spend part of its revenue on research.
A backyard operator fails before the paperwork starts. The new penalties make that gap enforceable, which earlier guidance did not.
The standard is already within reach for the biggest recyclers. For small workshops, it is a wall.
Who enforces what
Put those two provisions together, and the April 27 campaign has something real to enforce.
The notice, signed by five departments, splits enforcement by violation type.
MIIT checks traceability uploads and battery handoffs. The environment ministry goes after illegal dismantling and illegal discharge. Transport authorities watch battery movement and repair shops selling packs through the back door. The Ministry of Commerce targets scrap dismantlers issuing false recovery certificates. Market regulators hunt salvaged cells inside e-bikes and scooters.
The campaign has owners, targets, and a deadline. Enforcement runs through May, with exposed cases due by June 30. Three years ago, a crackdown would have had nothing to trace.
Now every missing pack maps to a record.
Where the batteries go now
The informal channel works only when enforcement is weak. Once inspections start, paying more for used batteries becomes dangerous. More packs then start moving toward licensed recyclers.
Large recyclers gain feedstock they could not secure before, at prices they could not match. Their black mass also gets cleaner because the input stream gets cleaner.
China’s recycling market was worth 48 billion yuan, about $6.7 billion, in 2024 and could pass 100 billion yuan, about $14 billion, by 2030, according to Xinhua. Formalization decides which operators capture that growth, and there are not many of them.
China uses a lot of LFP batteries (80% market share in the EV market). So its recycling market is not only about nickel and cobalt. Many retired packs will carry less value per tonne. That favors recyclers with steady feedstock and low processing costs.
CATL’s recycling arm, Brunp, has a recycling capacity of nearly 270,000 tonnes a year and reports nickel, cobalt, and manganese recovery rates of 99.6%, among the highest publicly reported in the industry.
GEM and Huayou are also among China's largest battery recycling and materials players.
As informal volume gets squeezed into the licensed channel, it lands with a small group of integrated companies that already control much of China’s secondary battery metal.
The same campaign that cleans the market pushes more volume toward those companies.
The companies that helped write the rules
The rulebook favors scale.
Brunp has helped shape many of China’s lithium-battery recycling technical standards. The recovery thresholds for whitelist entry sit close to what Brunp already achieves.
That matters.
A standard set near the leader’s capability is easy for the leader to pass. It is impossible for a workshop to meet. So when the sweep pushes informal volume into the licensed channel, it favors companies that already operate at the standards the new system requires.
Who wins
The campaign ends on June 30 with a list of exposed cases.
That list will show the intent. A few fines mean routine enforcement. Closed workshops and revoked licenses mean a market-clearing.
Either way, the surviving volume moves toward the companies built for the new rules. At that scale, China’s secondary lithium, nickel, and cobalt will move through a short list of integrated recyclers. Those companies also feed the cathode supply chain.
China spent years trying to stop battery metal from leaking into backyard workshops.
Now it is pushing more of that metal toward companies already tied to cell and cathode production.
That does not guarantee pricing power. But it changes the balance.
The companies that control compliant recovery will sit closer to China’s next stream of battery metals. As retired packs scale, recovered lithium, nickel, and cobalt become more valuable. Control over that flow becomes part of the supply chain.
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Thank you Christopher. I can just imagine what would happen if someone tried to propose this in the US. There would be all the complaints about how this is impractical and it's expensive and wasteful and generally unrealistic. I think we've been lied to in the West to believe that humans are incapable of organizing and doing what is best for the group.
Sounds like an improvement.
What about in the US?