Economic Observer reporter Wang Yajie

On August 26th, at the themed press conference of the "Starting the 15th Five Year Plan" series organized by the State Council Information Office, Xin Guobin, Deputy Minister of the Ministry of Industry and Information Technology (MIIT), set a target for the recycling of power batteries: by 2030, the comprehensive utilization of waste power batteries should reach over one million tons, and a "power battery digital ID card" management system should be implemented to achieve "traceable source and traceable destination".

This is the second heavy blow thrown by regulatory authorities in the past month.

On July 30th, the Ministry of Industry and Information Technology issued Announcement No. 20 of 2026, abolishing the relevant provisions on "cascade utilization" in the "Industry Standard Conditions for Comprehensive Utilization of Waste Power Batteries in New Energy Vehicles (2024 Edition)", and 100 cascade utilization enterprises were removed from the compliance list.

Clearing the portal, issuing ID cards, and establishing a million ton market, regulators are using a combination of tactics to rectify this industry.

Chen Kai, the head of the power battery recycling business of a leading enterprise specializing in power battery recycling, revealed that several mainstream car companies he has been in contact with are re compiling the shortlist of recycling service providers. In the past month, the company has received double-digit growth in targeted recycling orders from car companies compared to the previous quarter, and the compliance capacity utilization rate of its six major national bases has increased by 8 to 12 percentage points compared to the second quarter.

But the accounts haven't been settled yet.

The China Automotive Strategy and Policy Research Center predicts that the retirement of power batteries will be approximately 43 gigawatt hours, equivalent to a weight of 280000 to 300000 tons, by 2026, and will increase to 171 gigawatt hours, equivalent to a weight of approximately 1.1 million tons, by 2030.

Who captures this market is the next question in this rectification battle.

Clearing the site and tracing back to the source, new regulatory strategies

The "clean-up" of the new policies mentioned above on July 30th is the starting point of this round of combination punches.

This clearance has clear boundaries.

What has been removed is the special announcement qualification for "hierarchical utilization", which does not involve the qualification for recycling.

Chen Kai said, "In the past, car companies would match both tiered and regenerative partners to complete the extended assessment of producer responsibility. Now, those 100 companies no longer have the policy level tiered compliance identity. The internal risk control systems of vehicle and battery factories are immediately tightened, and they no longer dare to outsource battery packs and modules to these entities

After clearing the site, it's time to trace the source.

The management system of "power battery digital ID card" set at the press conference of the State Council Information Office on August 26 requires "traceable source and traceable destination". Chen Kai understands that the essence of this change lies in the fact that the digital ID card essentially pushes the post reporting of the recycling industry towards mandatory traceability throughout the entire chain. For recycling enterprises, it will reconstruct the entire business logic of sorting, warehousing, ledger, and settlement.

Chen Kai gave an example that in the past, when his company obtained batteries and reverse filed them, many historical operating conditions and cycle data were missing. After the digital ID card is implemented, each battery cell is bound with a unique code from the factory, and every step of loading, maintenance, replacement, retirement, circulation, dismantling, and material regeneration must be traced on the national traceability platform.

At present, Chen Kai's company has deployed battery code recognition terminals in national bases, and the internal ERP (Enterprise Resource Planning) system can interface with the national traceability platform.

However, the stock of batteries remains a challenge for the industry. A large number of vehicles in transit manufactured before 2026 have not yet included their battery codes in the mandatory traceability platform of the unified country. Many batteries collected by society after repair or replacement may result in a mismatch between the package code and the cell code.

The regulatory logic goes beyond issuing certificates.

Zhao Xiaobing, a local government official in the Yangtze River Delta region, analyzed that the transition from abolishing hierarchical utilization announcements to introducing digital identity cards marks a significant shift in the regulatory logic of domestic power battery recycling. This means a shift from qualification access management to full lifecycle flow control, from screening which companies can be classified into hierarchical categories to controlling where each battery ultimately flows.

Zhao Xiaobing said, "In the past, regulators answered who was qualified to do this, but now they need to answer where this battery came from, who passed through it, and what material it turned into in the end

Who can withstand the million ton market

The retirement volume of power batteries is increasing, and the catching capacity of formal channels has not yet kept up.

Zhao Xiaobing analyzed that although the total dismantling capacity of the industry is considerable in name, the overall utilization rate of capacity is relatively low. The top compliant enterprises maintain a range of 30% to 50%, and the operating rate of a large number of small and medium-sized recycling enterprises is less than 30%. The root cause is that a large number of retired batteries have not entered formal channels.

Zhao Xiaobing said, "If traceability and law enforcement are in place, a large number of batteries that originally flowed into the gray market will be returned to the formal system, which will create a significant gap in effective production capacity

Who will take on the incremental cake?

Chen Kai believes that by 2030, the million ton market will eventually form a tripartite and mutually cooperative pattern.

Chen Kai stated that the first type is battery factory recycling platforms, represented by companies such as CATL's Bangpu Cycle. The advantage lies in deep binding with the battery production end and smooth material closed-loop; The weakness lies in the relatively weak social bulk cargo recycling network.

The second category is independent third-party professional recycling leaders. The advantage is the nationwide layout of the recycling network, with multiple car companies and battery factories cooperating simultaneously; The disadvantage is that recycled materials need to be sold externally, resulting in greater profit fluctuations.

Chen Kai further stated that the third category is self built recycling systems by car companies. Most car companies will not build large-scale smelting and dismantling factories. Instead, they will focus more on the front-end, establish recycling service outlets, be responsible for battery collection and traceability data management, and entrust the collected batteries to qualified professional enterprises for back-end dismantling and smelting.

Chen Kai said, "In the future, it is highly likely that car companies will be responsible for front-end collection and source digital ID coding, battery factory recycling companies will undertake their own closed-loop batteries, and third-party recycling leaders will undertake cross brand and social bulk retired batteries. The three types of entities are not zero sum games, but more about division of labor and cooperation

The pattern is highly influenced by the implementation of policies. If digital identity cards and joint law enforcement are implemented effectively, compliant enterprises will fully benefit; If discounts are implemented, the grey market will continue to divert sources of goods, and the expansion pace of top enterprises will also be suppressed.

Zhao Xiaobing added that the core competitiveness of third-party professional recycling enterprises in the future is to expand compliance dismantling capacity while firmly connecting multi-dimensional recycling channels for car companies, maintenance, and scrapped cars. But in his opinion, the bottleneck is not hardware.

Zhao Xiaobing said, "If we sort, the first bottleneck is the acquisition of channels and sources of goods, the second is the flexible dismantling technology of the production line, and finally is the construction of hardware production capacity

(Author Wang Yajie)