The tide of power battery retirement has given rise to a 100 billion industry, is it really hot?

Reporter Wang Xiaoxia

Trainee reporter Zhong Qiuyue

For the power battery recycling industry, 2024 may be a new node.

In 2023, the production and sales of new energy vehicles in mainland China accounted for more than 60% of the world's total, and the sales volume from January to February 2024 increased by 29.4% year-on-year, once again hitting a record high, which means that mainland has become the world's largest new energy vehicle market. The continuously expanding market demand has made the power battery recycling industry, which is in the downstream of the new energy vehicle industry chain, the focus.

According to the regulations of the Ministry of Industry and Information Technology, passenger car manufacturers have implemented an 8-year or 120,000-kilometer warranty for core components such as batteries and motors since 2016. Now that 8 years have passed, the mainland will usher in the first batch of power batteries "out of insurance" in 2024. Some people in the industry expect that in the next 8 years, the number of domestic power battery warranty expired will exceed nearly 20 million, and the scale of power battery retirement will usher in a period of rapid growth. This is undoubtedly a challenge when it comes to achieving the goal of peaking carbon emissions before 2030.

In the context of the growth of the new energy vehicle market and green and sustainable development, what is the current situation of the power battery recycling industry in China?

The scale has expanded, but the industry has weakened

According to data from consulting firm MarketsandMarkets, the global EV battery recycling industry continues to grow from US$4.6 billion in 2021 to US$22.8 billion in 2030. According to the forecast of the New Energy Battery Recycling Professional Committee, by 2027, the cumulative retirement of power batteries in mainland China will reach 1.14 million tons, and by 2030, the retirement of power batteries may increase to 3.5 million tons.

In the face of a market size of 100 billion yuan, the power battery recycling industry has begun to expand its capacity collectively, and related enterprises have been emerging in the past five years. According to the statistics of Qichacha, nearly 80% of the power battery recycling enterprises in mainland China were established around 2021. As of early April 2024, the total number of power battery recycling enterprises has reached 120,000, an increase of about 9 times compared with five years ago.

On the one hand, the market scale continues to expand, but on the other hand, practitioners reflect that from the end of 2023, the power battery recycling price has been declining and the market has weakened.

The reporter of China Economic Times contacted a number of small power battery recycling enterprises and businesses, taking a domestic new energy vehicle produced in 2017 as an example, for its 75Ah, 640V specification power battery, each merchant evaluated the price between 5000-8000 yuan. Some merchants said that the overall recycling price has dropped by at least 50%, and the orders they can receive this year are relatively small.

"Now there are too many retired power batteries, and the domestic demand is saturated. Coupled with the increasing competition in the market, the price of battery recycling will only get lower and lower in the future. Ms. Liu, the person in charge of a recycling company in Langfang, Hebei Province, told a reporter from the China Economic Times that the vast majority of power battery recycling companies could make money before, but after 2023, many companies that re-enter the industry are losing money, and the market is relatively weak.

At present, the power batteries commonly used in new energy vehicles are lithium iron phosphate batteries and ternary lithium batteries. According to the calculation of brokers, the profit margin of recycling lithium iron phosphate batteries and ternary lithium batteries is about 2.29% and 14.91%, and in the whole recycling process, the highest economic value lies in lithium carbonate, the raw material of battery cathode, so the price of lithium carbonate is closely related to the profits of the power battery recycling industry.

According to the price released by Shanghai Nonferrous Metals Network, the price of lithium carbonate has risen from 50,000 yuan per ton in 2020 to more than 500,000 yuan per ton in 2022. But at the beginning of 2023, the price of lithium carbonate began to fall, and as of March 2024, the price of lithium carbonate has fallen to about 110,000 yuan per tonne. At the same time, starting from the third quarter of 2023, the profits of lithium mining companies have also continued to decline.

Industry analysts believe that the current lithium carbonate price has been falling, and the overcapacity of power battery manufacturers may be the main reason, and the phenomenon may continue for a period of time.

The demand side of new energy vehicles is also facing the dilemma of insufficient consumption power. Since 2024, as major new energy vehicles have collectively cut prices, industry analysts predict that China's lithium carbonate prices may fall by another 30% relative to current levels in 2024. For enterprises in the power battery recycling industry, more fierce competition may come.

All parties make efforts to make the industry gradually show a competitive situation

According to the China Economic Times reporter, from the perspective of the type of power battery recycling enterprises, it can be roughly divided into the following four categories: the first category is BYD, BAIC, Geely, etc.-based automobile enterprises; the second category is Honeycomb Energy, Tianneng Group, Guoxuan Hi-Tech and other battery enterprises; the third category is GEM, Hengchuang Ruineng and other recycling enterprises; the fourth category is Ganfeng Lithium, Tianqi Lithium, Xiamen Tungsten and other raw material enterprises.

From the perspective of enterprise scale, according to the list of 1-5 batches of enterprises in the "Industry Standard Conditions for the Comprehensive Utilization of Waste Power Batteries for New Energy Vehicles" announced by the Ministry of Industry and Information Technology, there are only 156 enterprises in total. Among them, there are 96 enterprises in the direction of cascade utilization, 60 enterprises in the direction of recycling, and only 12 enterprises with dual qualifications of cascade utilization and recycling. It can be seen that under the huge volume of about 120,000 enterprises, the enterprises with recycling qualifications account for a minority, and most of the enterprises still exist in the form of "small workshops".

Zhao Xiaoyong, managing director of Saidmei, believes that large profits and low costs have led to the savage growth of "small workshops". "In order to save costs, the 'small workshops' with recycling technology often disassemble the batteries by hand, although there is a risk of explosion, but in the face of high profits, many people choose to take risks, so it is difficult for many formal enterprises to compete with this kind of small traders in terms of cost. He said.

The relevant person in charge of Ganfeng Lithium interviewed the China Economic Times

In an interview, he said that the current phenomenon of "small workshops" still exists, and these companies do not have protection measures in terms of safety, environment, supply chain traceability, etc., so they may have more advantages in terms of cost. "With the advent of the retirement tide, especially the retirement of some operating vehicles, in addition to the economic value, the environmental value of battery recycling must also be taken into account. ”

At present, the mixed "small workshops" have occupied nearly six or seven percent of the market share. Shi Peiying, general manager of Yixin Environmental Protection, said that at present, most of the retired lithium batteries in China are in the hands of "battery scalpers", or directly flow into the private "small workshop". According to data, by the end of 2023, more than sixty or seventy percent of retired batteries in the market will still be digested by "small workshops" without recycling qualifications.

An anonymous individual recycling merchant revealed in an interview with a reporter from the China Economic Times that a large number of retired batteries flowing into "small workshops" are basically from C-end customers such as online car-hailing, auto repair shops, and leasing companies, which are mainly used to recycle scrapped electric vehicles with a journey of 300,000-400,000 kilometers.

It is worth noting that the "small workshops" that lack relevant qualifications and supervision also have certain safety risks in recycling. The pollutants in the power battery, such as electrolyte, heavy metals, etc., are difficult to track the specific emission destination, and there are potential environmental pollution risks, and the resulting environmental pollution risks have also attracted the attention of relevant departments.

On February 9, 2024, the General Office of the State Council issued the "Opinions on Accelerating the Construction of a Waste Recycling System" (hereinafter referred to as the "Opinions"), in which the "Opinions" clearly stated in the "Opinions" that it is necessary to carry out workshop-style recycling of waste power batteries and joint special inspection actions.

With the gradual improvement of policies, under the dual pressure of market competition and increased supervision, some "small workshops" have begun to delist since the beginning of this year. According to the latest data from Qichacha, as of April, about 1,800 power battery recycling-related enterprises in mainland China have been cancelled and revoked this year, with an average of about 20 closed every day, an increase of about 97% compared with the same period in 2023.

Standardized development has become a trend, and the growth of the industry is highly certain

Since last year, the question of "who will recycle" has caused controversy in the industry. However, the successive introduction of relevant policies has further standardized the development of the power battery recycling industry.

In June 2023, the European Parliament officially passed the EU Batteries and Waste Batteries Act, which stipulates that only electric vehicle batteries and rechargeable industrial batteries with a carbon footprint declaration and label, as well as a digital battery passport, can enter the EU market. According to the "who produces, who is responsible" model, Chinese automakers will solve the problem of battery recycling on their own.

In December 2023, the Ministry of Industry and Information Technology (MIIT) issued the Administrative Measures for the Comprehensive Utilization of Power Batteries for New Energy Vehicles (Draft for Comments) (hereinafter referred to as the "Management Measures"), aiming to increase the management of the comprehensive utilization of power batteries for waste new energy vehicles.

The "Management Measures" also clarify and optimize the main body of responsibility for power battery recycling. Battery manufacturers are required to provide technical information on power battery dismantling to automobile manufacturers, and encourage battery manufacturers to give priority to the use of recycled raw materials and disclose the proportion of recycled raw materials used in power batteries. And from the previous "suggestion" to "legal" supervision, to further promote the high-quality development of the comprehensive utilization of power batteries.

Local governments' support for power battery recycling is also increasing. Sichuan, Guangdong, Anhui, Fujian and other places have introduced a series of support policies according to the actual local situation. For example, Fujian Province issued the "Several Measures to Support the Recycling of Waste Power Batteries for New Energy Vehicles in the Province", which will reward enterprises that have passed the industry standard conditions, and also give subsidies to enterprises with annual processing capacity of a certain scale.

Since the beginning of this year, relevant enterprises have laid out the construction of power battery recycling system to further respond to the call for standardized management.

Recycling companies are continuing to strengthen cooperation with automobile companies and battery companies, GEM has reached cooperation with several battery companies and automobile companies, including CATL, EVE Lithium Energy, VOYAH Automobile, Dongfeng Motor, Mercedes-Benz, etc., and the two sides will jointly establish a recycling network and recycling sites to ensure that power batteries can be easily recycled after retirement.

Battery companies are also continuously strengthening the traceability management of recycled power batteries and building a closed-loop industrial chain. Taking Tianneng Battery as an example, it uses the channel advantages of offline marketing channels and online recycling platforms all over the country to build a reverse recycling network and recycle it to the disposal point for recycling. Zhang Tianren, chairman of Tianneng Holding Group, said in an interview with a reporter from the China Economic Times that the construction of an ecological closed loop of "battery production-sales-recycling-cascade utilization-recycling" will effectively solve the "bottleneck" link in the field of retired large-scale power battery circulation.

Compared with recycling companies and battery companies, which have the advantages of natural recycling networks, automobile companies have a long way to go for the standardized management of power battery recycling. It is reported that Tesla's official website clearly states that users are not allowed to dispose of batteries at will, not only need to be repaired at designated locations, but also notify the official of the whereabouts of the batteries they purchased.

A reporter from the China Economic Times visited the 4S stores of major car companies and learned that Tesla, BYD, Xiaopeng and other well-known companies have their own recycling channels. Some salespeople also said that although companies can recycle vehicles of different brands, it is limited to the form of trade-in.

Some industry insiders said that in the long run, the window period of the power battery recycling industry will be longer, and the "cake" will be further expanded. Under the guidance of standardized development, the gradual elimination of "small workshop" enterprises and inferior production capacity will allow the industry to usher in a truly benign development.

As the power battery recycling industry gradually moves from disorderly to orderly, the sustainable development model with both environmental protection and economy will become a compulsory course for many power battery recycling companies in the next five years.