China’s EV Battery Recycling Subsidies Face Challenges: Informal Recyclers and Lithium Price Volatility Hinder Systematization

July 12, 2026

Dialogue Earth China

Overview

According to Dialogue Earth, China’s EV battery recycling efforts are hampered by government subsidy policy inefficiencies. With a large volume of EV batteries sold since 2018 nearing end-of-life, the prevalence of informal small-scale recyclers and fluctuating lithium prices impede the establishment of a systematic recycling infrastructure. Despite the ‘Trial Measures for EV Battery Recycling Management’ issued in late 2025, which clarify responsibility for EV and battery manufacturers, significant challenges persist in formalizing the process.

In Depth

Key Findings

According to an analysis by Dialogue Earth, despite government subsidy policies, China’s electric vehicle (EV) battery recycling landscape faces significant challenges in achieving systematization and efficient operation. The report specifically identifies the proliferation of informal, small-scale recycling operators and the volatility in lithium prices—a key recovered material—as primary obstacles hindering the healthy development of a comprehensive recycling system.

Technical Details

A substantial volume of EVs sold in China since 2018 is now approaching its end-of-life, making the management of spent lithium-ion batteries an urgent issue. While some of these batteries are repurposed for second-life applications, such as communication backup power, the majority are destined for dismantling and material recycling to recover critical minerals. The Chinese government introduced the ‘Trial Measures for EV Battery Recycling Management’ in late 2025, explicitly assigning responsibility for collection and recycling processes to EV and battery manufacturers. However, even with these regulations, small and informal recycling operators continue to thrive, impeding the establishment of high-efficiency recycling processes. These informal operations often fail to meet safety and environmental standards, leading to valuable resource loss and increased risks of environmental pollution.

Background & Context

China, being the world’s largest EV market and battery producer, recognizes that successful EV battery recycling is paramount for its resource security, environmental protection, and the realization of a circular economy. The government has attempted to establish formal recycling channels through subsidies and policy guidance, but market complexities and the fluctuating prices of commodities like lithium have complicated these efforts. A sharp decline in lithium prices, for instance, has squeezed the profitability of formal recyclers, placing them at a disadvantage against informal operators. This situation disincentivizes investment across the recycling industry, potentially leading to delays in developing necessary infrastructure.

Strategic Significance & Outlook

The Chinese government needs to implement stricter regulations and more effective incentives to systematize its EV battery recycling system. Eliminating informal recyclers and establishing a transparent collection and processing network are urgent priorities. Furthermore, policy support to mitigate lithium price volatility and innovation in battery recycling technologies (e.g., direct recycling) will be crucial. The healthy development of China’s EV battery recycling market is not merely a domestic issue; it has significant implications for the sustainability of the global battery supply chain. Therefore, its evolution will continue to be closely watched, demanding a comprehensive approach beyond just subsidies.

Source: https://dialogue.earth/en/business/why-subsidies-wont-work-for-ev-battery-recycling-in-china/

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