The Moment of Truth

The global shift towards electric mobility is undeniable. Forecasts indicate that the automotive and commercial vehicle industry will produce around 70 million passenger & commercial electric vehicles (EVs) by 2035.^{1; 2} The transformation involves not only the development of advanced battery technologies and the localization of value chains, but also the industrialization of gigafactories. The rapid expansion uncovers another significant challenge: the management of enormous volumes of spent batteries and production scrap. Therefore, the implementation of a circular economy for batteries will be a crucial component of a successful battery strategy.

By 2035, the cumulative return volume of spent batteries is expected to reach around 50 million tons globally, a significant increase from the current volume of around two million tons.³ Loaded into around 2 million shipping containers and placed end-to-end, the number of spent batteries would stretch half around the globe. This staggering volume raises a critical question: what should be done with all these returned batteries and scrap?

More than recycling

The immediate response to this question is often recycling. Indeed, when done correctly, battery recycling is an efficient way to recover valuable raw materials for reuse in battery production. Recycling batteries can cut CO₂ emissions by up to 30 percent versus mining, while reducing reliance on primary resources and supporting long-term geopolitical resilience through local closed-loop systems.⁴ For these reasons, battery recycling is favored by regulators, e.g. through the demand for recyclate content within the EU battery regulation.⁵ However, a closer look at battery technology development reveals a less discussed aspect of recycling: it can potentially destroy significant functional value of the battery. A typical battery recycling process involves several key phases. It starts with the collection of spent batteries from various sources. Then, the batteries undergo diagnostics and sorting to assess their condition and categorize them based on their state and type. After that, the batteries are broken down to produce so-called black mass, which contains valuable materials. Finally, valuable metals like lithium, cobalt, and nickel are extracted from the black mass. These steps are crucial for ensuring that the recycling process is both efficient and effective.

As battery technology continues to improve, their lifespan is expected to outlast a typical vehicle life in the budget and volume segment. Particularly the use of low-cost LFP (Lithium Iron Phosphate) batteries coupled with mild user profiles, could result in battery life exceeding 25 years, well suited for reuse after use in the first vehicle. On the contrary, in the high-performance segment where NMC batteries with potentially high silicon anodes will be the technology of choice, shorter battery life and frequent fast charging could cause the need for battery replacement – either with a new battery or a refurbished one.

To address this issue, a holistic approach to deal with used batteries is essential. Beyond recycling, there are three additional "Rs" in battery revival methods: repair, refurbish, and repurpose. 

1. Repair: This involves replacing damaged components of the battery, mainly control units, electronics & wiring, so it can continue to be used in the same vehicle.
2. Refurbish: This process prepares a used battery to continue serving in automotive applications, not necessarily in the same car. Refurbished batteries can be crucial in creating a sustainable & cost-efficient aftersales strategy and stabilizing the residual value of used electric cars.
3. Repurpose: Also known as second-life applications, this method is for batteries that no longer meet automotive requirements but are still suitable for other use cases, such as stationary storage systems or electric two- and three-wheelers. 

Untapped potential for newcomers

The battery aftermarket is evolving into a multi-billion-euro market, with an overall market size projected to reach around ca. €25 billion by 2035. Recycling of battery scrap and end-of-life batteries constitutes a significant portion of this market (ca. €15 billion by 2035).⁶ Entering the recycling sector can be challenging for newcomers due to strong competition from large chemical companies and start-ups with unique technologies.

Among the revival use cases, refurbishing and repurposing appear particularly attractive for new entrants. The current competition consists mainly of fragmented start-ups and small-scale activities by Original Equipment Manufacturers (OEMs). The operations in refurbishing and repurposing are primarily mechanical and electrical, aligning closely with the core competencies of traditional automotive players. Refurbish and repurpose collectively constitute a substantial value pool, estimated at around €9 billion by 2035. Of this, €4 billion is attributed to the refurbish segment, while the remaining €5 billion is allocated to the repurpose market. The competition in the refurbish segment is only moderate, primarily involving OEMs who dominate the spare parts business. The independent aftermarket for refurbishing is not yet well-established. Regulatory constraints, such as the battery passport & extended producer responsibilities in Europe and the battery code in China, must be considered for refurbishing operations. Repurpose, on the other hand, is largely driven by start-ups offering small-scale solutions. Industrialized solutions for repurposing are in development. Managing variances in state-of-health (SoH) and ageing behavior of used batteries as well as clear assignment of liability in case of damage are current value chain challenges. 

Repair constitutes only a small portion of the market, projected to account for ca. €1 billion by 2035.⁷ This segment is largely dominated by OEMs due to the long warranty period of batteries (8 to 10 years). For independent aftermarket players, the segment is primarily relevant after the warranty period, which means that only a small portion of the market is addressable (ca. 10%).⁸

The condition decides

Only a part of the batteries sold in electric vehicles actually return to the dealer network. The majority end up in the open market and scrapyards. Therefore, it is crucial to actively manage battery returns and secure access to valuable battery raw materials. For successful entry into the battery aftermarket, significant technical and operational challenges remain to be solved. They span from safeguarding battery access to techno-economic assessment of the returned batteries, to ramp-up regulatory compliant large-scale operations, to rapid market entry ahead of competition. Among these key challenges, determining the battery state-of-health as key input for the techno-economic assessment is considered most relevant for all value chain players. At the “Moment of Truth” – where diagnostic and sorting occur – the fate of each battery in the aftermarket is decided.

A standardized decision-making process is essential for guiding the techno-economic assessment of used batteries. Decisions must consider both the technical constitution and the economic viability of battery revival to ensure the optimal application. Technical feasibility of battery disassembly and reassembly in repair, refurbish and repurpose is influenced by multiple factors such as return incident (accident vs. technical failure vs. end-of-life), pack architecture (modular vs. highly integrated) and bonding technology (glued vs. screwed). On the other hand, economic viability of the revival methods depends on the cell chemistry and corresponding material value (NMC vs. LFP), the state-of-health (remaining cycle life) and the residual value of the vehicle. 

Precise state-of-health determination is challenging due to high variance in technologies, time-consuming and low-accuracy measurement methods, and lack of standardized testing protocols. However, accurate measurement of a battery's remaining capacity and performance is crucial for determining its suitability for reuse, refurbishment, or repurposing. Fortunately, some German start-ups such as Twaice, Volytica and Accure have recognized this challenge and are working together with established institutions such as the German technical inspection association TÜV Süd to improve battery diagnostics and testing technologies. Starting in 2027, the European battery passport will enhance SoH transparency by providing information on battery chemistry, specifications, performance, durability, and lifecycle records regarding battery usage and maintenance history.

Collaboration accelerates the battery cycle

All different market player archetypes pursue specific key interests and provide different core competencies which make them a valuable partner within an integrated battery aftermarket value chain. Automotive OEMs, for example, are focused on effective and cost-efficient take-back of high-voltage batteries (HVB), supply refurbished and new parts for aftersales at good prices, maintain vehicle residual value and meet recyclate obligations. By standardizing product platforms, optimizing design for disassembly and introducing new business models for battery take-back, OEMs critically influence battery aftermarket decision-making. 

Recyclers aim to ensure plant capacity utilization and achieve premium prices for recycled materials. They offer chemical expertise for the battery recycling process and could access large portions of spent batteries from accidents and end-of-life vehicles if the reverse logistics for batteries (hazardous waste) are properly managed. Suppliers, such as cell manufacturers, are seeking access to batteries suitable for remanufacturing and reuse, as well as secondary raw materials that meet OEM recyclate requirements. Providing deep know-how about battery technologies, diagnosis, disassembly, and reassembly, they play a major role in reintroducing returned batteries to further applications. Traditional component suppliers recognize the importance of the EV transformation and are committed to maintaining their value contribution. Therefore, they are adapting business models and leveraging their extensive distribution networks to effectively connect battery aftermarket players to achieve an integrated and collaborative supply chain. Bringing all key interests and core competencies together, forming strong partnerships early on with specialists who have core competencies in the required areas is essential for a successful market entry.