Second-hand car batteries were robbed by the "black market".

The "price war" of new energy vehicles has escalated again, but the second-hand car market has been caught off guard.

Just after the Spring Festival, BYD fired the first shot of the new car price war, and its two hybrid models were launched, and the lowest price plunged to 79,800 yuan. On April 1, the starting price of the entry-level model of the new M7 was lowered by 20,000 yuan to 229,800 yuan.

New energy vehicle companies "flip the table", but the first to be overturned is the second-hand car dealers. The price of new cars is even lower than that of used cars on sale, and there is a price inversion. Second-hand car dealers "lose money when they collect the car", and the market price of some old cars with large kilometers or collisions is cut in half. Under the new market, second-hand car dealers no longer dare to accept new energy vehicles, and even began to advise new energy vehicle owners, "There is no big problem to continue driving first".

Zhang Hong, secretary general of the new energy branch of the China Automobile Dealers Association, once said in the media that the "battery residual value assessment problem" is one of the main reasons. Due to the current lack of objective and impartial battery testing methods, buyers and sellers often disagree over battery issues, and the valuation of batteries usually accounts for half of the value of the vehicle, which also makes it difficult to price electric used cars.

On March 13, the State Council issued the "Action Plan for Promoting Large-scale Equipment Renewal and Consumer Goods Trade-in" to promote the trade-in of automobiles. According to the research report of Caitong Securities, in 2023, there will be about 110 million passenger car models in China in the peak period of core replacement (that is, 4~9 years). Experts predict that 40% of the increase in consumption in the passenger car market this year will come from trade-in.

However, the price war of new cars and the recycling and pricing problems of power batteries may lead to "obstruction" in the replacement of new energy second-hand vehicles. Consumers can't sell their old cars, which in turn affects their willingness and budget to replace new cars. There is a complex ultra-long chain between the collection and replacement of new energy vehicles, and the more urgent problem affecting the operation of this chain is how to deal with waste power batteries?

Is the tide of battery retirement really coming?

On the day of the business trip to Guangzhou to investigate the site selection of the branch, Zhao Xiaoyong flew back to the Tianjin factory overnight to prepare to receive a government delegation from a city in Shandong the next day. Since the beginning of this year, both new and old players in the recycling market have begun to actively expand their business.

Zhao Xiaoyong's Saidmei New Energy Technology Co., Ltd. is the second batch of whitelist enterprises for power battery recycling announced by the Ministry of Industry and Information Technology.

"The recycling and reuse of lithium batteries is an environmental protection need, and it is also the last track of the new energy industry. With more than 20 years of experience in the field of new energy, Zhao Xiaoyong sees the potential of "battery recycling". As the last mile of the green closed-loop of the new energy industry chain, power batteries not only have a large number of "cascade utilization" scenario needs, but also the recycling of rare and precious metal resources in batteries will also bring huge benefits.

Under normal circumstances, when the life of the power lithium battery is attenuated to less than 80%, the electrochemical performance of the battery will decline significantly, which is difficult to meet the normal power demand of the car, and the battery enters the retirement state.

Since the 2009 "Ten Cities and 1,000 Vehicles" project, China's new energy vehicles have been promoted for 15 years. With the promotion and demonstration application in Beijing, Shanghai and other places in 2013 as a watershed, new energy vehicles began to enter the era of private consumption. The power batteries of new energy vehicles promoted in the early days will be scrapped after 3 years of operation for commercial vehicles and 5 years of operation for passenger cars.

"The batch retirement of the first batch of new energy vehicles in China has laid the foundation for the large-scale development of power battery recycling after 2014. Zhao Xiaoyong recalled that at the beginning of the business in 2016, battery recycling began to be mentioned in the policy, but only as part of the policy document to promote the application of new energy vehicles. For car companies, having a formal recycling process meant easier access to subsidies, but at the time, the industry was not paying enough attention to used batteries.

In 2018, the sales volume of new energy passenger vehicles in China exceeded one million, the volume of waste power batteries grew rapidly, the introduction of policies for power battery recycling was significantly accelerated, various measures were intensively released, and pilot projects increased.

The recycling of waste power batteries and critical metal resources is also seen as a way out of "expensive electricity". Power batteries account for more than 40% of the cost of the whole vehicle, and the car factory once laughed at itself as working for the battery manufacturer, due to the high price of raw materials, the battery manufacturer is also complaining, "just struggling on the edge of small profits". In 2022, the benchmark price of battery-grade lithium carbonate will rise to a peak of 604,000 yuan/ton, and the recycling price of lithium batteries will rise, and enterprises from all walks of life will pour into the recycling track.

According to data from the China Business Industry Research Institute, there were only nearly 2,000 registered battery recycling-related enterprises in 2018, and by 2022, it has exceeded 42,000, an increase of more than 20 times. In addition to third-party recycling companies and battery manufacturers, downstream car companies, upstream battery material companies and lithium mining companies have also joined in.

"In order to meet the large-scale scrapping cycle of batteries, enterprises should prepare for building factories 2~3 years in advance. Liu Gangfeng, technical director of Beijing Bocui Recycling Technology Co., Ltd., told China News Weekly. Huaan Securities predicts that the number of retired batteries will reach 437GWh in 2030, and the recycling market value will reach 169.5 billion yuan. Some brokerages and consulting institutions are more optimistic, believing that the industry's scale of exceeding 100 billion yuan is expected to be achieved ahead of schedule in 2025.

Earlier came the peak of car trade-ins. In the past decade, domestic new energy vehicles have developed rapidly, with sales jumping from 75,000 units in 2014 to 9.495 million units in 2023. According to the Ministry of Public Security, by the end of 2023, the number of new energy vehicles in China will reach 20.41 million, and 7.43 million new registrations will be registered throughout the year.

Lang Xuehong, deputy secretary-general of the China Automobile Dealers Association, said that at present, the general replacement cycle of traditional fuel vehicles is 6~8 years, and the new energy replacement cycle is 3~5 years, and it is predicted that 40% of the increase in consumption in the passenger car market this year will come from the old to the new. Based on last year's passenger car sales of 26 million, about 10 million passenger cars will come from trade-ins this year.

The release of the new round of "trade-in" action plan comes at an opportune time. The Action Plan for Promoting Large-scale Equipment Renewal and Trade-in of Consumer Goods (hereinafter referred to as the "Action Plan") requires the trade-in of automobiles, increasing policy support, smoothing circulation blockages, and promoting automobile cascade consumption and renewal consumption.

The details of the car trade-in policy have not yet been released, but at least 20 car brands have launched promotional activities in advance, and Chongqing, Shanghai and other places have also recently introduced car "trade-in" policies. For the replacement of new energy vehicles, the Shanghai Municipal Department of Commerce proposed that the government will provide a one-time subsidy of 10,000 yuan for the purchase of pure electric vehicles after scrapping or transfer, which will be valid until the end of 2024.

The Action Plan clearly calls for a 45% increase in the number of scrapped cars recycled by 2027 compared to 2023, and a 45% increase in second-hand car transactions compared to 2023. According to Cui Dongshu, secretary general of the passenger association, the net increase in the number of scrapped vehicles in 2023 will be 7.56 million, and the trend of accelerating scrapping in the future will be significant. The industry expects that in the coming period, new energy vehicles will become the largest contributor to the development of the passenger car market.

"Large-scale trade-in, including automobiles, home appliances, and various types of equipment, will leverage the explosive growth of the battery recycling market. Sun Donggang, general manager of the business management center of Beijing Metal Recycling Co., Ltd., told China News Weekly. Since 2018, the industry has almost every year "will usher in the tide of power battery retirement" prediction voice, now really standing on the eve of the outbreak of the industry, he has another concern, "will the power battery recycling market has been the chaos will also intensify?"

The regular army can't do small workshops

"For power battery recycling companies, getting the supply is the first step, and it is also a difficult step. Xia Yonggao, chairman of Ningbo Weifu Technology Co., Ltd., said frankly, "In many cases, formal recycling companies can't grab small workshops." ”

Gao Weiqiao, deputy general manager of Zhejiang Huayou Recycling Technology Co., Ltd., one of the first batch of battery recycling whitelist companies in China, once shared an experience with the media that when he went to a battery factory to recycle batteries, the number of non-whitelisted companies invited to participate in the auction was doubled, and the quotations of these small workshops were usually about 15% higher than those of whitelisted companies, and the premium has exceeded the regular profit margin of the company.

"Most of the small battery recycling workshops are still a crowbar and a machete. Sun Donggang introduced that these self-employed people dismantle batteries on the spot in their own courtyards, without invoicing, basically without environmental protection, production equipment and other inputs, almost zero cost operation, bargaining power is naturally relatively higher. On the other hand, domestic enterprises most often use centralized auctions when dealing with waste power batteries, and in the past one or two years, larger enterprises have begun to strictly review the qualifications of recycling enterprises, but many small auctions still follow the "highest price wins", "whoever pays more, the battery will be given to whom".

The Society of Automotive Engineers of China predicts that by 2030, the retirement of domestic power batteries will reach 3.5 million tons. However, a "survey research report" released by the Development Research Center of the State Council shows that as of 2023, the standardized recycling rate of power batteries for new energy vehicles in China is less than 25%. Some whitelisted companies shouted, "More than seventy percent of waste batteries have fallen into the hands of second-hand traders and small workshops."

Recycling is lower than expected, which means that it is difficult for companies to make a profit. In order to avoid being constrained by traders, Zhao Xiaoyong has been building his own recycling channels since the beginning of his business, and has maintained a relatively stable growth in the volume of receipts by cooperating with five major channel entities, including new energy vehicle companies, battery manufacturers, scrapped vehicle dismantling plants, operating enterprises and energy storage companies. "By this year, we are only expected to recycle 10,000 tonnes, and that's just the bottom line for the plant to achieve economies of scale. Zhao Xiaoyong said.

In order to standardize the development of the industry, in 2018, the Ministry of Industry and Information Technology released the first batch of enterprises that meet the "Industry Standard Conditions for the Comprehensive Utilization of Waste Power Batteries for New Energy Vehicles" (referred to as the "white list"). Up to now, five batches of enterprise whitelists have been released, with a total of 156 companies, which are regarded as the "regular army" of battery recycling.

"If a company wants to be shortlisted, it must meet more than 50 evaluation conditions, which is cumbersome and requires a lot of investment. A white-listed company bluntly said that the factory has strict requirements in terms of project site selection, equipment technology, environmental protection, product quality, etc., and must obtain a number of certificates and project approval documents such as pollutant discharge permits and cleaner production licenses. However, in the real competition, the "white list" does not have mandatory exclusivity, and informal enterprises still take advantage of loopholes, and regulated enterprises are limited by costs, but are at a disadvantage in the process of competing for sources.

The goods are not smooth, and the quality of the battery is "full of uncertainty". "It's like betting on a stone, it's a matter of luck. Xia Yonggao reluctantly explained that it is difficult for third-party companies to get effective data from car companies or battery companies, and the reference significance of information such as service life is not great, and it is impossible to accurately evaluate the battery life in the "bidding harvest" link.

The dispute over supply has not yet been resolved, and the difficulty of dismantling and disposing of batteries is constantly improving, and the recycling industry laughs at itself that "it is more difficult to dismantle a battery than to build a battery". At the forum of China Electric Vehicle 100 2024, Bao Wei, general manager of Zhejiang Huayou Recycling Technology, publicly said that the battery integrated chassis is very unfriendly to battery recycling and dismantling, "everyone makes the battery extremely strong", and it is becoming more and more difficult for recycling companies to dismantle battery packs.

"The health of the battery is like a black box, how to use a battery?" Wang Zhenpo, deputy director and secretary general of the new energy battery recycling professional committee, concluded at an industry conference that the asymmetry of upstream and downstream information in the lithium battery industry chain has led to a series of problems.

Guohai Securities' report on the research of lithium battery recycling industry pointed out that the maintenance and traceability of power battery "ID card" has not been smooth, the recycling policy has not been perfected, and the qualification requirements of formal enterprises for recycling batteries are high, resulting in the number of small workshops in the industry far more than the regular army.

"Most of the scrapped batteries flow to small workshops and the echelon utilization market in the regulatory blind spot, and it is basically difficult for formal recycling companies to receive scrapped batteries, and a large number of high-quality recycling capacity is idle. During the two sessions of the National People's Congress in 2023, Zeng Yuqun, a member of the National Committee of the Chinese People's Political Consultative Conference and chairman of CATL New Energy Technology Co., Ltd., told the media.

In order to survive, some whitelisted companies choose to "turn enemies into friends" with small workshops. The person in charge of a power battery recycling company in Zhejiang told China News Weekly that individual white-listed companies bundled bids with scalpers with channel advantages, or used whitelist qualifications to trade retired batteries, and sold batteries without carrying out recycling work, resulting in batteries flowing into informal recycling channels, which virtually pushed up the cost of recycling batteries by formal enterprises.

Not long ago, the Ministry of Industry and Information Technology sent a notice to all provinces (autonomous regions and municipalities) to clarify the conditions for suspending the acceptance of new energy vehicle power battery comprehensive utilization enterprises. "It's good to stop. Zhao Xiaoyong calculated that in 2023, the comprehensive utilization of waste power batteries for new energy vehicles in China will be 225,000 tons, and if it is evenly distributed to all 156 white-listed enterprises, each recycling volume is less than 1,500 tons, and the fierce industrial competition can be imagined. Not only are the regular army competing with small retail investors for the market, but there is also a fight between whitelisted companies, "This track is too crowded." ”

The producer's recycling dilemma

Zhao Xiaoyong is also looking for answers.

"The length of the contract period varies from channel to channel, and the amount of recycling involved in the order varies greatly, making it difficult to calculate the specific number of the proportion of recycling that a certain channel occupies. Zhao Xiaoyong said that among the five major recycling channels he built, the power batteries obtained from scrapped motor vehicle recycling and dismantling enterprises accounted for the highest proportion.

As the upstream of battery recycling enterprises, "automobile scrapping and dismantling plants provide about 60% of retired power batteries". Sun Donggang said that the after-sales of new energy vehicles to enter the market again, will be diverted to the second-hand market and scrapped in two directions, and the end of the second-hand car circulation is also scrapped, the formal dismantling plant with a license to handle the scrapping business is the only way for the car to the end of life.

Sun Donggang introduced that scrapped and dismantling enterprises are managed by the Ministry of Commerce and the Ministry of Public Security at the same time. To put it simply, the scrapping and dismantling plant first uploads the relevant information of the vehicle to the Ministry of Commerce, and after getting the recycling certificate, it goes to the vehicle management office to compare the uniqueness of the vehicle, and then disassembles it in accordance with the dismantling process and standards, and uploads the dismantling video, photos and other documents to the website of the Ministry of Public Security, and gets the official cancellation certificate and cancellation decision, and the car cancellation work is completed.

Sun Donggang stood in front of the office window, pointing to the light poles that can be seen everywhere in the parking lot, and there are three or four monitors fixed on the top of each light pole, all of which are remotely monitored by the public security system, and all the scrapping and dismantling processes will be completely recorded. The scrapping of traditional fuel vehicles is strictly defined, and the five major assemblies of engine assembly, steering machine assembly, transmission assembly, front and rear axles, and frame are indispensable. However, at present, the scrapping standards for new energy vehicles have not been clearly implemented, that is, the new energy vehicles that have been scrapped before do not necessarily have batteries.

"Taking my family as an example, for every 1,000 scrapped new energy vehicles recycled, only about 10 batteries can be received. Sun Donggang said that the battery property rights of new energy vehicles belong to consumers, and they are regulated by the market, and the batteries are often dismantled and sold separately in advance before the vehicle is scrapped. However, the main engine factory that is responsible for battery recycling has no property rights, and it is difficult to control the flow of batteries.

A senior practitioner who has worked in automobile dismantling and scrapping enterprises for ten years told China News Weekly that in the early years, the scrapping of new energy vehicles was relatively single, mainly the main body of enterprises operating vehicles. The car has been driven for a certain number of years, and the overall replacement has a large amount of scrap at a time, "but I have also encountered a situation where I can't receive a single battery." With the sudden increase in the purchase of private cars, the sources of scrap are gradually diversifying, and enterprises may recycle personal vehicles through outlets, and may also receive scrapped cars from various channels such as car companies, repair shops, and scalpers. "It's harder to grasp where the battery is going, but there's nothing you can do about it. ”

In December last year, the Ministry of Industry and Information Technology 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"), which made it clear in the scrapping and handover requirements that if the power battery of scrapped new energy vehicles is missing, it should be recognized as the lack of vehicles, and scrapped motor vehicle recycling and dismantling enterprises shall not issue the "Scrapped Motor Vehicle Recycling Certificate". In addition, scrapped motor vehicle recycling and dismantling enterprises are also required to upload storage information to the national platform.

"The loss of retired power batteries is more likely to occur in circulation, and automobile manufacturers are the key starting point. The above-mentioned senior practitioners in the automobile recycling and dismantling industry said that car companies can not only grasp more data on battery traceability, but also directly reach consumers through sales outlets. If a large number of repaired and replaced old batteries are returned to regular 4S stores, they can often be packaged and sent to battery factories that have signed "back-to-back contracts", but if they are sporadically accumulated in the hands of maintenance points, small workshops, and second-hand car dealers, it is difficult to track the whereabouts of the batteries after several changes.

The "Management Measures" put forward corresponding responsibilities for different entities in the recycling process, requiring automobile manufacturers to bear the main responsibility for the recycling of installed power batteries, battery manufacturers to bear the responsibility for the recycling of power batteries sold directly to the market, and echelon utilization enterprises to bear the responsibility for the recycling of the echelon utilization products produced.

Among them, the principle of "who produces and who recycles" has been clarified for the first time. In the sales stage, the "Administrative Measures" require automobile manufacturers to record the traceability information of new energy vehicles and owners, clarify the requirements and procedures for the maintenance, decommissioning and recycling of power batteries, and timely inform the owners of new energy vehicles of the requirements and procedures for recycling and disposal when the power batteries meet the retirement conditions specified by the enterprises. In addition, car companies are also required to set up or entrust the establishment of collection-type recycling service outlets that match the sales volume in the administrative regions at the prefecture level and above where they are sold.

The "Management Measures" encourage enterprises to jointly build and share recycling channels. Leading companies have begun to join forces to lay out the recycling market. In 2013, CATL acquired Brunp Cycle to enter the power battery recycling track. In 2018, CATL reached a strategic cooperation with SAIC Motor to jointly promote the recycling and reuse of power batteries for new energy vehicles.

Vehicle companies have also entered the market by participating in or holding third-party recycling enterprises, and have carried out strategic cooperation or direct layout with upstream and downstream enterprises in the industrial chain. Mercedes-Benz set up a special joint venture company as early as 2015 to make relevant preparations for the secondary use of batteries. In China, since 2018, China Tower has joined hands with Chongqing Chang'an, BYD, Guoxuan Hi-Tech and other enterprises to form a battery recycling alliance to use the recycled batteries for base station energy storage backup.

"To promote the implementation of the extended producer responsibility system, in fact, is to allow car companies to transition from the original production management to take into account the use of management, the key is to extend the responsibility to which link. The above-mentioned senior practitioners in the automobile recycling and dismantling industry said that for some car companies and battery manufacturers, recycling batteries is really a public welfare, and additional labor costs and technical costs must be paid.

For example, he said, what happens when consumers don't go to a designated repair point to replace the battery, whether they still have to track the return of the battery, and who will bear the management costs? No one wants to stretch their hands too far. ”

"Going to sea" is forced

Liu Gangfeng obviously feels that the industry is becoming more and more involuted. Since 2022, more and more companies have started to do battery recycling consulting business overseas.

According to the latest data released by the China Association of Automobile Manufacturers in January this year, China's automobile exports will reach 4.91 million units in 2023, becoming the world's largest automobile exporter. However, non-trade barriers to exports have repeatedly increased. After nearly three years of legislative process, the EU Battery and Waste Battery Regulation (the "New Battery Law") officially came into effect in August 2023. According to the new regulations, from 2027, power batteries exported to Europe must hold a "battery passport" that meets the requirements, recording the battery's manufacturer, material composition, carbon footprint, supply chain and other information.

The boots of the "New Battery Law" have landed, and the pressure on China's battery industry is obvious. Sun Fengchun, academician of the Chinese Academy of Engineering, said at the 2023 World Power Battery Conference that as Europe and the United States drive the green and low-carbon transformation of the battery industry with stricter requirements and strive to dominate the rules of global competition, Chinese battery companies are facing multiple challenges such as European carbon barriers, industrial chain localization and carbon peaking.

"The first challenge for Chinese battery products exported to Europe is the regulatory issue. Liu Gangfeng reminded that starting from July 1 this year, only batteries that have declared their carbon footprint can be put into the European market, which means that battery export companies must collect and calculate carbon emission data from upstream minerals, materials to battery production, recycling and reuse, and disclose them.

However, the accumulation of carbon footprints in the whole life cycle of Chinese battery companies is relatively weak. Zheng Ying, a specially invited researcher at the Society of Automotive Engineers of China, said in an interview with the media that there are still imperfections in carbon footprint standards and database construction in China and even the world, and for most enterprises, "this is a relatively unfamiliar job that is far from traditional production technology".

A user-friendly "battery passport" that meets the requirements needs to document around 90 mandatory data attributes as well as voluntary recommendations. In addition to the carbon footprint, it includes information such as battery and manufacturer information, compliance and certification, supply chain due diligence, battery materials and composition, cycle and resource efficiency, and performance and durability.

The establishment of the "battery passport" involves a large amount of information disclosure by many enterprises in the upstream and downstream of the entire industrial chain, which not only has technical difficulties, but also many risks. "Requiring suppliers to provide relevant data and information will inevitably increase costs, further increase the threshold for enterprises to go overseas, and power battery recycling may face two modes in the future: domestic and overseas. Liu Gangfeng said.

Up to now, Chinese battery companies, including CATL, Envision Power, China Innovation Airlines, EVE, Honeycomb Energy, Funeng Technology, Guoxuan Hi-Tech, Sunwoda and other Chinese battery companies have been deploying zero-carbon transformation strategies, exploring solutions such as battery carbon footprint, digital battery passport, recycled materials and traceability.

Huatai Securities released a research report saying that the implementation of the "New Battery Law" is expected to force the improvement of the domestic recycling system, and in the long run, it will drive the green transformation of the domestic industrial chain and promote the sustainable development of the industry. Stricter recycling requirements may be beneficial to enterprises that have cooperated with overseas manufacturers to recycle.

In Guben, Brandenburg, in northeastern Germany, a new lithium-ion battery recycling demonstration plant is under construction. As a hub for Germany's new energy industry, Brandenburg is also home to Tesla's first Gigafactory in Europe, as well as BASF's battery materials plant. "Not only the differences in laws and regulations, but also the requirements for building factories in Europe and other aspects of equipment quality standards and organizational production forms are different from those in China. Liu Gangfeng said.

Lang Xuehong, deputy secretary-general of the China Automobile Dealers Association, has called for a time window to deploy overseas by 2030, at most to 2035, if you can't seize this time window, it will be difficult for Chinese car companies to achieve the 1:1 sales target in the overseas and domestic markets.

According to the new game rules of "who produces and who recycles", electric vehicle batteries that go overseas to Europe will have to be accounted for in accordance with the EU battery carbon footprint rules and audited by an EU-recognized certification body from February 2025 at the earliest, otherwise they cannot be sold in the European market. There is not much time left for battery companies to prepare.

Published in the 1135th issue of China News Weekly magazine on April 8, 2024