[SMM Analysis] Before the Wave of Battery Retirement Arrives, Recycling Needs to Be Standardized

Since 2015, NEV sales in China have shown explosive growth, and the installed capacity of power batteries has risen accordingly. Given the average lifespan of power batteries is 5-8 years, a large-scale wave of battery retirements is expected. In October this year, the penetration rate of NEVs in the Chinese market reached 51.8%, surpassing 50% for four consecutive months. It is expected that sales this year will exceed 12 million units.

Currently, there are two main methods for reusing end-of-life batteries: cascade utilization and recycling. When a battery's capacity declines to 80%, it is no longer suitable for use as a power battery for vehicles. Batteries with a capacity between 50% and 80% undergo cascade utilization, meaning they are repurposed into products such as emergency power supplies and energy storage devices, continuing their service life. If the capacity falls below 40%, the batteries are dismantled and crushed to extract elements for upstream battery producers, achieving resource utilization.

From the perspective of channels, the main sources of power battery recycling include old cars from 4S shops, scrap cars from repair shops, accident cars from insurance companies, old cars from automakers, experimental batteries from vehicle manufacturers, and batteries awaiting processing from electronics factories. The diversity of these sources naturally poses challenges for one-stop recycling processes. One of the biggest difficulties in cascade utilization of end-of-life batteries is ensuring "consistency." With a wide variety of brands and models, standardizing them into uniform products is very challenging.

To address the industry-wide issue of poor battery consistency, the state has made forward-looking plans. In August this year, the Ministry of Industry and Information Technology released the "Comprehensive Utilisation Industry Standard Conditions for NEV End-of-Life Power Batteries (2024 Draft for Comments)," requiring automakers and battery producers to consider environmental protection and recycling requirements during product development, including cascade utilization and recycling stages. To promote the standardized development of the industry, the "Comprehensive Utilisation Industry Standard Conditions for NEV End-of-Life Power Batteries (2024 Draft for Comments)" released this year not only sets higher requirements for site selection, traceability management, and energy-saving assessments but also strengthens supervision and inspection, clarifies producer responsibilities in the triangular area, and promotes the industry's steady progress towards standardization.